Customs, Excise and Gold Tribunal - Bangalore
J.K. Industries Ltd. vs Commissioner Of Central Excise on 22 February, 2006
ORDER S.L. Peeran, Member (J)
1. By Stay Order No. 879/05 dated 24-11-2005, the Tribunal passed the following order directing to pre-deposit the amounts as noted in Para 4
4. On a careful consideration, we notice that we are bound by the judgment rendered by the larger bench in the assessee's own case. The demands have been requantified in terms of the larger bench judgment rendered in the assessee's own case. Therefore, they are required to pre-deposit the balance amount i.e. Rs. 79,33,636/- after deducting Rs. 6 lakhs already deposited by them within three months. Matter to come up for reporting compliance on 16-3-2006. It is made clear that on failure to pre-deposit the amount, appeal is liable to be dismissed.
2. They were to report compliance on 16-3-2006. Before the date of compliance the appellants have filed the above noted Miscellaneous Application under Section 35C(2) of CE Act asking for rectifying the mistakes on the grounds stated in the Miscellaneous Application.
3. The learned SDR submitted that an application for rectification of mistake under Section 35C(2) is maintainable and it is to be filed only when a final order has been passed by the Tribunal. It is his submission that application is not maintainable in terms of the said provisions.
4. The learned Counsel submits that the application may be treated as an application for modification of the Stay Order already passed directing them to pre-deposit the entire amount on the ground given therein. He submits that the grounds made in the Miscellaneous Application may be treated as for modification of the Stay Order as per Rule 41 of the CE Act.
5. The prayer of the Counsel to treat the application for modification of the stay order is accepted. The application cannot be treated as rectification of mistake under Section 35C(2) of the CE Act, as the application for rectification of mistake arises only when a Final Order is passed by the Tribunal.
6. The contention of the appellant is that the CESTAT, New Delhi vide Final Order No. 13-16/05 NBA dated 6-1-2005 [2005 (179) E.L.T. 542 (Tribunal)] has rejected the appeals filed by the Revenue on the issue of classification of rubber coated tyre cord fabrics, which has been subjected to the processes of rubber coating and calendering and held that the item in question is not classifiable under Heading 59.02. On that premise, the Tribunal has rejected the stay application and directed them to pre-deposit, as the goods have been held to be classifiable under Heading 59.06. The Tribunal in the Stay Order has noted that the Adjudicating Authority was directed only to re-quantify the amount, which he has been rightly done. It is the submission of the appellant that the issue in the appeal pertains to duty payable on Rubberised Nylon Tyre Cord Fabric (RNTCF) manufactured and used captively in the manufacture of Animal Driven Vehicle (ADV) tyres which were exempted from payment of duty. The item is not marketable and chargeable to duty. It is submitted that in the Final Order No. 13-16/05-NBA dated 6-1-2005 dealt with rubber coated tyre from fabric and not with the issue pertaining to Animal Driven Vehicle tyres. He also submits that the issue pertaining to marketability has not been dealt with. Therefore, the Stay Order is required to be rejected. The learned Counsel submits that the Commissioner in their competing industries case i.e., in the case of Falcon Tyres Ltd. vide Order-in-Appeal No. 175/2005 has allowed their appeal on the ground of non-marketability and the item having very small shelf-life. He submits that the appellants' factory is also situated in Mysore Collectorate and therefore the Order of the Commissioner (A) is applicable to the facts of the case. He submits that irrespective of plea for financial hardship, the stay order is required to be allowed and full waiver to be granted. It is his submission that once a prima facie case has been established, the question of considering the Revenue's hardship for pre-deposit does not arise. The learned Counsel submits that he is conscious of the Karnataka High Court ruling rendered in the case of CCE v. McDowell & Company Ltd. wherein it has been held that Tribunal has no powers to recall an interim order passed under Section 35F of the CE Act. He submits that this order of McDowell & Company Ltd. (supra) has also been followed by the same Karnataka High Court in the subsequent writ petition filed by United Telecom Ltd. vide WP No. 25431 of 2005 (T-TAR) 2006 (198) E.L.T. 12 (Kar.). He contends that the Divisional Bench of Karnataka High Court in the case of STC Ltd. v. CCE &C-ILR reported in 2000 KAR (25) has held that once the appellants demonstrates to the Tribunal that their case is required to be allowed on merits, then they are required to be granted full waiver of pre-deposit of the amounts. He also submits that the Apex court in the case of Mehsana District Cooperative Milk Producers Union v. UOI has held that no pre-deposit is required to be made in case the appellant establishes that the appeal is required to be allowed on facts of the case. He further submits that the Stay Order is required to be recalled and full waiver to be granted by allowing the Miscellaneous Application, in view of the fact that the Commissioner (A) in the case of M/s. Falcon Tyres Ltd. vide Order-in-Appeal No. 175/2005 dated 8-9-2005 has held that the product in question is not marketable.
