Customs, Excise and Gold Tribunal - Delhi
Nirmal Steel Tubes (I) Ltd. vs Collector Of Central Excise on 7 December, 1994
Equivalent citations: 1995ECR61(TRI.-DELHI), 1995(76)ELT141(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. In this appeal, the stay application of the appellants was disposed of by this Tribunal's stay order No. E/351/93-B1, dated 29-10-1993. By this order, they were directed to deposit an amount of Rs. 5 lakhs within a period of three months from the date of the order out of the adjudicated amount of Rs. 14,50,267.00. Being aggrieved [by] this order, the appellants had approached the Hon'ble High Court of Rajas-than. The Hon'ble High Court of Rajasthan by their letter dated 10th Feb., 1994 in SB Civil Writ Petition No. 421/94 has set aside the order and remitted the same with the direction "to hear the petitioner on the point of irreparable losses which the company may suffer on account of requirement of the depositing any amount. This contention may also be examined in the light of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and the objects under which such restrictions have been made".
2. As a consequence of the above order, the appellants were issued notice for hearing the stay petition on the above issue.
3. We have heard Shri G.L. Rawal, ld. Advocate for the appellants and Shri S.K. Sharma, ld. JDR for the Revenue.
4. Shri G.L. Rawal, ld. Advocate vehemently argued his case and submitted that the Hon'ble High Court has been given specific direction to consider the irreparable losses which the company may suffer on account of requirement of the depositing the duty amount of Rs. 5 lakhs, as also given a direction to examine this point in the light of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and the objects under which restrictions have been made. Pointing out to the provisions of the said Act and the judgment rendered by Hon'ble Supreme Court in the case Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd.
and Anr. as reported in 1993 (Scale) page 62 in particular para 6, ld. Advocate submitted that once an order has been passed under BIFR Act, declaring the industry as a sick industry then it follows that the recovery of amounts by a Bank or a State Financial Corporation or by Revenue Authorities should give way to the public interest of reviving a sick industry. He submitted that the effect of any order under Section 35F of Central Excises & Salt Act if not complied with would result in dismissal of the appeal and as a consequence the recovery proceedings would be initiated. He pointed out that in such an eventuality the very purpose of rehabilitating a unit by declaring as a sick unit would be lost. He pointed out that the appellants have faced a serious cash crunch, inasmuch as not a drop of money can be arranged for making payment, inasmuch as the entire industry is in the hands of special administrator. The industry being on a tight rope and therefore in the circumstances to deposit Rs. 5 lakhs would cause irreparable damage. He pointed out from the balance sheet that the appellants do not have cash at all except cash amount of Rs. 6.21 lakhs which are required for day-to-day requirements. Pointing out to the paras 4 to 8 of the above-said judgment of the Hon'ble Supreme Court, the ld. Advocate submitted that the Hon'ble Supreme Court had clearly stated that the basic idea in declaring unit as a sick is to revive sick unit, if necessary by extending further financial assistance, after a thorough examination of the units by experts and only when the unit is found to be more capable of rehabilitation that the option of winding up may be resorted to. He has further pointed out from para 6 of the said judgment and argued that the Supreme Court had laid down that the proceedings under Sections 17 and 25 of the BIFR Act and underlying idea is that every such action should be frozen unless expressly permitted by the specified authority until the investigation for the revival of the industrial undertaking is finally determined. He further pointed out that the Hon'ble Supreme Court had also held that "it is thus crystal clear that the main thrust of this special legislation is at revival or rehabilitation of the sick industrial undertaking and it is only when it is realised that the same is not feasible that the option of winding up of the unit can be resorted to". Further reading the judgment, the ld. Advocate submitted that in para 14 of the said judgment, the Supreme Court had categorically laid down that if the financial institution and Banks or statutory Corporations are permitted to resort to independent action in total disregard of the pending inquiry under Sections 15 to 19 of the 1985 Act, then the entire exercise under the said provisions would be rendered nugatory by that time. Therefore, the ld. Counsel vehemently submitted that once an order for declaring a unit as sick unit has been passed, then the recovery proceedings should stop, inasmuch as, even due payments required or task payments should also be withheld. This is only to enable the unit to revive. He submitted