Calcutta High Court
Hindusthan Laminators Pvt. Ltd. vs C.C.E., Calcutta-I on 28 January, 2002
Equivalent citations: 2002(83)ECC418, 2002(141)ELT614(CAL)
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose
ORDER Pinaki Chandra Ghose, J.
1. The petitioner has challenged the orders passed by the Customs Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as CEGAT). The Tribunal on the application under Section 35F of the Central Excise Act, 1944 (hereinafter referred to as the said Act) directed the petitioner company to make a pre-deposit of Rs. 10 lacs out of a demand for duty of Rs. 86,54,835.69 and penalty of Rs. 9 lacs. The other order which has been challenged in the order dated July 6, 2001 filed by the petitioner-company for modification of the said order dated August 30, 2000 praying that it should not be required to make any pre-deposit.
2. The basic dispute between the petitioner-company and the Central Excise Authorities is whether duties were required to be paid on duty paid jute fabrics after lamination. According to the Central Excise authorities such duty was required to be paid after lamination, the quantum thereof being equal to the duty already paid on the jute fabrics and the case of the petitioner is that by reason of a Notification bearing No. 53/65-C.E., dated March 20, 1965 and a circular dated March 24, 1965 contemporaneously issued by the Central Board of Revenue (hereinafter referred to as the Board). No further duty was payable on the duty paid jute fabrics after lamination.
3. The show cause notice dated March 31, 1994 demanding duty in respect of the period from April 1, 1989 to December 31, 1993 was served on the petitioner company on May 16, 1994. According to the petitioner, the normal period of limitation laid down in Section 11A(1) of the Act for issuing the show cause notice is six months. The notice sought to invoke the longer period of limitation laid down in the proviso to Section 11A(1) of the Act. The Commissioner, who readjudicated upon the matter on February 28, 2000 pursuant to an earlier remand by the Tribunal confirmed the demand only in respect of the period from April 1, 1989 to March 31, 1993. The Commissioner has also justified the invocation of the longer period of limitation laid down in the proviso to Section 11A(1) of the Act on the ground that the petitioner company did not inform the department about its activities nor complied with any Central Excise formality and the material facts came to be known to the Department only on the visit of the Central Excise Officers in August, 1993. The Commissioner also accepted the declaration filed by the petitioner on April 15, 1993 and dropped the demand in respect of the period from April 1, 1993 to December 31, 1993. However, learned Commissioner has confirmed the demand of duty amounting to Rs. 86,54,835.69 and imposed a penalty of Rs. 9 lacs on the appeals. Hence appeal was filed on the CEGAT inter alia challenging the said order passed by the learned Commissioner.
4. The petitioner filed the said petition seeking waiver of the condition of pre-deposit of the Central Excise duty of Rs. 86,54,836/- and penalty of Rs. 9 lacs imposed on the petitioner company by the order passed by the Commissioner dated 28th February, 2000. The said application was heard and disposed of on 30th August, 2000 by the CEGAT rejecting the prayer of the petitioner. CEGAT came to the conclusion that the case is arguable from both the sides. Having regard to the facts and circumstances of this case, the Commissioner directed the appellants to deposit Rs. 10 crores towards duty by 15th November, 2000 and the matter was kept for compliance on 20th November, 2000. Subject to payment of the said amount, pre-deposit of the balance amount of duty and penalty is waived and its recovery stayed. The petitioner from the said order did not make any payment in terms of the said order and thereafter filed an application for modification of the said order before the CEGAT and the said modification application was disposed of on 6th July, 2001 by the said Tribunal. After hearing the said modification application the Tribunal came to the conclusion that after the parties the Tribunal only directed the petitioner to deposit a small portion of the total demand of duty i.e. Rs. 95 lacs which was confirmed against them and it further appears that the original order passed by the Tribunal on 30th August, 2000 and the modification application was filed almost after a year without depositing the amounts so directed by the CEGAT. The Tribunal rejected the said modification application and extended the said period to deposit the said amount till 31st August, 2000.
5. As it appears from the order passed by the CEGAT learned Counsel appearing on behalf of the petitioner only submitted that the peti-' tioners are in a poor financial condition.
6. It further appears that the petitioner did not place any other facts to show that if any order of payment is made by CEGAT that will really cause undue hardship to the petitioner. No documents were placed before the CEGAT to come to such conclusion. Accordingly, the CEGAT was pleased to pass the above order.
7. Thereafter, this application has been filed before this Court. The petitioner has submitted that the said Tribunal has failed to exercise the discretion in favour of the petitioner.
8. Learned Counsel appearing on behalf of the petitioner contended that the proviso also relied upon 1991(53) E.L.T. 543 [J.N. Chemical (Pvt.) Ltd. v. CEGAT) and directed the Tribunal to entertain and to decide the appeal in accordance with law by dispensing with the requirement of pre-deposit of the amount of excise duty and penalty in dispute on the finding that the case of the appellant was fully covered by the authority and the Tribunal ought not to have insisted upon pre-deposit. He further relied upon another judgement reported in 1989 (39) E.L.T. 178 (Vijay Prakash Mehta v. Collector of Customs) and contended that the proviso of Section 35F gives a discretion to the authority to dispense with the obligation to deposit in case of "undue hardship" and the discretion must be exercised on relevant materials, honesty, bow fide and objectively. He further contended that the Tribunal has failed to exercise its discretion on the basis of the relevant materials.
