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TMI Blog2024 (12) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued vide F.No. V.Ch.24(04)01/ Altaf-KKGutkha/ H-1/ Prev/ Adj/ Commr.2017-18. (c) Pending the admission, final hearing and disposal of the present Special Civil Application be pleased to stay implementation, operation and execution of the Order-in-Original dated 25.03.2021 bearing No. VAD-EXCUS-002-COM-29-20-21, in Show cause notice dated 19.11.2019 bearing No. V Ch 24 (04) / Altaf-KK-Guthka/H-l / Prev/Adj /Commr /03/2019-20 passed by Principal Commissioner, Central GST & Central Excise, Vadodara - II; (d) Quash and set aside Show Cause Notice dated 08.08.2017 bearing F. No. V.Ch.24 (04)01 / AltafKK-Guthka/ H-I/Prev/Adj/Commr./ 2017-18 issued by Principal Commissioner, Central GST & Central Excise, Vadodara - I. (e) Quash and set aside Show Cause Notice dated 19.11.2019 bearing F. No. IV/6-Pre / 66 / KKGuthka / 2016-17 / Gr.A / Part-II in V.Ch.24(04) 01 / Altaf / KK-Gutkha / HI / Prev / Adj /Commr / 03 / 2019-20 issued by Principal Commissioner, Central GST & Central Excise, Vadodara - II; (f) Quash and set aside the Order-in-Original dated 25.03.2021 bearing No. VAD-EXCUS-002-COM-2920-21, passed by Principal Commissioner Of Central GST & Central Excise, Vadodara-II; (g) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Act, 1944 (for short, "the Act"), submissions were made on two counts, firstly, the financial incapacity of the petitioner to deposit Rs.10 Crore as pre-deposit and secondly, to make out a prima facie case in favour of the petitioner on merits for waiver of pre-deposit. 6. Before we advert to the submissions in detail, it would be germane to refer to the bare facts emerging from the record. 6.1 The petitioner is the owner of a 'Gutkha' (tobacco) manufacturing unit named "M/s. K.K. Gutkha" situated at Village: Kumbhani, District: Chotaudepur. It is the case of the respondents that the petitioner was involved in the activity of manufacture of 'Gutkha' under various brand names, viz. "KK Gutkha", "RR Gutkha" and "Goa Gutkha" with the aid of Form, Fill and Seal pouch packing machines (FFS machines), classifiable under "CETH 2403 9990". The said machines were neither registered with the respondent Department under the Central Excise Rules, 2002 (for short 'the Rules') nor were declared as such under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (for short, "the Rules , 2008"). 6.2 On 15th/16th February, 2017, a search was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emises. 4 OPPO Mobile (Model-A33F) IMEI - 863710031542417 01 From labour's room of second part of the factory premises. 5 INTEX Mobile (Model-Cloud Cube) IMEI 0911497600140400 /18 01 From labour's room of second part of the factory premises. 6 Finished goods 10 bories From outside field which is around 100 metres away from factory premises. 7 Packing material 03 Rolls (01-Goa,01-KK& 01-RR) From the second part of the factory premises. 6.4 The above seized goods were loaded in two trucks bearing registration number GJO1AU3396 and GJ20U4896 for transporting the same from Chhotaudepur to Vadodara. Further, the Officers, in the presence of Panchas, sealed all the three parts of the said premises with paper seals duly signed by Panchas and officers. 6.5 The statements of the Employees / Workers / Labourers viz. Shri Sushil Kumar, Shri Pradeep Kumar Gautam, Shri Lavlesh Kumar, Shri Ranu Rajput, Shri Amar Rajput, Shri Neeraj Kumar Nishad, Shri Anil Kumar Gautam, Shri Ankit Kumar Gautam were recorded on 15/16.02.2017 at the said Gutkha manufacturing unit/factory. From their statements, it was noticed that there is a common thread coming to light, as under: (i) That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods / items were stored and sealed in two go-downs in office premises of Vadodara-I Commissionerate. Sr. No. Goods appeared to be Sack No. from sample taken No. of sample taken 1 Supari 867 04 sample taken 2 Tobacco 71 04 sample taken 3 Katha 30 04 sample taken 4 Mix material 242, 258, 236, 181, 128, 102, 50, 31, 78, 150 03 sample from each sack 6.8 It appears that after the aforesaid searches, two separate show cause Notices were issued to the petitioner. The first Notice dated 21.02.2017 related to the goods seized under Panchnama dated 15/16.02.2017 valued at Rs.6,71,200/-; whereas, the second Notice dated 08.08.2017 related to levy of duty and for imposition of penalty under Rule 25 of the Rules and Rule 17 of the Rules of 2008. The petitioner was, thereby, asked to show cause as to why; "(i) Central Excise duty amounting to Rs. 433,11,24,000/- (Rupees Four Hundred Thirty Three Crores Eleven Lakhs Twenty Four Thousands only) from period October 2014 to February 2017, should not be demanded and recovered from him under Section 11A (4) of the Central Excise Act, 1944. (ii) Interest should not be demanded and recovered from him on the Central Excise Duty d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the impugned Order-in-original came to be passed by the respondent authority and final portion of the said order reads as under; " : ORDER : (i) I hereby determine the demand of Central Excise duty amounting to Rs. 433,11,24,000/- (Rupees Four Hundred Thirty Three Crores Eleven Lakhs Twenty Four Thousands only), as summarized in ANNEXURE - A & A-1 to the Show Cause Notice, for the period from October-2014 to February- 2017 and order for recovery of the same from Shri Altafhusen Mayuddin Khatri, Owner of Gutkha manufacturing Unit known as M/s. K.K. Gutkha, Kumbhani village, 8 km from Zoj, Nr. Tejgadh Village, District Chhotaudepur, Gujarat-391165 under Section 11A(10) of Central Excise Act, 1944 which has been kept in force post 01.07.2017 vide Section 142 and 174 of the Central Goods and Services Tax Act, 2017; (ii) I order to recover interest at appropriate rate from Shri Altafhusen Mayuddin Khatri, Owner of Gutkha manufacturing Unit known as M/s. K.K. Gutkha, Kumbhani Village, 8 km from Zoj, Nr. Tejgadh Village, District Chhotaudepur, Gujarat-391165, on Central Excise duty amounting to Rs. 433,11,24,000/-, mentioned at (i) above, under Section 11AA of the Central Excise A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods, i.e. Pan Masala/Gutkha illegally under unregistered factory premises and also transporting, removing and keeping record of the said goods which he knows or has reason to believe to confiscated under the Central Excise Act and rule made there under. (vi) I impose penalty of Rs.5,00,000/- (Rupees Five Lakhs only) on Shri Bhangrabhai Undalbhai Rathva, Kumbhani Village, 8 K. M from Zoz, Chhota Udeipur, Landlord of Gutkha manufacturing Unit known M/s. K.K. Gutkha, Kumbhani village, 8 km from Zoj, Nr. Tejgadh Village, District Chhotaudepur, Gujarat-391165, under Rule 26(1) of the Central Excise Rules, 2002, which has been kept in force post 01.07.2017 vide Section 142 and 174 of the Central Goods and Services Tax Act, 2017, for providing his premises on rent without any legal rent agreement where illegal activity of manufacturing of Gutkha / Pan Masala containing tobacco performed specially at night, and the said goods were stored which he knows or has reason to believe, were liable to confiscation under the Central Excise Act and rule made thereunder. (vii) I am-not imposing penalty under Rule 26(1) of the Central Excise Rules, 2002, on Shri Govindbhai Bicchiabhai Rathva, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thirdly, a total number of 17 machines were taken into consideration for computation of the alleged evasion of Duty; however, only 06 (six) machines were in working condition. Therefore, the amount calculated by the respondent authority would come down to anywhere between Rs.20 to 30 Crore instead of Rs.433 Crore (rounded off). 9. Learned advocate Mr. Raju referred to and relied upon the findings given in the impugned Order-in-original dated 25.03.2021 to demonstrate that the petitioner has a very good prima facie case for waiver / reduction of the amount of pre-deposit. It was pointed out that the respondent authority has considered the period of operation for the Duty liability by relying upon the statement of Shri Bhangrabhai Undalbhai Rathva, landlord of the premise where the factory was operating, recorded on 07.03.2017 wherein, he has indicated that the premises were being utilized for manufacture of "Gutkha" for about two years from January 2015. It was submitted that such statement was later retracted and therefore, it ought not to have been relied upon by the adjudicating authority to consider the period of operation from Financial Year 2014-15 in view of Rule 17(2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid decision, it was submitted that a writ petition under Article 226 of the Constitution of India would be maintainable in the facts of the present case considering the prima facie case in favour of the petitioner. It was submitted that in extreme cases, the assessees are not remedy less and that a writ petition under Article 226 of the Constitution could be preferred, which was upheld by the Hon'ble Apex Court. While upholding the judgment of the Hon'ble Jharkhand High Court, the Hon'ble Apex Court also upheld the Constitutional validity of the amendment of Sections 35F & 35D of the Act. It was pointed out that before the Hon'ble Jharkhand High Court, while contesting the vires of the provisions of section 35F of the Act, it was the stand of the respondent Department that in extreme cases, it would be open to the assessee to avail the remedy provided under Article 226 of the Constitution of India. 10.1 Reliance was also placed on the decision of the Hon'ble Delhi High Court in the case of Mohammad Akmam Uddin Ahmed and others Versus Commissioner Appeals, Customs and Central Excise and others reported in 2023 SCC OnLine Del 2450 wherein, in the facts of the said case, it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be entertained. 