2010 (9) TMI 185 - HC - Central Excise

Cenvat credit appeals arise out of common proceedings - Assessee availed the CENVAT Credit wrongly and illegally Penalty - order for recovery of interest in respect of alleged illegally availed CENVAT Credit Non-payment of interest - Held that - As per the Order-in-Original, interest is demanded only from M/s. Natraj Plast Industries Ltd. on the purported wrong availment of CENVAT/MODVAT Credit. There was no interest payable by other appellants - Therefore for alleged non-payment of interest, appeals of other appellants in any case could not have been dismissed - Tribunal shall hear these appeals and decide the same on merits Matter remanded back to Tribunal.

Summary

Issues:
1. Compliance with pre-deposit orders and subsequent dismissal of appeals by the Tribunal.
2. Interpretation of Section 35F of the Central Excise Act regarding the deposit of duty, penalty, and interest pending appeal.

Issue 1: Compliance with Pre-Deposit Orders and Subsequent Dismissal of Appeals by the Tribunal:
The judgment involves a case where multiple appellants challenged an Order-in-Original for recovery of wrongly availed CENVAT Credit, penalties, and interest. The appellants sought a waiver of pre-deposit under Section 35F of the Act for their appeals before the Tribunal. The Tribunal initially directed the appellants to deposit Rs.40 lakhs, in addition to the Rs.20 lakhs already deposited, for a waiver of the remaining duty and penalty amounts. However, the Tribunal later required the appellants to deposit the interest amount as well. The appellants failed to comply with this additional requirement, leading to the dismissal of their appeals by the Tribunal. The High Court admitted the appeals on the grounds of non-compliance with the pre-deposit orders and lack of direction regarding the deposit of interest in the initial stay order.

Issue 2: Interpretation of Section 35F of the Central Excise Act Regarding Deposit of Duty, Penalty, and Interest Pending Appeal:
The judgment delves into the interpretation of Section 35F of the Act, which mandates the deposit of duty demanded or penalty levied pending an appeal. The provision allows for the waiver of such deposit under certain conditions to prevent undue hardship. The High Court emphasized that the provision does not explicitly mention interest in the context of pre-deposit. However, the explanation under the section clarifies that duty demanded includes interest payable under the Act or related rules. The Court highlighted that once there is a stay on duty demanded, the interest component is also stayed. Furthermore, the judgment pointed out that the Order-in-Original demanded interest only from one of the appellants, not all, indicating an oversight by the Tribunal in dismissing all appeals for non-payment of interest.

In conclusion, the High Court held that the Tribunal erred in dismissing the appeals for non-compliance with the interest deposit requirement, as it was not explicitly directed in the initial pre-deposit order. The Court set aside the impugned Order-in-Original and restored the appeals for a fresh hearing on merits. The judgment stressed the importance of expeditiously deciding the appeals without the need for a specific time-bound direction.