that this is a view expressed by Calcutta High Court also in the case of Himalaya Rubber Products Ltd. v. Board for Industrial & Financial Reconstruction as held in 1992 (61) E.L.T. 210. In this judgment, the recovery of sales tax was also considered and the Court held that withholding of the Sales Tax declaration forms on account of non-payment of arrears of Sales Tax dues is a similar process such as execution and distress. The Court has further held that it follows that the Sales Tax authorities cannot in such circumstances withhold such forms except with the consent of the BIFR. He also referred the judgment of Gujarat High Court rendered in the case of Testeels Ltd. v. Radhaben Ranchhodlal Charitable Trust. He also relied on the ruling rendered in the case of Gram Panchayat and Anr. v. Shree Vallabh Glass Works Ltd. and Ors. - 1990 (2) SCC 440 paras 8 & 9. Shri S.K. Sharma, Id. JDR submitted that the BIFR order is itself an evidence for considering the waiver of deposit of duty but the report has to look into the liquidity position as held by the Hon'ble Supreme Court in the case of Spencers & Co. He submitted that in this particular case that the appellants have assets of Rs. 1.28 crores as against liability of Rs. 54,53,545. He also submitted that there is an inventory of Rs. 27 lakhs. As there is good liquidation position, therefore, no irreparable losses will cause to the appellants if they directed to deposit Rs. 5 lakhs.
5. We have carefully considered the submissions made by both the sides and have also perused the judgments rendered by Hon'ble Supreme Court and the other judgments delivered by High Court referred to by the ld. Advocate. On a careful consideration of this judgment, it follows that the Supreme Court has clarified that once the order has been passed under BIFR declaring a unit as sick undertaking then such an undertaking should be given full scope for its revival and if recovery proceedings are directed then the very purpose of the order would be defeated. In view of these rulings and the ratio laid down therein and also taking into consideration the irreparable loss that may be caused to the appellants, also in view of the cash crunch faced by them; it is but proper that duty amount of Rs. 5 lakhs is waived and the appeal is taken up for early hearing in the month of September. Ordered accordingly.
Sd./-
(S.L. Peeran)
Dated : 22-3-1994 Member (J)
P.C. Jain, Member (T)
6. I have carefully perused the order proposed by my learned brother, Shri S.L. Peeran, Judicial Member but I regret I am unable to agree with the same.
7. The subject misc. application has been filed seeking modification of the Tribunal's Stay Order No. E/351/93-B1, dated 29-10-1993 whereby the applicants were directed to pre-deposit an amount of Rs. 5 lakhs within a period of three months from 29-10-1993 as against the duty liability of Rs. 14,50,267.00 imposed on the applicants under the impugned order passed by the Collector of Central Excise, Jaipur. The appellants thereafter moved a writ petition before Hon'ble High Court of Rajasthan. The Court has directed vide its stay order dated 10-2-1994 as follows :-
"The arguments of both the learned counsel have been heard. To grant or not to grant or partly grant the stay is discretion of the Tribunal and this court is not exercising the power as an appellate authority in respect of the orders passed by the Tribunal particularly against an order which is of interlocutory nature. The special circumstances which have been pointed out in the present case shows that the Tribunal has not examined the matter of the petitioners in the light of one of the requirement for considering the stay application, that is, irreparable losses which the company may suffer if it is directed to make the payment of Rs. 5 lacs as a pre-condition for entertainment of the appeal. This contention has force. Exercise of power under Section 35F of the Act no doubt is not a step for realisation of amount from movable or immovable asset of the company, but the effect to grant part stay would be to give the opportunity to the executing authority to realise the demand from the assets of the company or if the company fails to deposit the amount the appeal will be dismissed. The period during which the company is declared sick is hibernation period and even the position of cash as on the date of passing the order has not been examined. The scheme if prepared and continuance of the viability has to be kept in mind and in these circumstances the order dated 29-104993 is quashed and the matter is remitted back to the Tribunal to hear the petitioner on the point of irreparable losses which the company may suffer on account of requirement of the depositing amount. This contention may also be examined in the light of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and the objects under which such restrictions have been made. The Tribunal may dispose of the application within a period of one month from today. A copy of this order shall be produced by the learned counsel for the petitioner within a period of seven days from today."
