Jharkhand High Court
Raj Jaiswal vs The Union Of India Through The ... on 31 July, 2020
Author: Aparesh Kumar Singh
Bench: Aparesh Kumar Singh, Anubha Rawat Choudhary
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (T) No. 532 of 2020
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Raj Jaiswal --- --- --- Petitioner
Versus
1. The Union of India through the Commissioner, Central Goods & Service Tax & Central Excise, Jamshedpur
2. The Assistant Commissioner, Central Goods & Service Tax & Central Excise, Jamshedpur --- --- Respondents With W.P. (T) No. 508 of 2020 Makers Casting Pvt. Ltd. --- ---- --- Petitioner Versus
1. The Union of India through the Commissioner, Central Goods & Service Tax & Central Excise, Jamshedpur
2. The Assistant Commissioner, Central Goods & Service Tax & Central Excise, Jamshedpur ---- --- Respondents With W.P. (T) No. 534 of 2020 Gyan Chand Jaiswal --- ---- ---- Petitioner Versus
1. The Union of India through the Commissioner, Central Goods & Service Tax & Central Excise, Jamshedpur
2. The Assistant Commissioner, Central Goods & Service Tax & Central Excise, Jamshedpur --- --- Respondents
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Coram: Hon'ble Mr. Justice Aparesh Kumar Singh Hon'ble Mrs. Justice Anubha Rawat Choudhary
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For the Petitioners: Mr. Sumit Gadodia, Advocate For the Respondent: Mr. Ratnesh Kumar, Advocate
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Reserved on: 25.06.2020 Pronounced on: 31.07.2020
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Aparesh Kumar Singh, J: All these writ petitions have been tagged together and are being analogously heard and disposed of as they arise out of the common impugned order. Petitioners Raj Jaiswal and Gyan Chand Jaiswal are the Directors of the petitioner Company Makers Casting Pvt. Ltd.
2. All these petitioners are aggrieved by the order dated 27.01.2020 passed by the Customs, Excise and Service Tax Appellate Tribunal (in short 'CESTAT'), Kolkata, whereunder appeal filed by the petitioners being Defect Memo Nos. D/MA (ROA)-77517 of 2019 & D/76041 of 2019, D/MA (ROA)-77526 of 2019 & D/76042 of 2019 and D/MA(ROA)-77527 of 2019 & D/76043 of 2019, have been dismissed on the sole ground of non-compliance of pre-deposit under section 35F of Central Excise Act, 1944 (In short 'C.E.A'). Petitioners have further sought a direction upon the CESAT, Kolkata to hear and decide their appeal on its own merit without insisting upon pre-deposit, as stipulated under section 35F of C.E.A. 2
3. Petitioner's claim relates to waiver of pre-deposit under the amended section 35F of C.E.A. Both the pre-amended and amended Section 35F are extracted hereunder.
Pre-amended section 35-F reads as under:
"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 adjudicating authority the duty demanded or the penalty levied:
Provided that where in any particular case, the Commissioner (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 Commissioner (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.
Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decides such application within thirty days from the date of its filing.
Explanation:-For the purposes of this section duty demanded shall include,-
(i) amount determined under section 11D;
(ii) amount of erroneous Cenvat credit taken;
(iii) amount payable under rule 57CC of Central Excise Rules, 1944;
(iv) amount payable under rule 6 of Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2002 or Cenvat Credit Rules, 2004;
(v) interest payable under the provisions of this Act or the rules made thereunder."(Emphasis supplied) By virtue of Section 105 of the Finance (No.2) Act, 2014, Section 35F has been substituted. The substituted Section 35F which has come into force with effect from 6th August, 2014, is as under:-
"35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.- The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal.-
(i) under sub-section (1) of Section 35, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Principal Commissioner of Central Excise or Commissioner of Central Excise;
(ii) against the decision or order referred to in clause (a) of sub-
section(1) of section 35B, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;
(iii) against the decision or order referred to in clause (b) of sub- section(1) of section 35B, unless the appellant has deposited ten per cent of the duty, in case where duty or duty and penalty are in dispute, 3 or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;
Provided that the amount required to be deposited under this section shall not exceed rupees ten crores;
Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act, 2014.
