2014 (11) TMI 423 - HC - Central Excise

Waiver of pre deposit - Revenue appeal - Confiscation of certain seized raw material - Provisional release of goods - Redemption fine - Clandestine removal of goods - Suppression of production of goods - Held that - Assessee had not obtained central excise registration. The principal manufacturers, from whom the assessee had obtained the poly film allegedly on job work basis, were not registered for the purposes of central excise and were not found to be paying central excise duty on the goods received from the assessee nor were they found to be using the goods in the manufacture of dutiable goods. The Managing Director of the assessee admitted during the course of his statement that the assessee was undertaking manufacturing activity without obtaining central excise registration and was clearing the goods without payment of excise duty. These facts cannot simply be brushed aside particularly at the prima facie stage while considering an application for waiver of pre-deposit. On these facts, it cannot be held that the assessee had made out a prima facie case either for a waiver of pre-deposit in totality or for an order to the effect that a further amount of ₹ 20 lacs, as stated on behalf of the assessee, would amount to a fair order on the application for waiver of pre-deposit. Having due regard to the quantum of duty demand of ₹ 3.85 crores, an order for the deposit of ₹ 20 lacs over and above the amount of ₹ 40 lacs, which has already been deposited by the assessee, cannot be regarded as amounting to a proper exercise of the discretion in law by the Tribunal. We are of the view that the ends of justice would be met if the assessee is directed to deposit a total amount of ₹ 1 crore after giving due credit for the amount of ₹ 40 lacs, which has already been deposited by the assessee. - Stay order of the tribunal modified - Decided in favor of revenue.

Issues Involved:
1. Error in granting stay on the condition of pre-deposit.
2. Justification of the third member's decision based on CESTAT decision not pleaded before the original Bench.
3. Justification of the third member's decision based on fresh evidence.

Issue-wise Detailed Analysis:

1. Error in Granting Stay on the Condition of Pre-deposit:
The Revenue's appeal arises from a decision by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) regarding the waiver of deposit. The Tribunal's two members differed on the quantum of pre-deposit. One member accepted the assessee's offer to deposit an additional Rs. 20 lacs on top of the already deposited Rs. 40 lacs, while the other member directed a pre-deposit of Rs. 1 crore in addition to the Rs. 40 lacs. The third member resolved the difference by directing a total pre-deposit of Rs. 20 lacs in addition to the already deposited Rs. 40 lacs. The Revenue questioned whether the CESTAT erred in granting stay based on this majority decision.

2. Justification of the Third Member's Decision Based on CESTAT Decision Not Pleaded Before the Original Bench:
The third member relied on a previous CESTAT decision that the activity of printing and plastic coating does not amount to manufacture. The Revenue questioned whether the third member was justified in deciding the referred points of difference based on a CESTAT decision that was never pleaded before the original Bench.

3. Justification of the Third Member's Decision Based on Fresh Evidence:
The Revenue also questioned whether the third member was justified in deciding the points of difference based on fresh evidence.

Detailed Analysis:

Background:
The Commissioner of Central Excise and Service Tax, Allahabad, adjudicated upon two show cause notices, resulting in confiscation orders, penalties, and a duty demand of Rs. 3.85 crores. The assessee appealed to the Tribunal, leading to differing views on the quantum of pre-deposit required for granting a stay. The third member's decision to require an additional Rs. 20 lacs deposit was challenged by the Revenue.

Tribunal's Differing Views:
The Member (Judicial) believed that the process of printing and lamination might not amount to manufacture and that the extended period of limitation might not apply. In contrast, the Member (Technical) found that the assessee was involved in manufacturing activities without proper registration and had cleared goods clandestinely. The Member (Technical) emphasized that the assessee's activities amounted to manufacturing, requiring central excise duty payment.

Third Member's Resolution:
The third member agreed with the Member (Judicial) and directed a total pre-deposit of Rs. 20 lacs in addition to the already deposited Rs. 40 lacs. This decision was based on a previous CESTAT ruling that printing and plastic coating do not constitute manufacturing.

High Court's Evaluation:
The High Court noted that the observations were confined to a prima facie evaluation. The Court cited Supreme Court precedents indicating that lamination amounts to manufacture. The Court found that the assessee's activities involved both printing and lamination, which prima facie amounted to manufacturing. The Court also noted that the assessee had not obtained central excise registration and had admitted to manufacturing without paying excise duty.

Conclusion:
The High Court concluded that the Tribunal's order for a deposit of Rs. 20 lacs over and above the Rs. 40 lacs already deposited was not a proper exercise of discretion. The Court modified the order, directing the assessee to deposit a total of Rs. 1 crore, giving credit for the Rs. 40 lacs already deposited and any additional Rs. 20 lacs deposited as per the Tribunal's order. The time to deposit the balance amount was extended by two months.

The appeal was disposed of with no order as to costs.

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