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TMI Blog2010 (10) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... aiver of pre-deposit - demand from units engaged in slitting - The units engaged in slitting of the HR coils which had been done by them in respect of the HR Coil received by them from the appellant - It is not the allegations of the department that it is they who are involved in the illicit sale of the HR coils in respect of which Cenvat credit has been taken by the appellant - Held that the requirement of pre-deposit the penalty imposed on them for hearing of their appeals would cause undue hardship - Accordingly, the pre-deposit of penalty of them is waived and the recovery thereof stayed. - E/821-823, 875 & 1063/2010Q - 792-796/2010-EX(PB) - Dated:- 25-10-2010 - Justice R.M.S. Khandeparkar, Shri Rakesh Kumar, JJ REPRESENTED BY : S/Shri Kamaljeet Singh and Rajesh Chhiber, Advocates, for the Appellant. Shri Virender Chaudhary, SDR, for the Respondent. [Order per : Rakesh Kumar, Member (T)] . - These are the applications for waiver from the requirement of pre-deposit of Cenvat credit demand of Rs. 12,13,66,764/- alongwith interest on it, confirmed against Appellant No. 1 and penalty of Rs. 12,13,66,764/- imposed on them under Rule 13 of Cenvat Credit Rules, 2002/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in their factory while they had shown manufacture and sale of CR coils/strips in their factory during this period. 2.3 Inquiry was made with Shri Amarjeet Singh, Proprietor of M/s. A.S. Roadlines who was authorised by the Appellant to lift the HR coils from SAIL s stockyard and from his premises some diaries were also recovered which were taken over by the investigating officers. Dairies No. 1 and 3 showed that the material lifted by M/s. A.S. Roadlines on behalf of Appellant No. 1 was being taken to some cutters. Shri Amarjeet Singh, in his statement stated that he used to lift HR coils from SAIL stockyard against delivery order and authority letter given by Appellant No. 1 and the material used to be taken either to the Appellant No. 1 s factory or directly to the premises of various cutters of Ghaziabad. Two of such cutters were M/s. Jain Cutters (Appellant No. 4) and M/s. Saaras (Cutters) India P. Ltd. (Appellant No. 5). 2.4 Inquiry was made with Shri Yashpal Sharma, Dy. G.M. of Appellant No. 1 in course of which his statements were recorded on 21-2-06, 27-2-06, 6-3-06 and 10-3-06 under Section 14 of the Central Excise Act, 1944 wherein he stated that - (a) there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they used to receive HR Coils for cutting from Appellant No. 1 through the persons of M/s. D.V. Steels, M/s. S.P. Sales and M/s. Mittal Steel of Navyug Market, Ghaziabad, and that the HR coils after cutting were not returned to the factory of Appellant No. 1 but were sold by Appellant No. 1 through brokers. 2.6 Inquiry was made with Shri Upender Goel, Director of Appellant No. 1 and his statement was recorded on 19-9-06 under Section 14 of Central Excise Act, wherein he stated that - (a) their factory was running into losses and electricity connection got disconnected on 30-11-02; (b) Appellant No. 1 had MOU with SAIL for purchase of 54000 MTs of HR Coils and SAIL s rate to them as actual consume was about Rs. 500 to 1000/- per MT lower than the market rate; (c) in August 2003 their cheque to SAIL got bounced, as a result of which cheque facility was withdrawn; (d) at one stage, some traders M/s. D.V. Steel, M/s. S.P. Sales, M/s. Mittal Steel of Navyug Market, Ghaziabad started lifting HR coils from SAIL on their account (i.e. on account of Appellant No. 1) and for this purpose, they used to give cash to Appellant No. 1 which was being deposited in its bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 26 of Central Excise Rules, 2002; (d) penalty of Rs. 5 lakhs each was imposed on Appellant Nos. 4 5 under Rule 26 of Central Excise Rules, 2002; and (e) penalty of Rs. 5 lakhs each was imposed under Rule 26 of Central Excise Rules on other noticees. 2.9.1 Against the above order these five appeals alongwith stay applications have been filed. 3. Heard both the sides. 