8. In terms of the last direction of the Court, as extracted above, copy of the said order of the Court dated 10-2-1994 was to be produced by the learned counsel for the petitioner within a period of seven days from 10-2-1994. However, copy was given only alongwith the subject misc. application on 28-2-1994.
9. Be that as it may, we have heard the learned counsel, Shri G.L. Rawal for the applicants. Main thrust of his argument is that the applicant company has been declared a sick unit under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and therefore, in accordance with the provisions of Section 22 of the said Act the proceedings for execution, distress or the like cannot be taken against any property of the Industrial Undertaking besides the proceedings for liquidation. Hon'ble High Court of Rajasthan has directed this Tribunal to hear the petitioner on the point of irreparable loss which the company may suffer on account of requirement of depositing any amount. This contention of the petitioner is to be examined in the light of the provisions of Section 22 of SICA, 1985. Learned advocate has not made any submission apart from stressing on the provisions of the SICA, 1985, that irreparable loss would be caused to the applicant company if they are to make any pre-deposit in terms of Section 35F of the CESA, 1944. Application of the learned advocate for the applicants in my view is not sustainable. It is difficult to imagine any irreparable loss on account of pre-deposit of any amount. Pre-deposit of an amount in terms of Section 35F is a condition precedent for hearing the appeal under Section 35F of the CESA, 1944, as held by the Hon'ble Supreme Court in the cases of (1) Navin Chandra Chottelal v. CBEC and Ors.1971 (3) SCR 357 and (2) Vijay Parkash D. Mehta v. C.C. - 1989 (39) E.L.T. 178 (SC) Right of appeal, no doubt a statutory right is a conditional one in terms of provisions of Section 35F and in view of the rulings of the Supreme Court, mentioned supra. The applicants, therefore, cannot claim it as a matter of right. The provisions of Section 35F of CE & SA, 1944 would not be overridden by provisions of Section 22 of SICA, 1985.
10. Learned advocate has, however, laid great stress on a very recent judgment of the Supreme Court in the case of Maharashtra Tubes Ltd. v. State Industrial Investment Corporation of Maharashtra Ltd. and Anr. reported in 1993 (1) Judgment Today 310. Heading of the judgment leaves no doubt that the provisions of Section 22 of SICA 1985 act as a bar on creditors of a company declared sick in terms of the provisions of Section 17 of the said Act, 1985 for recovery of any dues from such a sick company except with the permission of the BIFR. The Tribunal in discharging its functions under Section 35F of the CE & SA, 1944 cannot by any stretch of imagination be treated as a creditor trying to recover its dues from the sick industrial company. Application of the provisions of Section 22 of SICA, 1985 would, therefore, in my view have no application in considering the stay petitions from the applicants before the Tribunal. This is a general view being taken by the various Benches of this Tribunal at Delhi. For example, a similar view has been taken by Special Bench 'A' in its Stay Order No. 15 to 17/94-A, dated 25-1-1994 in the stay applications of Maharashtra Tubes Ltd. and Ors. v. C.C. in A. Nos. C/118/93-A to C/120/93-A. That stay order of the Tribunal also cites another Stay Order No. S-136/93-D and Misc. Order No. M-205/93-D in the case of Orissa Synthetics Ltd. v. C.C.E. That order was challenged before the Orissa High Court, inter alia, on the ground that the applicant company M/s. Orissa Synthetic Ltd. have been declared a sick [unit] under SICA, 1985. Yet the High Court of Orissa declined to interfere with the Tribunal's order directing that applicant to deposit Rs. 20 lakhs. The High Court, however, extended the time for complying with the direction of the Tribunal for pre-deposit.
