1994 (12) TMI 154 - AT - Central Excise

Issues Involved:

1. Waiver of pre-deposit of duty demand.
2. Validity of the review show cause notice.
3. Allegations of undervaluation and mis-statement.
4. Method of quantifying the short levy.

Detailed Analysis:

1. Waiver of Pre-deposit of Duty Demand:

The applicants sought a waiver of the pre-deposit of the duty demand amounting to Rs. 1,52,89,588.00 for the period 1-7-1977 to 30-6-1980. They argued that the Supreme Court's direction implied that the pre-deposit was not required for the appeal to be heard. However, the Tribunal clarified that the Supreme Court had since stated that the hearing of the appeal on merits was subject to the fulfilment of the statutory condition under Section 35F of the Central Excises & Salt Act, 1944. Consequently, the Tribunal took up the stay application for hearing.

2. Validity of the Review Show Cause Notice:

The applicants had previously challenged the validity of the review show cause notice issued by the Collector of Central Excise, Allahabad, on 22-5-1982, both before the Allahabad High Court and the Supreme Court, but were unsuccessful. The Tribunal noted that the Supreme Court had dismissed the applicants' SLP against the Allahabad High Court's decision, thereby upholding the validity of the review show cause notice. The Tribunal emphasized that the prima facie case on the question of limitation favored the department, as the Supreme Court had found the review show cause notice to be within the period of limitation prescribed under Section 11A of the Central Excises & Salt Act.

3. Allegations of Undervaluation and Mis-statement:

The department argued that the factory gate price was manipulated to evade duty and that there was a deliberate non-disclosure of full particulars regarding the pricing pattern. The Collector's findings indicated that the applicants had charged a depressed factory gate price to a few chosen buyers under a secret understanding and refused to sell at that price to other customers. The Tribunal noted that the Collector's conclusions on undervaluation and the special relationship with Hindustan Safety Glass Works (HSGW) were based on evidence. The Tribunal acknowledged that these issues required an in-depth consideration of facts and evidence, which could only be undertaken during the appeal on merits.

4. Method of Quantifying the Short Levy:

The applicants contested the method adopted by the Collector in quantifying the short levy. The Collector had calculated the differential duty based on excess realization from depot sales and extended this ratio to factory gate sales, including sales to HSGW. The applicants argued that this method resulted in double payment, as it separately calculated duty for factory gate sales after already considering depot prices. The Tribunal recognized that there was some ambiguity in this aspect of quantification, which would be relevant in determining the pre-deposit amount. Consequently, the Tribunal directed the applicants to deposit Rs. 1,05,64,893.00 by 31-1-1995, with the balance of the duty demand being dispensed with and recovery stayed pending the appeal's disposal.

Conclusion:

The Tribunal concluded that the appeal would be heard on merits subject to the applicants depositing Rs. 1,05,64,893.00. The Tribunal emphasized that a bank guarantee would not suffice in such matters and scheduled the matter for compliance verification on 7-2-1995, after which an early hearing date would be set for the appeal.

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