2012 (11) TMI 151 - HC - Central Excise

Waiver of pre deposit - Rectification Application rejected - seeking recall and modification of the previous order directing payment of Rs.6 Crores as pre deposit - Held that - Section-3A imposes liability on the basis of the assumptions which can be drawn. However, the assumptions have to be linked to or based upon some objective materials based upon the available evidence. No doubt, the data in the pen drive indicated certain figures and the person from whom it was seized suggested that these reflected the sales figures of the assessee. At the same time, the Commissioner was also alive to the fact that the production capacity of the Unit was 75 MT per month which would have worked out to maximum of 600 MT. In the eventuality, the duty liability would have been in the range of Rs. 74-75 Lakhs. Then there is absolutely no discussion on this aspect in the Order in Original. Though this appears to have been urged before the Tribunal, the latter did not give sufficient weightage to this aspect and appears to have adopted a rough and ready rule while directing pre-deposit of Rs. 6 Crores which it refused to alter when the rectification application was made. The Tribunal s order does not reflect any discussion on the relative hardship which would be visited upon the appellant in the light the latter is constrained to make the deposit, thus having regard to the above factors, the directions of the Tribunal are required to be altered. Instead of Rs. 6 Crores, the appellant shall deposit a sum of Rs. 1.5 Crores. The balance of the demand shall be secured through bond to the satisfaction of the excise authorities. The appellant is permitted to make the deposit of Rs. 1.5 Crores in two instalments provided the entire amount is deposited on or before 31.12.2012.

Summary

Issues:
1. Tribunal's rejection of rectification application seeking recall and modification of pre-deposit amount.
2. Consideration of production capacity and financial hardship in the original order.
3. Assessment of objective evidence and liability under Section-3A of the Central Excise Act, 1944.

Analysis:
1. The appellant contested the Tribunal's rejection of their rectification application, which sought to recall and modify the pre-deposit amount of Rs. 6 Crores directed in the previous order. The Tribunal's decision was based on the appellant's extreme financial hardship and the contention that the duty liability was inaccurately calculated, overlooking crucial production capacity details.

2. The original order imposed a significant duty and penalty on the appellant based on the production capacity and evidence of unaccounted production. The Commissioner considered various factors, including statements from employees and seized documents like a pen drive containing sales data. However, there were discrepancies in the assessment, as the production capacity was not adequately linked to the duty amount, and other objective facts like diesel oil purchase were not thoroughly examined.

3. Section-3A imposes liability based on assumptions supported by objective evidence. The pen drive data indicated sales figures, but the production capacity suggested a lower duty liability. The Tribunal failed to address the appellant's financial hardship adequately, leading the High Court to modify the pre-deposit amount to Rs. 1.5 Crores, securing the balance through a bond. The Court emphasized the need for a balanced approach considering all relevant factors in such cases.

In conclusion, the High Court allowed the appeal partially, altering the pre-deposit amount and emphasizing the importance of considering production capacity, financial hardship, and objective evidence in excise duty cases. The judgment highlighted the necessity for a thorough assessment before imposing significant financial burdens on appellants and ensuring a fair balance between the parties involved in such disputes.