Customs, Excise and Gold Tribunal - Delhi
M/S. Rishabh Chemicals Pvt. Ltd. vs Cce Indore on 26 March, 2001
ORDER
P.S. Bajaj
1. This order will dispose of two stay applications bearing Nos.E/Stay/495/2000-D and E/Stay/496/2000-D arising out of Appears Nos.E/857/2000-D and E/858/2000-D respectively. In the first stay application the appellants have sought waiver of the pre-deposit of the duty demand of Rs.25,77,654/- and also of the equal amount of penalty confirmed on them by the Commissioner through the impugned order in original. Similarly, in the second stay application the appellant who was the Managing Director of the firm M/s.Rishab Chemicals (P) Ltd., has prayed for waiver of pre-deposit of penalty of Rs.5 imposed on him under Rule 209-A06 the Central Excise Rues.
2. The appellants were engaged in the manufacture of grey filter cloth classifiable under Chapter 59 of the CETA and Chargeable to duty at the rate of 15% ad valorem. On 10.2.98 their Maruti car carrying 400 Mts of fabric was intercepted by the officers of Central Excise. The driver of that car deposea that he was carrying the goods for delivery to M/s.D.D.Industrial fabrics and only showed challan No.2799 to the officers. He was not carrying any other document showing the discharge of the Central Excise duty on those goods by the appellants. On examination the fabric was found to be filter fabric classifiable under Chapter 59(sup-heading 5911.40) of the CETA. The factory premises of the appellants was also consequently inspected and Jayant Bam, appellant disclosed to those officers that the turnover during the financial year 1997-98 upto 10.2.98 was Rs.35 lakhs and also admitted that he neither filed any declaration nor obtained registration under Rule 174 of the Central Excise Rules. The officer detained the fabric and later converted the same into seizure. Show cause notice was accordingly served on both the appellants vide which duty demand was raised and penalty was proposed to be imposed on them. On getting their reply wherein they pleaded that fabric was classifiable under Chapter 52(sub-heading 5207.10) of the CETA and was chargeable to nil rate of duty, the Commissioner who adjudicated that show cause notice, confirmed the duty demand and imposed penalty on both the appellants, as detailed above.
3. The learned counsel for the appellants has contended while arguing on stay applications that the fabric manufactured by the appellants was classifiable only under Chapter 52 of the CETA being grey fabric on which no further processing was undertaken and as such was classifiable under Chapter 52 of the CETA wherein the duty rate provided was nil. Therefore, the waiver of the entire duty and the penalty amounts deserves to be allowed.
4. On the other hand, the learned SDR has arguned that the fabric manufactured by the appellants was classifiable only under Chapter 59 of the CETA and chargeable to duty at the rate of 15% ad valorem and as such no waiver of the duty or the penalty amount deserves to be allowed to the appellants for having not paid the duty on the clearances made by them upto 10.2.98.
5. We have hard both the sides and gone through the record.
6. The perusal of the impugned order shows that the appellants were engaged in the manufacture of grey filter cloth which was classifiable under Chapter 59(sub-heading 5911.40) of the CETA and chargeable to Central Excise duty at the rate of 15% ad valorem. The Commissioner in this order had given detailed reasons for so holding. He had also recorded sufficient reason for not accepting the version of the appellants that the fabric produced by them was classifiable under Chapter 52 of the CETA. Prima facie, his order cannot be said to be unsustainable under the law. Moreover, the question regarding the classification of the fabric produced by the appellants has to be determined after hearing their appeals on merits. At this stage, the legal proprietory prevents us from giving any final verdict on this issue.