11. I am, therefore, unable to agree with the submission of the learned advocate that declaration of a company as sick under SICA, 1985 would ipso facto mean that its financial condition is extremely poor and therefore, the Tribunal should exercise the discretion given to it in terms of Section 35F of the CE & SA, 1944. It is to be observed that proviso to Section 35F no doubt gives a discretion to the Tribunal to dispense with the pre-deposit stipulated in that Section pending the appeal but it is to be noted that this dispensation has to be granted subject to such conditions as the Tribunal may deem fit to impose so as to safeguard the interest of Revenue. The Tribunal, therefore, is required to see whether any 'undue hardship' would be caused to the applicants such pre-deposit is not dispensed with. Undue hardship is examined by the Tribunal from various angles such as strong prima facie merits in the case of the appellants/applicants, acute financial hardship etc., as has been laid down by the Hon'ble Supreme Court in the case of Spencer & Co. Ltd. quoted in Tribunal's judgment in the case of Jayashree Insulators Ltd. v. Collector of Central Excise, Calcutta-II [1987 (28) E.L.T. 279 (Tribunal). Observations of the Supreme Court are as follows :-
"We are in agreement with the contention of the counsel for the petitioner that the expression 'undue hardship' occurring in the proviso to Section 35F of the Central Excises & Salt Act, 1944, would include consideration, inter alia of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that aspect has been completely ignored as was contended by counsel. With these observations, the special leave petition is dismissed."
It will, therefore, be observed that the Tribunal is not merely to take the prima facie merits of the case but also the aspect of liquidity possessed by the assessee while considering the undue hardship likely to be caused by any pre-deposit.
11.1 Liquidity possessed by a person would mean not only ready cash available in his hands but even those assets which can be readily converted into cash. It is well understood in commercial circles that liquidity of a business concern is reflected by its net current assets. As pointed out by the learned SDR, position of net current assets in the case of present applicants is very good. The applicants have current assets to the tune of Rs. 1.28 crores as against the current liabilities of Rs. 54,53,545.000. Thus net current assets available in the hands of the applicants are to the tune of Rs. 75 lakhs approximately. There is, therefore, no doubt, that the applicants have a good liquidity and the question of irreparable loss does not arise in these circumstances. As already stated no irreparable loss by any pre-deposit of a fixed sum can at all be caused. If the applicants succeed in their appeal they would get back pre-deposit of Rs. 5 lakhs. If they fail they would no doubt be required by the Collector to deposit the balance duty liability, if any, devolved upon them as a result of failure of their appeal. It is at that stage, I feel that the applicants may, if they are so advised, invoke the provisions of Section 22 of the SICA, 1985 because the Collector would be making a recovery of duty due from the applicants. The question of any recovery on compliance with the Tribunal's Stay Order No. E/351/93-B1, dt. 29-10-1993 of the balance amount of duty does not arise in view of the terms of the said stay order which is as follows :-
"In case of compliance of the aforesaid directions, balance amount of duty shall stand waived and Revenue shall also be debarred from making any recovery during the pendency of this appeal."
12. In view of the aforesaid discussion, misc. application is dismissed. However, in the interest of justice I give further time of four weeks to the applicants to deposit the said amount of Rs. 5 lakhs (Rupees five lakhs only).
Sd/-
(P.C. Jain)
Dated : 24-3-1994 Member (T)
POINT OF DIFFERENCE
"Whether in the facts and circumstances of the case misc. application is to be allowed, as held by the Judicial Member or to be dismissed, as held by the Technical Member".
Sd/ Sd/-
(P.C. Jain) (S.L. Peeran)
Member (T) Member (J)
28-3-1994
Lajja Ram, Member (T)
13. The point of difference, referred to me, is whether in the facts and circumstances of the case, the miscellaneous application, seeking modification of the Tribunal's stay order dated 20-10-1993, filed by M/s. Nirmal Steel Tubes (I) Limited, in pursuance of the orders passed by the Hon'ble High Court of Rajasthan, is to be allowed, or not.
14. The brief facts of the case are contained in the stay order passed by the Tribunal on 29-10-1993, and in their respective orders proposed by the learned Member (J), Shri S.L. Peeran and the learned Member (T), Shri P.C. Jain, on the applicant's miscellaneous application, referred to above. Under stay order dated 29-10-1993, the applicants were directed to pre-deposit an amount of Rs. 5 lakhs within a period of 3 months, from the date of the order, as against the duty liability of Rs. 14,50,267/- imposed on the applicants under the impugned order passed by the Collector of Central Excise, Jaipur. The learned Member (J) has proposed that the deposit of the amount of Rs. 5 lakhs as directed by the Tribunal under their stay order dated 29-10-1993, be waived and the appeal taken up for hearing without pre-deposit. The learned Member (T) has on the other hand proposed the dismissal of the applicants' miscellaneous application seeking modification of the Tribunal's stay order dated 29-10-1993; he, however, proposed to give further time of 4 weeks to the applicants to deposit the said amount of Rs. 5 lakhs.
