2009 (3) TMI 534 - AT - Central Excise

Period of limitation - SCN issued beyond on year - at least in November, 2006 the Department was fully aware of the fact regarding the allegation of suppression of differential amount of the freight charges and alleged misdeclaration in this regard, however, the show cause notice was issued only in December, 2007 - Demand of duty of excise with interest and penalty u/s 11AC - Held that - it was necessary for the authority to deal with the said point while deciding the matter under the provisions of Section 35F of the Act. Neither the interim order nor the impugned order passed by the lower authority discloses application of mind to this aspect, and therefore the appellants are justified in contending that the impugned order is bad in law. The matter, therefore, needs to be remanded to the lower appellate authority to deal with the same in accordance with the provisions of law as early as possible within a specified time limit.

Summary

Issues:
Challenge to original order under Central Excise Act, 1944 - Time-barred demand, non-compliance with pre-deposit order, consideration of undue hardship for deposit exemption.

Detailed Analysis:

1. Challenge to Original Order:
The appellant challenged the order passed by the Additional Commissioner, Central Excise, confirming a demand of Rs. 22,06,738/- under Section 11A(1) of the Central Excise Act, 1944, along with interest and penalty. The appeal was based on various grounds, including the argument that the demand was time-barred as the Department was already aware of the relevant facts. The Commissioner (Appeals) directed a pre-deposit of Rs. 12,58,753/- under Section 35F of the Act, which the appellant failed to comply with, leading to a challenge on the grounds of limitation not being considered.

2. Consideration of Undue Hardship:
The appellant contended that the show cause notice and audit report indicated that the Department was aware of the alleged suppression of facts well before issuing the notice. The appellant relied on a Supreme Court decision to support their argument. The Department, however, argued that Section 35F mandates the deposit of duty demanded unless undue hardship is proven. The appellant failed to demonstrate any undue hardship or economic hardship, as required by the law.

3. Exemption from Deposit and Safeguarding Revenue:
Section 35F necessitates the deposit of duty demanded unless undue hardship is established. The appellate authority must consider undue hardship and safeguarding the interest of revenue before granting any exemption. The Apex Court's rulings emphasize the importance of considering undue hardship in economic terms and ensuring that the appellant's conduct warrants such exemption. The lower appellate authority failed to consider the aspect of undue hardship in its orders, leading to the conclusion that the impugned order was not in accordance with the law.

4. Remand and Disposal of Appeal:
The matter was remanded to the lower appellate authority to consider the bar of limitation raised by the appellant and to dispose of the appeal on merits within a specified time limit. The lower appellate authority was directed to consider both the hardship to the party and the interest of revenue while deciding on the stay application. The importance of a speaking order granting exemption from deposit was highlighted, emphasizing the need for a detailed examination of the facts and circumstances.

5. Final Decision:
The impugned order and the interim order were set aside, and the Commissioner (Appeals) was directed to dispose of the appeal within thirty days from the first appearance of the party after hearing. The party was instructed to appear for further proceedings, and the Registry was tasked with promptly informing the Commissioner (Appeals) of the decision for expeditious action.

This detailed analysis of the judgment highlights the key legal arguments, procedural requirements, and the court's directions regarding the challenge to the original order, consideration of undue hardship for deposit exemption, and the remand for a proper examination of the bar of limitation and disposal of the appeal on its merits.