7. The learned counsel has, no doubt, referred to two cases decided by the Tribunal, namely Madura Coats Ltd. vs. CCE, Madras, 1999(106) ELT 213 and Simplex Mills Co. Ltd. Vs. CCE, Bombay, 1998(103) ELT 568(Tribunal) wherein the cotton fabric grey was held to be classifiable under Chapter 52( Heading 52.05) of the CETA. But as to whether the ratio of the law laid down in those cases squarely applies to the fabric manufactured by the appellants is a question to be examined on merits after marshalling the process adopted and the nature of the fabric produced by them. At this stage as we are dealing with stay applications, we have only to see if any prima facie case is made out and equity and balance of convenience are in favour of allowing the total waiver of the duty and the penalty amounts to the appellants. Keeping in view the facts and circumstances of the case it can be only said that the question regarding the classification of the fabric manufactured by the appellants is debatable and requires close detailed scrutiny, but still it is difficult to hold that the appellants have got a very strong prima facie case for allowing their stay applications in toto.
8. The equity and balance of convenience for al-lowing total waiver of the duty and penalty amounts cannot be said to be in favour of the appellants. They have cleared the goods during the period in question without payment of any duty. They did not file even declaration with the Excise department declaring that their fabric was covered by Chapter 52 of the CETA and was chargeable to nil rate of duty. Their conduct of having kept the Excise Department in dark about the nature of the fabric manufactured by them is enough to infer that the equity is not in their favour as it is well settled that one who seeks equity has to prove his conduct to be above board and free from any dubious dealings and suppression of material facts from the authority concerned. The appellants cannot be said to have done equity and come with clean hands as they did not disclose even to the Excise Department that the fabric they were manufacturing was covered by Chapter 52 and not 59 of the CETA. If they had been fair in their business conduct they would have sought opinion from the Excise Department about the correct classification of their fabric, but they did not so act. They rather kept everything under the cover and concealed the facts from the Excise Department.
9. The learned counsel has, no doubt, also pleaded financial hardship of the appellants while praying for total waiver of the duty and the penalty amounts during the course of arguments. He has referred to the copy of the Director's report, balance sheet upto 31.3.2000 their profit and loss account ending 31.3.2000 and other statements appended to these documents to urge that the appellants were in financial crisis. But in our view, all these documents cannot be accepted to be true and the entries regarding the profit and loss showed in the statements cannot be said to be correct one for having got prepared by them from their own Chartered Accountant. They have not placed on record any copy of the Income Tax Return wherein they must have shown their total sales and profits and losses, if any, incurred by them. Moreover, we find that invariably barring few, every assessee when saddled with the duty and penalty for having evaded the payment of Excise duty, puts forth the plea of financial hardship for claiming waiver of the pre-deposit of the duty and penalty amounts in the appeals. But we cannot overlook the fact that the government also needs money for running/implementing and executing their projects/schemes for the welfare of the society. The Government cannot be asked to write off their legitimate claim for duty from an assessee, simply because the assessee had suffered losses which ever could be attributable to his own conduct and mismanagement of the affairs. The appellants owe substantial amount of duty to the Government as they had been clearing the goods from the factory without payment of single paise of duty for a petty long time. The evasion of duty on their part came to the notice of the Excise Department when their officers happened to intercept their vehicle carrying the goods without proper documents. Therefore, keeping in view the facts and circumstances of the case, we are unable to pursuade ourselves to allow total waiver of the duty and penalty amounts to the appellants simply because they have come foward with the plea of financial hardship.
10. In the light of what has been discussed above, the appellants in Appeal No.E/857/2000-D are, therefore, directed to make pre-deposit of the entire duty amount of Rs.28,77,645/- for the purposes of hearing their appeal within a period of eight weeks from the date of receipt of the copy of the order and on deposit of this amount the entire penalty amount of Rs.28,77,645/- shall stand waived and recovery stayed. Similarly, in Appeal No.E/858/2000-D the appellant is directed to deposit penalty of Rs.2,5 lakhs (Rupees two lakh and fifty thousand only) within a period of eight weeks from the date of receipt of the order. However, in case the appellants fail to make deposit within the stipulated period their appeals shall become liable to be dismissed under Section 35-F of the Act without any further reference to them.
To come up for reporting compliance on 4/6/2001