STAY/DISPENSATION OF PRE DEPOSIT IN CENTRAL EXCISE AND CUSTOMS APPEALS

[Mr. M. GOVINDARAJAN]

Chapter V of the Customs Act deals with appeals and revision.   Section 128 deals with the appeals to Commissioner of Customs (Appeals).   Section 129A deals with the appeals to the Appellate Tribunal.  Sec. 129E provides that where in any appeal, the decision or order appealed against relates to any duty and interest demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the duty and interest demanded or the penalty levied.  Where in any particular case the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of revenue.

Chapter VIA of the Central Excise Act deals with appeals.   Section 35 deals with the appeals to Commissioner of Central Excise (Appeals).  Sec. 35 B deals with the appeals to the Appellate Tribunal.  Sec. 35F provides that where in any appeal, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied.  Where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of the revenue.

It is clear from the above that stay order is at the discretion of the appellate authorities. But at the same time they have to act judicially in making such decision.   Normally if the assessee is able to prove that there is a strong prima facie case pre deposit of duty, interest and penalty is not ordered.   Based on the facts and circumstances of the cases the Tribunal may waive duty only and directed to pay interest and penalty; in some cases duty was ordered to be paid and the interest was waived.   In this article eight case laws are given in which different decisions are taken by the High Courts/tribunals based on the facts and circumstances of the case.

CASE LAWS:

1. Tata Motors Ltd., V. Union of India - 2009 -TMI - 75453 - (BOMBAY HIGH COURT)

CENVAT credit was availed in respect of job work undertaken.   The impugned issue is settled Tribunal Larger Bench in 2005 (183) ELT 353 (Tri. LB) and appeal there against was dismissed by the High Court.   It is settled law that even in respect of job work where final product is dutiable, CENVAT Credit can be availed.   Petitioner is having strong prima facie case.   The Court held that no pre deposit is required and the petitioner is directed to give bond for such amount.

2. Ambuja Cements Ltd. V. Union of India - 2009 -TMI - 34201 - (CHATTISGARH HIGH COURT)

In the present case, stay was declined on the ground that the petitioner had suppressed material facts as the petitioner has not submitted details as to quantification of steel utilized as inputs for manufacture of the capital goods.   In spite of the clear finding by the adjudicating authority, the petitioner failed to disclose any details as regards the quantity of steel utilized for the purpose of other than the manufacture of capital goods while admittedly, the steel purchased by the petitioner was not only used for the manufacture of the capital goods but also for other purposes.   The purchase order discloses the total quantity of the steel on which the CENVAT credit was sought to be availed.  But the petitioner had failed to disclose as to how much steel was used for the purpose of manufacture of capital goods alone.   Accordingly, the impugned order was passed as stated above.

3. Jitendra Kejriwal V. Commissioner of Central Excise, Rohtak - 2009 (244) ELT 422 (Tri. Del)

The main issue involved in the matter relates to allegation of under valuation of the goods manufactured and cleared by the applicants during the period from March 2002 to June 2005.   The product relates to plywood and block board manufactured and cleared by the appellants by disclosing only part of the actual consideration in their invoices and thereby evading excise duty to the tune of the amount specified in the impugned order.  The case of department in that regard is sought to be made good on the basis of documentary evidence seized from the premises of the applicants as well as the data retrieved from the lap top which was also seized from the premises of the applicants, and further sought to be corroborated by the statements of some of the distributors of the product manufactured by the applicants.   Considering this material, prima facie, the same discloses, the modus operandi of under invoicing system in relation to the product manufactured and cleared from the factory premises of the applicants.   The analysis of such materials, seized in the course of investigation by the concerned authorities, which is revealed from the impugned order, further discloses the retrieved data from the lap top seized from the premises of the applicants, has been corroborated by the documentary evidence in the form of ledgers and invoices also seized from the premises of the applicants.   The correlation between the entries in the data retrieved from the lap top with the entries in the ledger and other documents seized from the premises of the applicants, prima facie, discloses the findings arrived at by lower authority regarding the duty liability of the applicants, in the facts and circumstances of the case, cannot be held to be either not borne out from the records or to be perverse.   Records, prima facie, disclose receipt of unaccounted cash and other moneys for the product manufactured and cleared without the disclosure thereof to the concerned authorities and thereby evasion of the duty in relation to such manufacture and clearance of products.   Being so, the findings as regards the duty liability, as such, cannot be found fault with.

The tribunal held that considering the facts and circumstances of the case, there is no waiver of duty demanded in the matter.   As far as liability to pay the penalty is concerned, it is to be noted that the penalty is sought to be levied not only under section 11AC, but also under Rule 25 of the said Rules. Considering the controversy, which is sought to be raised in relation to some part of the evidence which has been taken into consideration by the authorities, while fixing the duty liability, even, in our considered opinion before addressing to those points on merits, it will be too premature to insist for deposit of the penalty amount ordered under the impugned order.  Certainly, therefore, prima facie case has been made out for waiver of penalty amount in the matter till the disposal of the appeals.  The Tribunal held that it would be proper to stay the order in relation to the recovery of interest on the duty amount till the disposal of the appeal.