7. The learned SDR submits that the Karnataka High Court in the case of McDowell & Co. Limited (supra) has clearly laid down that the Tribunal has no powers to modify an interim order passed under Section 35F of the Act. He also points out that even if the appellants have established their prima facie nature of the case in their favour, yet the Revenue's hardship is required to be considered. It is his submission that the assessee is not pleading financial hardship, therefore in terms of the latest order of the High Court dated 20-1-2006 in the case of M/s. United Telecom Ltd., this issue pertaining to recall of the order for pre-deposit cannot be reconsidered. The High Court has held in Para 27 onwards that prima facie case in itself does not translate into a case of undue hardship. The learned SDR further submits that the product is marketable and they are required to pre-deposit the amount. He submits that the larger bench dealt with the same issue. He also relies on the Birla Tyres v. CCE, Bhubaneswar-I reported in 2001 (135) E.L.T. 1313 (Tri.-Kolkata) which has held Dipped/Rubberised tyre cord fabric captively consumed in the manufacture of tyres is classifiable under Heading 59.05 (now 59.06) and the Tribunal has upheld the levy of basic excise duty. He also submits that the issue has been decided by the Tribunal in the Revenue's favour and hence, the order of the Tribunal directing them to pre-deposit should not be recalled and waiver is not required to be granted.
8. On a careful consideration, we notice that the Karnataka High Court in the case of McDowell & Company's case (supra) has given a ruling that the Tribunal has no powers to recall the interim order. This view has been reiterated by the High Court in the case of CCE v. United Telecom Ltd., (supra). Although, we find that the Divisional Bench of the High Court in the case of ITC (supra) has taken a view that when the appellant establishes a prima facie case, then the hardship is also said to be in favour of the assessee and waiver is to be granted. But the Karnataka High Court in the case of McDowell & Company (supra) has taken a contra view that the Tribunal has no powers to recall the order. In our humble opinion, the law is settled that when a matter is covered by series of case laws, then the waiver for pre-deposit is to be granted. The Tribunal has also inherent powers to recall or modify its interim orders. However, we are now faced with two different directions given by the High Court in the case of CCE v. United Telecom Ltd. (supra) and McDowell & Company (supra). We also find the views expressed in these two orders are also contra to the view expressed by earlier order of Karnataka High Court and Apex Court. But keeping in view the dicta given to us in these two orders and in keeping with the judicial discipline, we are of the view that we are not in a position to recall the said stay order in question. The appellants' contention is that the Commissioner (A) in the case of M/s. Falcon Tyres Ltd. has dropped the demands and hence, the said stay order is required to be recalled, The learned SDR at this stage pointed out that he has no information about the Revenue filing an appeal before the Tribunal. This issue is covered in the Revenue's favour in the case of Birla Tyres (supra). He further submits that the Larger Bench judgment cited in the Stay Order is applicable to the facts of the case and the matter was sent back only for re-quantification of duty. The assessee had not appealed against the Larger Bench judgment. In view of this submission, we are of considered opinion that the appellant having not established any prima facie nature of the case in their favour and that the financial hardship has not been pleaded in the matter, therefore, in the light of the observations made by the High Court in the case of CCE v. United Telecom Limited, we have to reject the miscellaneous application seeking for modification of the stay order in question. Paras 27-30 of the stated judgment is reproduced herein below:
27. I am of the clear view that a prima facie case in itself does not translate into a case of undue hardship. A prima facie may be the sine qua non for invoking the jurisdiction of the Tribunal to exercise the power for passing order of waiver of pre-deposit and not the end in itself to automatically grant a total waiver. It is only when the Tribunal is satisfied and forms an opinion that the requirement of pre-deposit will constitute undue hardship then the discretion can be exercised for considering the application for waiver. The extent of waiver which again depends upon the financial position of the assessee, is again a matter in the discretion of the Tribunal. But the Tribunal should show its awareness to this aspect. Even while the Tribunal should remain focused on the aspect of safeguarding the interest of the revenue and that awareness is exhibited by imposing commensurate conditions and not by indicating that the hearing in the appeal may be expedited as the amount involved is huge. It is not the lip sympathy of the Tribunal which can fulfil the statutory requirement of ensuring the safeguard of the interest of the revenue, but a concrete order indicating the manner in which the interest of the revenue is in fact safeguarded by imposing commensurate conditions.
28. The phrase 'undue hardship' which occurs in the proviso to Section 129E where the rule is pre-deposit of the amount that is disputed in the appeal, has to receive the meaning in the context in which it occurs viz., in the context of the requirement of the pre-deposit. In all tax matters, the lis between the revenue and the assessee is about the tax liability which again is in terms of the amount the assessee has to pay in favour of the revenue. The difficulty arises to an assessee because of this liability and not for other reasons. The concept of undue hardship in the context of taxing statutes and occurring in a provision like the pre-deposit provision under Section 129E can only be linked to the financial hardship that the assessee faces if the assessee has to comply with the pre-deposit requirement and cannot be anything else. Unless an assessee pleads the financial hardship for the compliance of pre-deposit and the assessee in fact is unable to pay the pre-deposit amount in reality also, there is no undue hardship as contemplated in the proviso to Section 129E. In the present case it is not even the case of the appellant before the Tribunal that it faces any financial hardship or has any difficulty in this regard. Even in the absence of any plea from the appellant before the Tribunal to this effect, the Tribunal ventures upon to grant total waiver of pre-deposit. It is undoubtedly yet another instance of as observed by this Court in the case of Mc Dowell & Company (supra) the Tribunal being more loyal than the king. It is rather surprising that the Tribunal persists in ignoring the statutory provisions as contained in the proviso to Section 129E in passing such order for the purpose of pre-deposit when the order is passed only under this proviso and not under any other provision. The impugned order is clearly a violation of the statute, fit to be characterized as arbitrary inasmuch as the Tribunal has not shown its awareness to the aspect of undue hardship if in fact existed or will be caused to the assessee if the assessee has to fulfil the statutory requirement of pre-deposit and not because of the Tribunal directs it and therefore calls for interference even in the exercise of jurisdiction under Article 227 of the Constitution of India.
29. I am of the view that such orders are clearly in the teeth of the ratio laid down by the Supreme Court in the case of Dunlop India Ltd. and Vijay Prakash Mehta (supra). The Tribunal cannot go beyond the statutory provisions and cannot take into consideration such other aspects which are not germane to the provision to Section 129E in passing such orders.
30. In the result, this writ petition is allowed and the impugned order is quashed by issuing a writ of certiorari. Rule made absolute.
9. The application is required to be rejected and we order accordingly. The appellants have also filed another Miscellaneous Application seeking for extension of time to comply with the stay order. This application for extension of time is allowed. But the Miscellaneous Application for modification of stay order is rejected and miscellaneous application for extension of time is accepted and the appellants are granted time to comply with the terms of the Stay Order up to 30th April 2006 with liberty granted to appellants to seek further legal remedies as available in law. Matter to come up to report compliance on 15th May 2006.
(Pronounced and dictated in open Court)