15. The matter was heard by me on 13-9-1994 when Shri G.L. Rawal, advocate appeared for the applicants. The respondents were represented by Shri K.K.Dutta, JDR.
16. Shri G.L. Rawal, the learned Advocate briefly referred to the facts of the case and stated that after the stay order dated 29-10-1993, under which the Tribunal had directed the appellants to pre-deposit a sum of Rs. 5 lakhs, they had approached the Rajasthan High Court. The Rajasthan High Court under their order dated 10-2-1994 had remanded the matter back to the Tribunal to hear the petitioner on the point of irreparable losses which the company may suffer on account of requirement of depositing any amount. He submitted that the unit has been declared a sick unit by the Board for Industrial and Financial Reconstruction (BIFR), under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the 'Act of 1985'), and that the Tribunal has no jurisdiction to direct the appellants to deposit any amount. In support of his contentions, the learned Advocate relied upon the following decisions :-
(1) Gujarat Narmada Auto Limited v. C.C.E., 1992 (59) E.L.T. 67 (Tribunal) (2) Supersum Laminations Plastic Pvt. Ltd. v. C.C.E., Kanpur - E/Stay/1677/93-NRB, dated 5-7-1994 (3) New Vinod Silk Mills Pvt. Ltd. v. U.O.I., 1994 (71) E.L.T. 910 (Bom.) (4) Himalaya Rubber Products Limited v. BIFR, 1992 (61) E.L.T. 210 (Cal.) (5) Maharashtra Tubes Limited v. State Industrial and Investment Corporation of Maharashtra Limited, 1993 (1) SCALE 223.
(6) Testeels Limited, Ahmedabad v. Radhaben Ranchhodlal Charitable Trust, Ahmedabad, AIR 1988 Guj. 213;
17. Shri K.K. Dutta, the learned JDR referred to the provisions of Section 35F of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act'), and stated that for the purposes of that Section, the provisions of the Act of 1985 were not relevant. As regards the observations of the Rajasthan High Court, he stated that the Hon. High Court has left the matter to be decided by the Tribunal in the light of their observations, and that the observations of the Hon. High Court have been dealt with by the learned Member (T), and he has come to a decision that no modification was called for in the stay order already passed by the Tribunal. He relied upon the Madras High Court decision in the case of Tamil Nadu Chromates Limited v. Union of India, reported at 1994 (70) E.L.T. 512 (Mad.)
18. In rejoinder, the learned Advocate stated that the various questions raised by the learned JDR had been dealt with by the Hon. Rajasthan High Court.
19. I have carefully gone through the matter. There were allegations against the appellants that they had cleared the excisable goods without obtaining Central Excise licence, without observing the Central Excise formalities and procedures, and without payment of any Central Excise duty. The show cause notice was issued on 9-10-1992, and the period involved was from 1-4-1991 to 25-4-1992. Relying upon the Tribunal's decision in the case of Calcutta Steel Industries v. C.C.E., 1991 (54) E.L.T. 90 (Tribunal), the Collector of Central Excise, Jaipur confirmed the demand of Rs. 14,50,267/-. Considering the fact that the issue was debatable, he did not impose any penalty on the assessee. There was no discussion about the alleged intentional suppression of production and clearance. In the stay application before the Tribunal the appellants had, among others, pleaded that they have become a sick unit and were before the BIFR; their financial position was bad and that they have suffered continuous losses; they had no money to deposit the duty and that in case no unconditional stay is granted, as prayed for, they would be put to irreparable loss and it would cause them undue hardship. The Tribunal had viewed that undue hardship would be caused to the applicants if the entire dues of Rs. 14,50,267/- are required to be deposited, and ordered that it would meet the ends of justice if the applicants deposit the amount of Rs. 5 lakhs. On the matter being taken up with the Hon. Rajasthan High Court, the Hon. High Court observed as under :-
"The special circumstances which have been pointed out in the present case show that the Tribunal has not examined the matter of the petitioner in the light of one of the requirements for considering the stay application that is, irreparable losses which the company may suffer if it is directed to make the payment of Rs. 5 lakhs as a pre-condition for entertainment of the appeal. This contention has force."
