Allahabad High Court
Amrit Banaspati Company Ltd. vs Commr. (Appeals) C. Ex. on 19 January, 2000
Equivalent citations: 2000(68)ECC436, 2000ECR454(ALLAHABAD), 2000(119)ELT524(ALL)
Author: P.K.Jain
Bench: P.K. Jain
ORDER P.K.Jain, J.
1. The petitioner is a company incorporated under the Indian Companies Act, 1956 having its registered Office at G.T. Road, Ghaziabad. It manufactures Banaspati Ghee (vegetable oil). During process of manufacturing vegetable oil a bye-product known as soap stock is generated. The petitioner's case is that the petitioner does not clear the soap stock as such it is used captively for manufacturing of acid oil which is cleared from the factory. Soap stock is not a marketable commodity as such and, therefore, not excisable. Prior to 23-7-1996 soap stock was exempted from payment of duty vide notification dated 1-3-1994. The said notification was rescinded w.e.f. 23-7-1994 and Central Excise authorities were of the view that soap stock was classifiable under Tariff Heading No. 1507.00 and petitioner was liable to pay Central Excise duty at the rate of 25 per cent. The petitioner filed the declaration under Rule 173C and declared the value of soap stock at the rate of Rs. 400 per tonne. The Central Excise authorities, however, served 3 show cause notices upon the petitioner for different periods on the ground that value of the soap stock shown by the petitioner at the rate of Rs. 400 per tonne was much less and the actual value was Rs. 7,620/- per tonne. After the petitioner filed reply to the show cause the adjudicating authority by order, dated 17-2-1998 had taken the value of the soap stock at the rate of Rs. 6,350/- per metric tonne and confirmed the demand of the show cause notice. The demand for Rs. 8,82,364/- being differential duty was raised by order/letter dated 24-2-1998. The petitioner felt aggrieved and filed appeals before the Commissioner (Appeals) Central Excise, Ghaziabad. Separate applications under Section 35F for waiving of the condition of per-deposit of the amount of duty as also for stay of the impugned orders were moved. The Commissioner of Appeals, respondent No. 1 by a common order directed the petitioner to deposit 50 per cent of the disputed amount of duty. The petitioner felt aggrieved by the said orders and filed the present writ petition with prayer that orders dated 16-6-1999 and 18-10-1999 be quashed and respondent No. 1 be directed to decide the appeals and condition for pre-deposit of duty for entertaining the appeals may be waived.
2. The department has contested the writ petition by filing counter affidavit of the Additional Commissioner, Central Excise. It is stated in the counter affidavit that the matter was considered in the light of undue hardship and respondent No. 1 after considering the prima fade case and financial hardship as pleaded, directed the petitioner to deposit 50 per cent of the disputed amount of duty within 15 days of its order dated 16-6-1999. Application for reconciliation was moved and this application was rejected. It was specifically stated in para 14 that from financial result for the period ending 31-3-1999 (vide Annexure 9 to the writ petition) it is evident that the income/receipts of the petitioner is about Rs. 433.73 crores and his current assets as per the balance-sheet is about Rs. 41 crores which includes bank balance of Rs. 5.7 crores.
3. In the rejoinder affidavit filed by the petitioner almost the same facts have been reiterated besides stating that the petitioner's company has been declared as a sick industrial company by the B.I.F.R. by order dated 30th September, 1998 and a rehabilitation scheme has been prepared by the officiated agency appointed by the B.I.F.R. It was also stated that Commissioner (Appeals) has not properly taken into account the financial position of the petitioner while disposing of the application for deposit of duty inasmuch as the petitioner company networth has been completely eroded and the petitioner company has incurred cash loss of Rs. 13.11 crores during financial year 1996-97, Rs. 10.53 crores during financial year 1998-99. In view of the huge accumulated losses of Rs. 27.94 crores as on 31st March, 1999, the liquidity position of the petitioner company is under severe strain.
4. Since counter and rejoinder affidavits have been exchanged, the petition has been heard finally and is being decided as such. Sri Rajesh Kumar, learned Counsel for the petitioner has raised two questions. One is that in the order passed by the Commissioner (Appeals), respondent No. 1 there is no whisper about the financial hardship of the petitioner. The second submission is that the petitioner company has been declared as a sick unit by the B.I.F.R. and under Regulation 22 of B.I.F.R., 1987, the amount cannot be recovered without prior permission of the Board. His submission is that in view of the legal position his right to appeal should not be curtailed by partly disallowing the waiver application. Sri S.F. Kesharwani, learned Standing Counsel has, however, submitted that the petitioner has liquid funds as is disclosed by the balance-sheet for the financial year 1999 and the petitioner company has sufficient liquid fund which has been considered by the Commissioner (Appeals). It is further argued that Regulation 22 of B.I.F.R. regulations provides that no proceedings for winding up of industrial company or for execution, distress or the like against any properties of industrial company, etc., shall be proceeded with except with consent of the Board. It is submitted that in the facts and circumstances of the case, no recovery of the money is being made nor any distress or execution against the properties of the petitioner company is being proceeded with. Therefore, the provisions of Regulation 22 are not applicable.