Explanation.- For the purposes of this section "duty demanded"
shall include,-
(i) amount determined under section 11D;
(ii) amount of erroneous Cenvat credit taken;
(iii) amount payable under rule 6 of the Cenvat Credit Rules, 2001 or the Central Credit Rules, 2002 or the Cenvat Credit Rules, 2004."
(Emphasis supplied)
4. It is pertinent to mention here that constitutional validity of the amended section 35-F has been upheld by the Coordinate Bench of this Court in WPT No. 6142/2014 (Sri Satya Nand Jha Vs. Union of India through the Secretary, Ministry of Finance, Department of Revenue & Others and analogous cases) reported in [2017 (3) JLJR 187]. It has been held thereunder that Section 35 and 35-B of the Act is, in no way, affected by the amendment made to Section 35-F of the Act requiring pre-deposit to be made at the time of preferring the appeal. It is a piece of procedural legislation. Right to appeal conferred under section 35 and 35-B is not an absolute right, but a conditional one. Amended section would apply to appeals preferred on or after 6th August 2014. There is no arbitrariness in laying down the cut-off date. It was also held that Section 35-F is not at all confiscatory in nature. Legislature has clearly laid down that Tribunal or Commissioner of appeals shall not entertain any appeal, unless appellant has deposited the duty or, as the case may be, a penalty to the stipulated extent. These words would indicate that on and after enforcement of the provision of amended Section 35-F of the C.E.A Act, appellant has to make the pre-deposit of the duty and penalty as stipulated and unless the appellant does so, the Tribunal shall not entertain any appeal. It has been further clarified by the second proviso that the provisions of the section shall not apply to stay applications and appeals which were pending before any Appellate Authority prior to commencement of Finance (No. 2) Act 2014. It has been held that the amended provision would curb endless litigations arising out of waiver applications and cannot be said to be violative of Article 14 and 19(1)(g) of the Constitution of India. Learned Division Bench, at the same time, held that there is no merit in the contention that even in such extreme cases where duty wrongly assessed or huge amount of penalty wrongly imposed, the pre-deposit of 7.5% to 10%, as the case may be, by the appellant-assessee would be confiscatory in nature. It was observed that in such an extreme cases, assessee can take recourse to the writ 4 jurisdiction under Article 226 of Constitution of India. In the concluding paragraphs of the judgment, it was observed that there is no concept at all under the substituted Section 35-F to prefer an application for waiver of deposit because Statute has already waived 92.5% or 90% of the duty demanded or penalty levied which is to be deposited with a maximum cap of Rs. 10.00 crores.
5. Special Leave Petition preferred by the petitioners against the judgment has been dismissed in limine by the Apex Court. Similar view has been taken by the other High Courts also on the validity of the amended Section 35-F of the Act of 1944.
6. In this legal background, the factual matrix of the case of the petitioners is briefly stated hereunder:
The petitioner Company is engaged in manufacturing of M.S. Ingots falling under Chapter 72 of the first Schedule to the Central Excise Tariff Act, 1985 and also procuring raw materials required for manufacture of sponge iron, pig iron, scrap, coal, etc. for the use in the manufacturing of this M.S. Ingot. On the basis of search conducted by the officials of Central Excise Department on 04.12.2015 in the petitioner Company and investigation, a show-cause notice was issued on 21.04.2016 upon it under section 11A(4) of C.E.A and also for the Central Excise Duty along with education cess and secondary and higher secondary education cess aggregating Rs. 11,73,32,395/- and also applicable interest thereupon in terms of section 11-AA along with penalty under section 11-AC(1)(c) of the Act of 1944 read with rule 25 of Central Excise Rules ('C.E.R' in short). The Directors Raj Jaiswal and Gyan Chand Jaiswal were also issued notice under rule 26 of C.E.R. All the Noticees submitted their replies thereto. On consideration of the materials on record including reply furnished by the noticee, Commissioner, Central Goods and Service Tax and Central Excise, Jamshedpur passed order in original dated 21.12.2018, inter-alia imposing Central Excise Duty amounting to Rs.