4. Pacific Links Export Industries (P) Ltd., V. Commissioner of Central Excise, Pune - 2009 (244) ELT 443 (Tri. Mumbai)

After hearing both parties, the Tribunal found that the capital goods, on which the duty is demanded, are under the control of the Department as they have been confiscated by the impugned order.   As per Section 129E of Customs Act wherein any appeal, the decision or order appealed against relates to any duty and interest demanded in respect of goods, which are not under the control of the customs authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with proper officer the duty and interest demanded or the penalty levied.  It is clear that the pre-deposit is required when the goods, on which the duty is not levied, are not in the control of the Department.   The tribunal held that the pre-deposit of duty is not warranted at this stage and the waiver of the pre-deposit is granted.   However, the applicant has not made out any prima facie case for waiver of penalty.

5. Vishwakarma Alloys Ltd., V. Commissioner of Central Excise, Ludhiana - 2009 (244) ELT 473 (Tri. Del)

CENVAT credit was wrongly availed by the appellant.  Allegation of the appellant is the failure to comply with the principles of natural justice.  No substance in the contention of the appellant as the assessee showed total lethargy and carelessness in the matter of his obligation to come forward with necessary materials for his defence.   Since the appellants themselves are responsible for failure on their part to take appropriate steps in time to get the copies of the documents, allegations as to failure to comply with principles of natural justice do not stand.   Based on the findings arrived by Commissioner regarding wrong availment of CENVAT credit and records showing a non-existing transport company, prima facie, no case made out by appellants.   The appellants are directed to pay pre-deposit of balance amount of demand.  The Tribunal reduced the pre deposit of penalty.

6. Novament Industries V. Commissioner of Customs, Noida - 2009 (244) ELT 478 (Tri. Del)

Since appellants have failed to make pre deposit within the time stipulated by the Apex Court in their Special Leave Petition, the Tribunal cannot consider appellant's application for modification of order.

7. Monnet Sugar Ltd., V. Commissioner of Central Excise, Meerut - I - 2009 (244) ELT 490 (Tri. Del)

As regards, the welding electrodes for use the repair and maintenance of the sugar mill factory, Rajasthan High Court in respect of the very issue in the case of 'Hindustan Zinc Ltd., V. Union of India' - 2008 (228) ELT 517 has held that welding electrodes used for repairs and maintenance of plant and machinery are eligible of Cenvat Credit as inputs as well as capital goods.   As regards, D.P. Liner, there is no dispute that this is use for lining of the jute bag and this is packing material and which is covered by definition of inputs. From the use of the other three chemicals Ranocide, Drimax and Magna Flock, it is clear that these items are used in the manufacture of sugar.  Therefore, in respect of welding electrodes, D.P. Liner, Renocide, Drimax and Magna Flock, prima facie there is merit in the contention of the appellant for eligibility of Cenvat Credit.  As regards, the eligibility of the disputed item of capital goods namely steel wire rope, chain and spares of cane carrier and spare of Boiler for Cenvat Credit, from the use of these items as described above, it is clear that all of them are parts of capital goods. While the steel wire rope is part of cane unloader and other spares are part of the cane carrier and insulating materials are part of boiler.   Thus in respect of three items of capital goods also, prima facie, there is merit in the contention of the appellant for their eligibility for Cenvat Credit.   In view of the above the tribunal was of the view that there was prima facie strong case in favor of the appellant and requiring them to deposit entire amount of credit along with interest and penalty would cause undue hardship.  In view of this pre-deposit of Cenvat credit demanded along with interest and penalty is waived.

8. Techno submersible Pumps Pvt. Ltd., V. Commissioner of Central Excise, Ahamedabad - 2009 (244) ELT 494 (Tr. Ahd)

The appellant is engaged in the manufacture of agricultural submersible pumps which attracted concessional rate of duty  of 8% in terms of serial No. 17 of Notification No. 10/2006-CE, dated 01.03.2006.   Instead of availing the benefit of the said Notification, the appellant cleared their final product at the rate of 16% of duty, by paying the same out of their Modvat credit account.

The Revenue's contention is that such payment of higher duty at the tariff rate was with a view to encash the credit available in their accounts. Accordingly they have confirmed the duty.  The tribunal held that Sec.5A (1) is to the effect that where the goods are unconditionally exempted, an assessee has no choice to pay duty on the same.   However, in the present case the goods attracted some rate of duty and were not exempted unconditionally.   Strictly speaking the said rule would not apply.   The provisions of section 11D would also have not applicability inasmuch as the duty charged by the appellant from its customer stand paid to the Revenue, though by making debit entries in their credit account.  Such credit is available to the appellant for payment of duties on their final product.   As such it cannot be said that the duties recovered by the appellant from their customer, do not stand paid to the Revenue.  The tribunal held that the appellant has a good prima facie case in his favor and allow the petition unconditionally.