9. He further contended that the Commissioner had no jurisdiction to act contrary to the circular issued by the Board on March 24, 1965 and relied upon the following judgments :-
1996 (87) E.L.T. 19 - Ranadey Micromitrients v. Collector of Central Excise;
1996 (88) E.L.T. 638 - Collector of Central Excise v. Jayant Dalai Pvt. Ltd.; and 1997 (94) E.L.T. 460 - Collector of Central Excise v. Usha Martin Industries.
10. He further submitted that the declarations submitted by the petitioner on April 15, 1991 and April 13, 1992 carrying the seal of the receiving office could not be ignored merely because the receiving person had not signed. He further contended that all concerns including the Central Excise Authorities, the petitioner company and the other manufacturers similarly situated had all along proceeded on a particular construction of the notification and Circular of 1965. 28 years after the issue of the said circular and notification, the Central Excise authorities sought to construe the same in a different manner and as soon as that happened the Government clarified the position by issuing a notification bearing No. 92/94-C.E., dated April 25, 1994. He further contended that the petitioner company and other manufacturers similarly situated had bona fide proceeded on a particular view of the notification and circular and no intention or motive could be imputed to the petitioner company so as to invoke the proviso to Section 11A(1) of the Act.
11. Learned Counsel relied upon the following judgements of the Hon'ble Supreme Court in respect thereof :-
- (Lubri-Chem Industries Ltd. v. Collector of Central Excise);
- Cosmic Dye Chemical v. Collector of Central Excise; and
- Pushpam Pharnmceuticals Company v. Collector of Central Excise.
12. He further contended that no other concern undertaking the same activities as the petitioner company had been required to pay duty and the petitioner company could not be denied the benefit of the notification and circular of 1965. The Tribunal itself has laid down this proposition in the case of "Commissioner of Central Excise v. Oswal Woollen Mills Ltd." reported in 2000 (120) E.L.T. 786.
13. He further contended that this is not a case where the penal provisions could at all be invoked. It has been stated in the said application that the petitioner company's factory at Calcutta closed since December, 1993 and the petitioner company had been incurring losses for some time. The petitioner company's balance sheet and profit and loss account for the year ended March 31, 2000 were annexed to the stay application. In these circumstances, he submitted that the financial position of the company is in such a position that the company will not be able to make any pre-deposit.
14. He further contended that the plea of the financial hardship was not even adverted to by the Tribunal. He further contended that the CEGAT did not dispute that the petitioner company has an arguable cause. In these circumstances he submitted that an order should be passed by this Court waving the said pre-deposit and he submitted that the Tribunal ought not have been insisted upon the pre-deposit and to allow the petitioner to proceed before it filed before them.
15. Learned Counsel appearing on behalf of the respondents contended before this Court that the Tribunal CEGAT has given substantial relief by way of waiving pre-deposit and submitted that the Tribunal has directed the pre-deposit only Rs. 10 lacs against the adjudication amount exceeding Rs. 96 lacs. He further contended that the discretion has been exercised substantially in favour of the petitioner, as such there is no cause of interference with such exercise of discretion.
16. After considering the facts and circumstances of this case only at this stage it is to be decided by the Court whether CEGAT has passed the said order dated August 30, 2000 after taking into account the financial hardship as stated by the company before the said Tribunal. As it appears from the order passed by the said Tribunal the Tribunal has only stated as follows :-
"... that the applicants are in a poor financial condition and insistence on payment of any amount would amount to undue hardship."
17. It appears that the documents placed by the company in the modification application to place the financial hardship to be caused to the petitioner has not been properly dealt with by the Tribunal at the time of passing of the said order dated July 6, 2001. It further appears from the order that the Tribunal was also pleased to uphold that the case is of arguable nature from both the sides. Therefore, the fact shows that the petitioner has a strong prima facie case and which has to be determined after hearing the parties. If the petitioner does not get any chance to place their case before the said Tribunal and only on the ground of the pre-deposit, the appeal is dismissed in that case, in my opinion the petitioner will suffer irreparable loss and prejudice. Furthermore, it appears to me that the case of the petitioner was also covered by the decision of the Hon'ble Supreme Court and in my opinion the company must get a chance for the interest of justice to be heard on the point by the Tribunal. It further appears that the case as pleaded by the plaintiff in respect of their financial hardship and the financial position which was also filed before the Tribunal and further placed before this Court which would show that the prior deposit of the duty will cause hardship to the petitioner and furthermore the said aspect has not been taken into account properly in my opinion by the CEGAT at the time of hearing of the modification application or the other application. Accordingly, in my opinion, the plea of financial hardship has to be taken into account by the Court for the interest of the justice in favour of the petitioner and I do not have any hesitation to agree with the opinion expressed by the Hon'ble Division Bench of this High Court in "J.N. Chemical (Pvt.) Limited v. CEGAT reported in 1991 (53) E.L.T. 543 where the Court has come to the conclusion which may be reproduced hereunder :-
"These judicial pronouncements of high authority show that even where enabling or discretionary power is conferred on a public authority, the words which are permissive in character may be construed as involving .1 duty to exercise the power is essential. If there is failure on the part of the donee to exercise such power accordingly, the Court will require it to be exercised."
18. Accordingly, I direct the Tribunal to entertain and decide the appeal in accordance with law by dispensing with the requirement of pre-deposit of the amount of excise duty and penalty in dispute. At the time of hearing of this application the Counsel appearing on behalf of the petitioner contended that the appeal has already been dismissed on 24th September, 2001. In view of such submission the order, if any, passed in the said appeal, is also set aside by this Court and I direct to hear out the appeal as directed hereinabove in accordance with law.
For the reasons stated hereinabove, this application is disposed of.