They quashed the order dated 29-10-1993 of the Tribunal and remanded the matter back to the Tribunal "to hear the petitioner on the point of irreparable losses which the company may suffer on account of requirement of the depositing any amount." It was further directed that this contention may also be examined in the light of the provisions of Section 22 of the Act of 1985 and the objects under which such restrictions have been made.
20. Stay applications are required to be considered by the Tribunal in terms of the proviso to Section 35F of the Act. Section 35F of the Act provides as under :-
"Section 35F. Deposit, pending appeal, of duty demanded or penalty levied. - Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied :
Provided that where in any particular case, the Collector (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Collector (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue."
It is seen that while the provision regarding deposit of the duty demanded and the penalty levied during the pendency of the appeal is couched in mandatory terms, exception has been provided in case where under the mandatory provision of pre-deposit, undue hardship could be caused to the person desirous of appealing against the decision or order appealed against. The expression 'Undue hardship' has not been explained in the Section but it appears to be comprehensive in nature. Decision under the proviso is a matter of judicial discetion of the Tribunal.
21. While exercising discretionary powers to consider exemption from the mandatory provision of Section 35F of the Act, under the proviso to that Section, the Tribunal is not seeking to recover any dues from the applicant before it. No proceedings have been sought to be initiated by it. Accordingly, there is no question of suspension of the proceedings as referred to by the Hon. Supreme Court in para 10 of their judgment in the case of Gram Panchayat and Anr. v. Shree Vallabha Glass Works Limited and Ors., AIR 1990 SC 1017.
22. In the provisions of Section 35F of the Act, there is no element of coercion, and while disposing of the appellant's stay application, it could not be said that any property of the appellant company has been made the subject matter of coercive action. The order passed on the appellant's stay application could not be termed as a coercive measure. In fact, hearing on the stay application is not a "proceeding" by the Tribunal but a judicial process with regard to the relief prayed for by the petitioner before the Tribunal. The Tribunal by no stretch of imagination could be even remotedly equated with any creditor of the appellant company. Thus, the Hon. Supreme Court's observations in para 10 of their judgment in the case of Maharashtra Tubes Limited v. State Industrial and Investment Corporation of Maharashtra Limited, 1993 AIR SCW 991 that the creditor of the sick undertaking had to obtain the consent of BIFR to proceed against the industrial concern, are of no relevancy for the purposes of Section 35F of the Act.
23. The Tribunal is concerned only with the proviso to Section 35F of the Act which is in the nature of exception to the main provision in the Section. The main Section is couched in a mandatory manner. The necessary consequence of non-compliance with the requirement regarding the deposit of penalty/duty will be that the appeal will have to be kept on file for ever and that the appellate authority cannot proceed to hear the appeal on merits as observed by the Hon. Supreme Court in para 18 of their judgment in the case of Navinchandra Chhote Lal v. CBEC, New Delhi, AIR 1971 SC 2280.
24. The Hon. Rajasthan High Court has observed that the contentions of the appellants may also be examined in the light of the provisions of Section 22 of the Act of 1985. For the proper appreciation of the legal position, Section 3(1)(o), Section 22 and Section 25 of the Act of 1985 are reproduced below :-
"3(1)(o) "sick industrial company" means an industrial company (being a company registered for not less than seven years) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year."
"22. Suspension of legal proceedings, contracts, etc. (1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority."
"25. Appeal. (1) Any person aggrieved by an order of the Board made under this Act may, within forty-five days from the date on which a copy of the order is issued to him, prefer an appeal to the Appellate Authority;
Provided that the Appellate Authority may entertain any appeal after the said period of forty-five days but not after sixty days from the date aforesaid if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time."
As has been mentioned above, no proceedings are being proceeded with by the Tribunal, and it is the appellant who have come to the Tribunal for statutory remedies. The Tribunal is not concerned with the execution against the properties of the appellant company. The meaning of 'execution' has been given in Halsbury's Laws of England 4th Edition Vol. 17 para 401 as follows :-
"The word "execution" in its widest sense signifies the enforcement of or giving effect to the judgments or orders of Courts of justice. In a narrower sense, orders by a public officer."
"The following definition is given in Bradby Law of Distress (2nd Edn.):
"A distress is the taking of a personal chattel, without legal process, from the possession of a wrongdoer, into the hands of the party grieved; as a pledge, for the redress of an injury, the performance of a duty, or the satisfaction of a demand."
