2014 (9) TMI 582 - HC - Central Excise

Waiver of the pre-deposit - Section 35F - divergent views in different judgements - Held that - Powers conferred under Section 35F of the Central Excise Act, 1944 so far as it relates to the dispensation of the pre-deposit of the duty demanded, is a discretionary one. The discretion should be exercised judicially and not capriciously and/or arbitrarily. While exercising the discretion the Court must record the reasons therefor, which should withstand on the settled legal parameters and does not lead to an inference which no reasonable man could arrive at. The order impugned suggests that the Tribunal has recorded respective submissions and disposed of the aforesaid applications by giving dispensation of deposit of 75% of the duty demanded meaning thereby petitioner is directed to deposit 25% within a stipulated period. There is no reflection in the said, order relating to the net worth of the company or relating to the existence of a prima facie case which is one of the facet for consideration whether the appellant would suffer undue hardship, if the duty demanded is directed to be deposited - tribunal to decide the applications afresh - Decided in favour of assessee.

Summary

Issues:
1. Waiver of pre-deposit of duty demanded by CESTAT.
2. Tribunal's satisfaction regarding the net worth of the company.
3. Applicability of Section 35F of the Central Excise Act, 1944.
4. Exercise of discretionary powers under Section 35F.
5. Lack of findings in the Tribunal's order.
6. Quashing and setting aside the impugned order.
7. Remand of the matter to CESTAT for fresh consideration.
8. Dismissal of appeals by CESTAT due to non-compliance.

Analysis:
The judgment revolves around the petitioner's challenge to the order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) directing the deposit of 25% of the duty demanded. The petitioner contended that the Tribunal failed to assess the company's net worth, a crucial aspect under Section 35F of the Central Excise Act, 1944. Reference was made to the Supreme Court's directions in the Sagarika Acoustronics case, emphasizing the need for a thorough evaluation of the company's financial standing before demanding pre-deposit.

The judgment delves into conflicting views presented by different High Courts and the Apex Court regarding the interpretation of Section 35F. The petitioner relied on precedents highlighting the importance of establishing undue hardship and a strong prima facie case to justify waiver of pre-deposit. Notably, the judgment emphasized the discretionary nature of Section 35F, requiring judicious exercise without arbitrariness. The Court stressed the need for reasoned decisions that align with legal standards and reasonable conclusions.

Critically, the Court found the Tribunal's order lacking essential findings related to the company's net worth and the existence of a prima facie case for assessing undue hardship. Consequently, the Court deemed the order unsustainable and quashed it, remanding the matter back to CESTAT for a fresh evaluation within a specified timeframe. Moreover, the judgment addressed the dismissal of appeals by CESTAT due to non-compliance with the deposit directive, highlighting the interdependence of subsequent orders on the initial decision.

In conclusion, the judgment underscored the significance of a comprehensive assessment of relevant factors under Section 35F, emphasizing the need for reasoned decisions and adherence to legal principles. The Court's intervention aimed to ensure a fair and just determination of the petitioner's obligations, setting aside the impugned order and directing a fresh consideration by CESTAT.