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TMI Blog2010 (6) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed against the Appellants under the provisions of Section 11A(1) of Central Excise Act, 1944 read with Section 11AB ibid and penalties imposed on them under Section 11AC of the Excise Act/Rule 26 of the Central Excise Rules, 2002 (hereinafter referred to as CER, 2002) by Commissioner of Central Excise, Jalandhar vide order-in-original No. 9-11/C.E./Jal/09 dated 24-2-09. The duty demands confirmed and the penalties imposed on the Appellants by the above mentioned order of the Commissioner are as under : S. No. Appellant Duty demand Confirmed Rs. Penalties imposed Rs. 1. Narinder Pulp Paper Mills Ltd. (M/s. NPPML) 1,26,22,075/- along with interest 1,26,22,075/- under Section 11AC and 1,50,00,000/- under Rule 26 of CER'02 2. M/s. Narinder Paper Mills Ltd.(NPML) 2,65,23,790/- along with interest 2,65,23,790/- under Section 11AC of the Excise Act 3. M/s. Charan Kamal Card Board Paper Mills Ltd.(CKML) 2,61,26,881/- along with interest 2,61.26,881/- under Section 11AC of the Excise Act 4. M/s. Narindera Paper Products Ltd. 1,77,08,854/- along with interest 1,77,08,854/- under Section 11AC of the Excise Act and 1,50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing for the Appellant, pleaded that this Tribunal while passing order dated 11-1-2010 in respect of the stay applications had not considered the aspect of financial hardship; that all the four applicant companies are sick units in terms of the order of BIFR that the Appellants had filed applications before BIFR under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA) but the BIFR had initially rejected their applications for their registration as sick unit and considering Rehabilitation Package; that while in respect of NPPML, appeal to AAIFR is being filed, in respect of NPML, on appeal filed to AAIFR, the AAIFR remanded the matter to BIFR for de novo consideration, where the matter is still pending, that in case of CKML, the appeal is still pending before AAIFR, that in respect of NPPL, on the matter being remanded by AAIFR, BIFR declared it a sick unit and thereafter directed for issue of a show cause notice for winding it up, that in view of this, all these companies have to be treated as sick companies meriting protection under SICA from coercive action for recovery of dues and also waiver from the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty demand, interest and penalty, pleaded that the Appellant's applications with BIFR had been rejected; that the BIFR in respect of the application made by NPPL had observed that the company is not interested in rehabilitation and is interested only in seeking the protection of the SICA; that the records show that the Appellant companies have been cheating Punjab Electricity Board as a result of which they are faced with huge demands from the electricity board, that profit and loss account of NPPL for the year ending 31-3-06 showed the profit of about Rs. 1.6 crores; that merely being declared a sick unit by the BIFR under Section 22 of the SICA does not automatically give immunity to the Appellants from the provisions of Section 35F of Excise Act and in this regard he relies upon Hon'ble Supreme Court's judgment in the case of Metal Box India Ltd. v. CCE, Bombay reported in 2003 (155) E.L.T. 13 and Indu Nissan Oxo Chemicals Industries Ltd. v. UOI reported in 2008 (221) E.L.T. 7 (S.C.); that undue hardship alone is not the only criteria to grant waiver from the provisions of Section 35F and in this regard, Hon'ble Gujarat High Court in the case of Special Prints Ltd. v. UOI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since their net worth has been totally eroded and for this reason, their applications are pending before BIFR or Appellate Authority for Industrial Financial Reconstruction (AAIFR), they are "sick companies" under SICA and therefore, in view of Hon'ble Supreme Court's judgments in cases of M/s. Sangfroid Remedies Ltd. v. UOI (supra), and Tata Davy Ltd. v. State of Orissa (supra) and judgments of Hon'ble Bombay High Court in case of New Vinod Silk Mills Pvt. Ltd. v. UOI (supra) and Delhi High Court in case of M/s. Surekha Coated Tubes Sheets Ltd. v. CEGAT (supra), the condition of pre-deposit of duty demand, interest and penalty under Section 35F of the Excise Act has to be waived. 5.1 The status of the Appellant's applications before BIFR is as under : 5.1.1 NPPML had filed an application before BIFR in 2005 and the same was granted registration as case No. 43/06. However, the application has been rejected on the ground that as on 31-3-05 their net worth had not totally eroded. An appeal before AAIFR against BIFR's order is being filed. 