The preamble for enacting the Act of 1985 states as follows :-
"An Act to make in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto."
The statement of objects and reasons for enacting the Act of 1985 are summarised as under in AIR 1988 Guj. 213 :
"The Statement of Objects and Reasons for enacting the Sick Industrial Companies (Special Provisions) Act, 1985 clearly states that in order to fully utilise the productive industrial assets, afford maximum protection of employment and optimise the use of the funds of the banks and financial institutions, it would be imperative to revive and rehabilitate the potentially viable sick industrial companies as quickly as possible. It also states that it would also be equally imperative to salvage any productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of these companies. Having the above factors in mind, the Statement of Objects and Reasons for enacting the said law states that a need has, therefore, been felt to enact in public interest a legislation to provide for timely detection of sickness in industrial companies and for expeditious determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch."
Both 'execution' and 'distress' relate to methods of recovery of monies due from the industrial company. Thus, it is seen that the provisions of Section 22 of the Act of 1985 have no bearing on the exercise of the discretionary powers by the Tribunal to provide justice to the parties before it.
25. In the case of Maharashtra Tubes Limited and Ors. v. C.C., Bombay vide Stay Order No. 15 to 17/94-A, dated 31-1-1994 in appeal No. C/118-120/93-A (Summarised at 1994 (1) RLT 23 (CEGAT 'A'), the Tribunal had occasion to deal with the similar situation. After analysing the Supreme Court's decisions in the cases of (1) Maharashtra Tubes Limited v. State of Industrial and Investment Corporation of Maharashtra Limited, 1993 (1) Judgments Today 310; (2) Navin Chandra Chhote Lal v. C.B.E.C, AIR 1971 2280; (3) Vijay Prakash D. Mehta v. C.C., 1989 (39) E.L.T. 178 (SC); and (4) The Gram Panchayat and Anr. v. Shri Vallabh Glass Works Limited, AIR 1990 SC 1017, the Tribunal observed as under :-
"...We feel that the correct view will be that where a unit has been declared as a sick unit by BIFR or an appeal under Section 25 of the Sick Industrial Companies (Special Provisions) Act, 1985 is pending before the appellate authority, there can be a bar for recovery, but in the matter before us, we are not ordering any recovery. We are passing this order in response to an application by the appellants for the waiver of the pre-deposit of the duty and penalty amounts. The Tribunal had occasion to deal with similar situation where the unit was declared a sick unit by BIFR, whether the pre-deposit should be dispensed with or not. The Tribunal in the case of M/s. Orissa Synthetics Limited v. Collector of Central Excise in Stay Application No. E/853/93-D in Appeal No. E/1550/93-D vide Order No. S-136/93-D and vide Miscellaneous Order No. M-205/93-D had held as under :-
* * * * * * * * * * These orders were challenged before the Hon'ble Orissa High Court. Hon'ble Orissa High Court had confirmed the findings of the Tribunal and had only extended time for making the payment. The order as passed by the Hon'ble Orissa High Court is reproduced below :-
* * * * * * * * * * We have got full respect for the judgments of the Hon'ble Supreme Court, but all these are for the purposes of recovery. The right of filing an appeal, as observed earlier, is a condition all right. Where a unit has been declared as a sick unit by BIFR or an appeal is pending before a higher forum, there is only bar of recovery. Where the amount is to be deposited by the assessee, suo motu or otherwise, the ratio of Shree Vallabh Glass Works Ltd.'s decision as well as in the appellant's own case which is pending before the Supreme Court will not apply."
26. Thus, I consider that the judicial discretion of the Tribunal in taking a view under the proviso to Section 35F of the Act, is not circumscribed, or controlled, either way, by the findings of the BIFR. This could, however, be one of the many considerations for coming to a decision by the Tribunal whether the deposit of duty demanded or penalty levied would cause undue hardship to the petitioner or not.
