2013 (11) TMI 25 - AT - Central Excise

Demand of duty, interest and penalty - company under liquidation Waiver of Interest and Penalty - Appellant assembled computers without payment of duty by the appellant-company - Hon ble High Court of Karnataka vide their order dated 28.3.2012 had ordered for winding up of the company in accordance with law and have also directed the official liquidator to take charge of the assets of the company and take steps for realization of the same Held that - It is very clear that the appeal filed by the appellant-company gets abated Nevertheless if the appeal abates it would mean that the order under challenge gets revived and the demand is enforceable - it would be appropriate that a copy of the order should be sent to the Registrar of the Hon ble High Court for sending it to the official liquidator for appropriate action by him - unless official liquidator files an appeal for restoration of the appeal, the appeal which is abated ceases to be a matter. Regarding penalties on directors - held that - penalty of Rs.10,000/- each on the Directors is nominal and no financial difficulty has been pleaded before us. The total duty evaded according to the appeal memorandum is Rs.17,79,472/- and having regard to the amount of duty evaded - amount of penalty ordered to be pre-deposited.

Summary

Issues: Assembling of computers without payment of duty, imposition of penalties on the company and its directors, abatement of appeal due to winding up of the company, waiver of pre-deposit and stay against recovery of penalties on directors.

Analysis:
1. Assembling of computers without payment of duty and imposition of penalties: The case involves the appellant-company being charged for assembling computers without paying duty, leading to duty demand, interest, and penalties imposed on the company and its two Directors. The learned counsel pointed out that the company was ordered to be wound up by the High Court, which would result in the abatement of the appeal. The penalty imposed on the Directors was Rs. 10,000 each, and they sought waiver of pre-deposit and stay against recovery.

2. Abatement of appeal due to winding up of the company: The counsel referred to Rule 22 of the CESTAT Procedure Rules, which states that if a company is being wound up, the appeal shall abate unless an application is made for continuance by the successor-in-interest or legal representative. The Tribunal acknowledged that the appeal filed by the appellant-company abated due to the winding up order. However, the Tribunal highlighted the need for clarity on whether the company maintained records of the liability and if the official liquidator was aware of the liabilities.

3. Waiver of pre-deposit and stay against recovery of penalties on directors: The Tribunal found the penalty imposed on the Directors to be nominal at Rs. 10,000 each, with no financial hardship pleaded. Considering the duty evasion amount of Rs. 17,79,472, the Tribunal deemed the penalty reasonable and necessary to be deposited. The stay applications of the Directors were rejected, and they were directed to deposit the penalty amount within six weeks, failing which the appeals would be dismissed for non-compliance with the Finance Act.

In conclusion, the Tribunal disposed of the appeal filed by the company due to abatement following the winding up order. The Directors were directed to deposit the nominal penalties imposed on them within a specified timeframe to avoid dismissal of their appeals.