5.1.2 NPML had filed an application before BIFR which was registered as case No. 20/26. However, BIFR vide order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal to AAIFR is yet to be filed against BIFR's order and in case of NPML, the appeal against BIFR's order is pending before AAIFR. However, in case of CKML while on appeal to AAIFR, the matter was remanded to BIFR vide order dated 12-8-08 of AAIFR, the BIFR, after reconsidering the case, again rejected their application vide order dated 15-7-09, against which the Appellant company has again filed an appeal before AAIFR which is pending before it. In case of NPPL, while on appeal to AAIFR against BIFR's order dated. 23-10-07, AAIFR remanded the matter to BIFR and BIFR vide order dated 20-1-09 declared the company as a sick company and appointed Punjab Sind Bank as OA for formulating a draft rehabilitation scheme (DRS), on account of non-corporation from NPPL, the BIFR vide order dated 4-2-10 ordered the issue of a show cause notice for winding it up. In this regard, para 4, 5 6 of the BIFR's order dated 4-2-10 are reproduced below : "4. In the hearing held today (4-2-2010), the learned Advocate of PSB(OA) submitted that they have sent a registered letter to the last available address of the company, which has been received back from the postal authorities with the remarks "p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear terms that the applicant company is not interested in rehabilitation under the aegis of SICA, but only wants to avail the protection available under SICA, by any means. The conduct of NPPL in the proceedings before BIFR create doubts as to whether their company is genuinely sick company. In fact in case of CKML also, in course of de novo proceedings before BIFR on the directions of AAIFR, the representative of State Bank of India (SBI) had submitted that the promoter of company was not interested in reviving the company and the company was interested only in enjoying the protection of SICA, 1985 to keep its secured creditors at bay. 6.2 In view of the orders of BIFR, record of proceedings before BIFR and conduct of the Appellant companies in proceedings before BIFR, we are not at all convinced that the Appellant companies are genuinely sick companies. 7. Moreover as discussed in the earlier stay order dt. 11-1-2010, the Appellant companies, which are owned and controlled by the members of the same family, were being run as one company and the separate entities - NPPML, NPML, NPPL and CKML had been created only to wrongly avail of duty exemption. In this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above findings of the Commissioner in the impugned order, which, prima facie are based on evidence on record, it is clear that focus of the promoters of the four Appellant companies was not the commercial operation of the companies but to illicitly take as much advantage as possible of the exemption notification, which provides for duty exemption to the clearances of paper board, craft paper etc. upto 3500 m.t. in a financial year. If just to wrongly avail this exemption and evade the duty, manufacture and sale of the goods is artificially split up into four companies and on records, a company is shown to be working only for 3 to 4 months in a year and its production is under reported, each such artificial entity created only on paper, would sooner or later, have to be declared a sick company as such level of operation is not commercially viable. But such sickness would not be genuine sickness. The Commissioner's findings in para 19(i) and 21(iv) of the impugned order cast serious doubt about the correctness of the books of accounts of the Appellant companies and their claim of their net worth having been fully eroded. When the records of production and clearance of the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so as to justify the dispensation of the requirement of pre-deposit of the disputed amount of duty and penalty". 9.1 In this case, as discussed in detail in the earlier stay order dated 11-1-2010, the Appellant companies have not been able to establish prima facie case in their favour and these findings have not been disturbed by Hon'ble High Court in its order dated 16-4-2010 remanding the matter for considering the aspect of financial hardship. As discussed above, the Appellants have failed to establish financial hardship. Thus, the Appellants have neither been able to establish prima facie case in their favour on merits nor they have been able to establish financial hardship. 10. In view of our discussion, we are of the view that there are no grounds to take a view different from that taken in our earlier order dated 11-1-2010. The Appellant companies are, therefore, directed to deposit the entire amount of duty demands confirmed against each of them within a period of eight weeks from the date of this order. Compliance to be reported on 6-9-2010. On deposit of the directed amount within the stipulated period, the requirement of pre-deposit of interest and pena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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