27. The matter before the Hon'ble Gujarat High Court in the case of Testeels Limited, Ahmedabad v. Radhaben Ran Chhodlal Charitable Trust, Ahmedabad, AIR 1988 Guj. 213 related to winding up proceedings and have no relevancy to the facts of the present case. In the case of Himalaya Rubber Products Limited v. BIFR, 1992 (61) E.L.T. 210 (Calcutta), the Calcutta High Court was concerned with the refusal of the sales tax authority to give declaration forms, in Form 'C', under Rule 4 of the Sales Tax Act, 1956. The Sales Tax authorities refused to issue declaration forms on the ground of petitioner's failure to pay the arrears of sales tax dues. The Calcutta High Court held in para 36 of their judgment that for the purposes of Section 22(1) of the 1985 Act, withholding of the sales tax declaration forms on account of non-payment of arrears of sales tax dues, is a similar process such as execution and distress. Obviously, the circumstances in the case before me are entirely different.
28. Considering the facts in this particular case, it is found that simply on the basis of the declaration as a sick unit by BIFR, there is no case for stay. At the same time, it is considered that in the particular circumstances of this specific case for the prima facie considerations which are discussed below, it appears just and proper that as proposed by the learned Member (J) Shri S.L. Peeran, the pre-deposit of the duty amount of Rs. 5 lakhs is waived.
29. The Adjudicating authority - the Collector of Central Excise, Jaipur has observed in para 11 of his order as under :-
"Considering the fact that the issue was a debatable one, I do not propose to impose any penalty on the assessee. For the same reasons, I also do not propose to order confiscation of the seized goods."
He has admitted that the issue before him was a debatable one and it is why he did not impose any penalty. For the same reasons, he refrained from confiscating the seized goods. At the same time it is seen that while confirming the demand of Rs. 14,50,267/- under Rule 9(2) of the Central Excise Rules, 1944, read with proviso to Section 11A (1) of the Act, there is no discussion by him at all as to why the extended period of limitation is invokable. He has simply confirmed the demand without any discussion on the point of limitation. The show cause notice was issued on 9-10-1992 for the period 1-4-1991 to 25-4-1992. The period from 1-4-1991 to 8-4-1992 prima facie appears to be barred by limitation. In this connection, ground 'XI' of the appeal is extracted below :-
"Because without prejudice to what has been stated above, larger period as contemplated Under Section 11(A) cannot be attracted. The Revenue has utterly failed to show that it was case of wilful misrepresentation. Besides, this aspect of the matter, it has also been the case throughout as detailed above not only in the Hon. High Court of Punjab & Haryana and otherwise that the input of the appellant as is produced .by the manufacturers at Mandi Gobind Garh are flats and rolled products viz. flats, hoops, strips and as such at least it gives all bona fides to the appellant for availing of the benefit of the exemption from payment of duty in terms of the Central Excise Notification No. 202/88, dated 20-5-1988 and as such have not taken the licence. Hence in no circumstances it can be said that there has been any act of fraud, wilful concealment or misrepresentation and in no manner it can be said that longer period under the provisions of Section 11(A) is attracted."
Thus, prima facie on the question of limitation the appellants appear to have a case. Any further observations in this regard may not be proper at this stage when the stay is the issue. Further independently of the findings of the BIFR, the facts speak of the economic hardship of the appellants. It is seen from the records that the company was promoted in the year 1982 for manufacturing black steel tubes. Its commercial production started in July 1985. For various reasons, its performance started deteriorating after September, 1987, and the accumulated losses of the company as on 31-3-1990 were Rs. 215.40 lakhs, which exceeded its paid up capital of Rs. 99 lakhs and free reserves of Rs. 22.2 lakhs. For the financial years ending 31-3-1989, 31-3-1990 and 31-3-1991, it incurred cash losses of Rs. 9.40 lakhs, Rs. 158.06 lakhs and Rs. 165 lakhs respectively, and its accumulated losses had risen to about Rs. 405 lakhs.
30. Taking all the relevant considerations into account, I consider it to be a fit case where pre-deposit of the Central Excise duty demanded is waived under proviso to Section 35F of the Act, and its recovery stayed till the disposal of the appeal. Accordingly, I allow the miscellaneous application filed by M/s. Nirmal Steel Tubes (India) Limited.
Sd/-
(Lajja Ram)
Dated : 28-11-1994 Member (T)
FINAL ORDER
31. In view of the majority opinion the miscellaneous application is allowed and the pre-deposit of duty demanded is waived and its recovery stayed till the disposal of the appeal.