3.1 Shri Kamaljit Singh, Advocate, the learned Counsel representing the appellant Nos. 1, 2, 3 pleaded that the inputs -H.R. Coils were duty paid and had been purchased by the appellant No. 1 from SAIL for manufacture of CR strips, that though during the period from December 2002 to December 2005, there was no electricity connection in the factory of appellant No. 1, the re-rolling units installed in the factory were being run on generators, that while the appellant No. 1 had three generators for 488 HP capacity, during period from July 2002 to December 2003 one more generator of 1250 KVA had been taken on rent and these generators were fully capable of running the entire plant, that the allegation that there was no manufacturing activity in the factory of appellant No. 1 is incorrect, that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Counsel representing the appellant No. 4 and 5 pleaded that they were only the cutters of HR Coils sent to them by the appellant No. 1, that the coils after being cut were being returned to them, that in any case they had no role in the alleged sale of the coils, that there is no contravention of any provisions of the Central Excise Rules by them and hence no penalty is imposable on them under Rule 26 of the Central Excise Rules and that in view of this, both the appellants have a strong prima facie case and, therefore, the requirement of pre-deposit of penalty may be waived for hearing of their appeals. 3.3 Shri Virender Choudhary, the learned Departmental Representative opposing the appellant s plea for waiver from the requirement of pre-deposit of duty demand, interest and penalty reiterated the findings of the Commissioner (Appeals) in the impugned order and emphasised that : (a) the appellant No. 1 during the period of dispute had no power connection and the diesel generators installed were not capable taking the load of the rolling mills and it was not possible for appellant No. 1 to consume the HR coils purchased from SAIL for production of CR strips, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied. As per the explanations to this Section, the term duty demanded includes the amount of erroneous Cenvat credit demand and also the interest payable under the provisions of this Act or the Rules made thereunder. First proviso to Section 35F, however, provides that the Appellate Authority can dispense with the pre-deposit, subject to such conditions as it may deemed fit to impose, so as to safeguard the interests of revenue, if the Appellate Authority is of the opinion that the pre-deposit of duty demanded and of penalty would cause undue hardship to such person. 5.1 On the question as to what is undue hardship Hon ble Supreme Court in the case of Benara Valves Ltd. v. CCE reported in 2006 (204) E.L.T. 513 (S.C.) = 2008 (12) S.T.R. 104 (S.C.) has held thus : 11. Two significant expressions used in the provisions are undue hardship to such person and safeguard the interest of revenue . Therefore, while dealing with the application, twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view. 12. As noted above there are two important expressions in Section . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such requirement particularly in a case where the appellant satisfies the Appellate Authority that his case is squarely covered by the decision of competent court binding on it and in such cases, asking the appellant to deposit the duty demanded and the penalty levied would cause undue hardship to the appellant. 5.3 On this question Hon ble Supreme Court in another judgment in the case of Indu Nissan Oxo Chemicals Industries Ltd. v. Union of India reported in 2008 (221) E.L.T. 7 (S.C.) has held as under : It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles, that does not give a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory premises of appellant No. 1 but were sold out from the factory premises of the M/s. Jain Cutter (appellant No. 4) and M/s. Saaras (Cutters) India P. Ltd. (appellant No. 5). Shri Yashpal Sharma, Dy. GM of the appellant company in his statements dated 21-2-06, 27-2-06, 6-3-06 and 10-3-06 has admitted that during the period of dispute, there was no production of CR coils but still the production of CR strips and scrap but the sale of CR coils/strips was being shown to various parties, some of which are M/s. Bharti Trading Company and M/s. Ashushi Steels. The statements of Shri Yashpal Sharma recorded under Section 14 of the Central Excise Act by a Gazetted Officer have not been retracted by him and resiling from such statements at the stage of appeal has no meaning and, therefore, we are of prima facie view that these statements of Shri Yashpal Sharma have to be treated as admissible evidence. We also find that the statements of Yashpal Sharma are corroborated by the statement of Shri Upender Goyal, Director of the appellant No. 1, wherein he has explained in much greater detail the modus operandi of taking bogus Cenvat credit and passing on the same. The huge outstanding ..... 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