5. The petitioner has filed supplementary affidavit to which copy of the stay-cum-waiver application has been appended as Annexure-3. Para 4 which relates to financial hardship reads as follows :-
"It would cause undue hardship if the pre-deposit of duty amounting to Rs. 2,95,942.00 is not waived."
There is nothing in the application to indicate the actual financial position of the company. It is not stated in the waiver-cum-stay application that the company has been declared a sick unit and that it has no liquid funds so as to be in a position to deposit the amount directed to be deposited by the impugned orders. The Commissioner (Appeals), therefore, made an observation in the order that financial hardship was pleaded by the appellants. He further observed that in view of the above finding he allows the waiver of pre-deposit condition to the extent of 50 per cent in case the appellants deposit remaining 50 per cent within 15 days from the date of the order. As already pointed out above, in the counter affidavit the case of the revenue is that the petitioner company has Rs. 5.74 crores cash balance in the bank and as per the balance-sheet it has income of about Rs. 433.73 crores for the period ending up 31st March, 1999. This being financial position of the petitioner it cannot be said that the petitioner is suffering form any financial hardship. May be that the petitioner company might have suffered loss in earlier financial years but considering the small amount of Rs. 4,40,000-00 and odd it cannot be said that the company has no means to deposit the same or that in case it is directed to deposit the said amount the company will be ruined.
6. Shri Kesharwani has referred to the case of Assistant Collector, Central Excise, Chandan Nagar v. Dunlop India Ltd. and Ors., 1985 (1) Supreme Court Cases 260 and has vehementaly argued that the Hon'ble Supreme Court has deprecated the practice of granting interim orders which have great potential for public mischief. He submits that only in very exceptional cases the powers under Article 226 of the Constitution of India may be exercised by granting stay of recovery of tax. Shri Rajesh Kumar, on the other hand, has cited certain decisions of this Court. The same may be enumerated as Kurt O John Shoe Components v. Union of India and Anr., 1999 U.P.T.C., 929, Ganga Fuels (pvt.) Ltd. v. Assistant Commissioner (Assessment), 1999 U.P.T.C. 817 and Kaushal Industries, Agra v. Commissioner of Appeals, Customs and Central Excise, 1999 U.P.T.C. 423 and has submitted mat proviso to Section 35F empowers the appellant authority to dispense with pre-deposit condition subject to such conditions as he or it may deem fit, if it is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person.
7. Having gone through the cases cited by the learned counsel for the parties, I am of the view that no hard and fast rules/procedures can be laid down to deal with the applications under Section 35F of the Central Excise Act and each individual case has to be considered on its own facts and merits. Normally, the court should restrain itself in exercising of powers under Article 226 of the Constitution of India unless there are exceptional circumstances. As observed by the Hon'ble Supreme Court in Siliguri Municipality v. Amaledu Das - 1984 (2) S.C.C. 436, normally the High Court should not, as a rule in proceedings under Article 226 of the Constitution of India grant any stay of recovery of tax save under very exceptional circumstances. The grant of stay in such matters, should be an exception and should not be a rule.
8. In the instant case, it has already been found above that the petitioner has liquid funds and the amount to be deposited by him under the aforesaid order is a very small sum. In this view of the matter, it cannot be said that if 100 per cent waiver is not allowed the petitioner shall be put to undue hardship.
9. Now coming to the next question raised by learned counsel for the petitioner, it is true that the fact on record shows that the petitioner has been declared a sick unit and no recovery could be made except in accordance with the provisions of Regulation 22 of B.I.F.R. regulations yet it may be seen that here in the instant case no recovery is being pressed against the petitioner. Besides this the scheme under the B.I.F.R. regulations provides for a sanctioned scheme and only those dues which are included in the package in a sanctioned scheme is covered by the bar contained in regulation 22. Similar question had arisen before the Hon'ble Supreme Court in the case of Deputy C.T.O. v. Coromandal Pharmaceuticals, 1979 U.P.T.C. 813. The question in that case was where certain amount which is not included in the package would be recovered without prior consent of B.I.F.R. The Hon'ble Supreme Court in para 16 observed that situation which has arisen in this case seems to be rather exceptional. The issue that has arisen in this appeal does not invite for consideration in any two cases decided by the Court in Gram Panchayat and Anr. v. Sri Vallabh Glass Works Ltd. and Ors., JT 1990 (1) S.C. 438 : 1990 (1) SCR 966 and Maharashtra Tubes Ltd. v. State Industrial and Financial Corporation of Maharashtra Ltd. and Anr., JT 1993 (1) S.C. 310. The Court held that we are, therefore, of the opinion that Regulation 22(1) may be read down and understood as contended by the revenue.
10. In the instant case, it is not shown that the dues relating to the excise duty are covered in the package of a sanctioned scheme. Therefore, no relief can be granted to the petitioner on the second ground also.
11. In view of the discussions made above, there is no sufficient grounds for interference in the order passed by respondent No. 1 in exercise of the powers under Article 226 of the Constitution of India. The Petition deserves to be dismissed and is hereby dismissed. Time for depositing the amount directed by Commissioner Excise (Appeals) is extended till 15-2-2000. No order as to costs.