11.3 It was further submitted that the petitioner has been precluded from making any submissions on merits by order dated 16.12.2021 inasmuch as paragraph-3 of the said order clearly refers to the financial difficulty of the petitioner and not about the merits of the case. 11.4 In support of his submissions, learned advocate Mr. Sharma referred to and relied upon the judgment rendered by the Division Bench of this Court in the case of M/s. Universal Gems Versus Union of India rendered in Special Civil Application No.16139 of 2023 dated 05.01.2024. It was pointed out that the Hon'ble Apex Court has also dismissed the S.L.P. preferred against the said order passed by this Court. It was pointed out that in the said case, the penalty amount was Rs.182 Crores and the petitioner therein was required to make deposit of 7.50% of the said amount or a maximum amount of Rs.10 Crore whichever is less as a pre-deposit for preferring appeal, and, the main contention of the petitioner therein was also financial hardship. It was pointed out that this Court considering the provisions of section 129E of the Customs Act,1962 which is similar to section 35F of the Act, held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. A bare perusal of the above provision makes it clear that the petitioner is liable to make pre-deposit of Rs.10 Crores, being the minimum amount for filing an appeal before the CESTAT. This Court is, therefore, not required to examine whether there is any prima facie case in favour of the petitioner in view of the fact that after the insertion of Section 35F, no discretion whatsoever has been left for granting any waiver / reduction in the amount of pre-deposit for preferring an appeal. Therefore, this Court would not be in a position to grant waiver or to reduce the amount of pre-deposit for preferring an appeal on the ground of financial hardship as it would be contrary to the legislative intention. Moreover, this Court vide order dated 16.12.2021 has observed that the petitioner is precluded to make submissions on merits, hence, the submissions made qua prima facie case is required to be considered accordingly. 14. In the case of M/s. Universal Gems (supra), under similar provision of the Customs Act, 1962, this Court held in paragraphs - 15 & 16 as under; "15. On perusal of the aforesaid provision, it is clear that it is mandatory for the person being aggrieved by the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Muzaffarnagar and also Nivedita Sharma vs. Cellular Operators Association of India & Ors.). In Thansingh Nathmal & Ors. vs. Superintendent of Taxes, Dhubri & Ors., the Constitution Bench of this Court made it amply clear that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition, if an alternative effective remedy is available to the aggrieved person. In paragraph 7, the Court observed thus: (Thansingh Nathmal case, AIR p.1423) "7. Against the order of the Commissioner an order for reference could have been claimed if the appellants satisfied the Commissioner or the High Court that a question of law arose out of the order. But the procedure provided by the Act to invoke the jurisdiction of the High Court was bypassed, the appellants moved the High Court challenging the competence of the Provincial Legislature to extend the concept of sale, and invoked the extraordinary jurisdiction of the High Court under Article 226 and sought to reopen the decision of the Taxing Authorities on question of fact. The jurisdiction of the High Court under Article 226 of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther appeal to the Tribunal under sub-section (3) of Section 23 of the Act, and then ask for a case to be stated upon a question of law for the opinion of the High Court under Section 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford [(1859) 6 CBNS 336, 356] in the following passage: 'There are three classes of cases in which a liability may be established founded upon statute. . . . But there is a third class, viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it.... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a case where the appellant has a strong prima facie case. 18. Considering the aforesaid dictum of law, it appears that the petitioner, therefore, must satisfy this Court that he has a good prima facie case to the effect that he is likely to succeed in the appeal. In order to come to the conclusion that the petitioner would succeed in the appeal, having a good prima facie case, so as to grant waiver of the pre-condition of pre-deposit for filing the appeal, the petitioner is required to disclose a situation where he may be either subjected to gross injustice and / or misfortune or he is liable to excessive demand, contrary to the facts and evidence on record or the impugned orders are perverse, coupled with the fact that the conduct of the petitioner is blotless. 19. Considering the facts of the case and the three tests which may be considered to arrive at a prima facie conclusion as to whether the petitioner has a prima facie case for waiver of the pre-deposit or not, we are required to examine the facts, which are recorded in the order-in-original. 20. A glaring aspect of the case is that the petitioner was manufacturing "Gutkha" in a clandestine manner, without having any Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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