11,44,27,725/-, education cess amounting to Rs. 19,36,447/- and secondary and higher education cess amounting to Rs. 9,68,223/-, the aggregate being Rs. 11,73,32,395/- as confirmed under Section 11A(10) of C.E.A upon the petitioner Company. Since the petitioner Company had voluntarily deposited Rs. 37,50,000/- during course of investigation, the same was ordered to be appropriated against the aforesaid confirmed demand of duty. Interest under section 11AA of the Act of 1944 was to be computed by the Jurisdictional Assistant / Deputy Commissioner, Central Goods and Service Tax and Central Excise, which shall be deemed to be confirmed by this order. Further, penalty of Rs. 11,73,32,395/- was imposed in terms of Section 11AC(1)(c) of C.E.A read with rule 25 of C.E.R, 2002. Separate 5 penalty of Rs. 2.00 crore and Rs. 1.00 crore respectively was imposed upon the two Directors Raj Jaiswal and Gyan Chand Jaiswal under rule 26 of C.E.R, 2002.
7. Petitioners being aggrieved by the order dated 21.12.2018, preferred statutory appeal under section 35-B of C.E.A before the learned CESTAT, Kolkata. Petitioners filed a separate application in the appeal for waiver of the mandatory pre-deposit of 7.5% of the deposit before learned Tribunal under section 35-F of C.E.A on the ground of financial stress. Besides taking various grounds on merits in the Memo of Appeal, appellant sought waiver of pre-deposit inter-alia on the following grounds:
(i) Appellant Company had already deposited Rs. 37,50,000/- at the time of investigation, as per Section 35 of the C.E.A.
(ii) Appellants Raj Jaiswal and Gyan Chand Jaiswal would be separately required to make mandatory pre-deposit of Rs. 50,49,930/-, Rs. 7,50,000/- and Rs. 15,00,000/-
respectively. In effect, the total amount of Rs. 72,99,930/- would be required to be deposited by the appellant Gyan Chand Jaiswal who is not in such a financial position to make pre-deposit of such amount in all the three appeals.
(iii) Appellants are facing financial crisis due to drop in sale and economic slowdown in the market. They had lost reputation in business circle due to false allegation and supply market has diminished.
(iv) Reliance was placed upon decision of Delhi High Court in the case of Pioneer Corporation Versus Union of India [2016 (340) ELT63(Del.) in support of the submission that under writ jurisdiction, High Court can exercise discretion and reduce the pre-deposit in rare and deserving cases, notwithstanding the amendment made under Section 35F of C.E.A.
8. It also pleaded that they had a prima facie case which should have been heard on merits since the impugned order was passed after more than nine months from the date of last personal hearing. Moreover, Panch witnesses Bir Karmakar and Bhima Lohar were interested Panch witnesses who have been routinely used as witnesses by the investigating authority in multiple proceedings. The premises raided were actually a go-down owned by M/s Cadbury and M/s Bournvita and no one from the side of the appellant was present at the time of search of their premises. It was alleged that the evidence relied upon from the hard disk was not in accordance with section 35-B of C.E.A and the data was also attempted to be manipulated. Further, data contained in the loose sheets and pocket diaries were not reliable since no standard accounting procedure was followed. There was no investigation by the department with respect to electricity discrepancy, production capacity and live recovery.
69. Learned CESTAT however, dismissed the appeals vide order dated 28.11.2019 since the appellant had not complied with the mandatory pre-deposit under section 35-F of C.E.A and no one had appeared on behalf of the appellant either. Petitioners filed misc. application before the learned CESTAT, Kolkata for restoration of appeal but the same was also dismissed vide impugned order dated 27.01.2020 as no compliance with respect to pre-deposit have been made.
10. It is pertinent to mention here that all the three writ petitions preferred by the Company and its two Directors have made identical prayers inter-lia,
(i) for quashing of the interim order dated 27.01.2020 passed by the learned CESTAT, Kolkata, whereunder appeal has been dismissed on the sole ground of non-compliance of the provision pertaining to pre-deposit as contained under section 35-F of C.E.A,
(ii) for a direction upon the learned CESTAT to hear and decide the appeal on its own merit without insisting upon the petitioners to make pre-deposit as stipulated under section 35-F of C.E.A,
(iii) for any other relief or relief (s) to which the petitioners would be very much entitled under the facts and circumstances of the case and in the interest of justice.
11. Conspicuously, there is no prayer in the writ petitions for waiver of the amount of pre-deposit under Article 226 of Constitution of India on grounds of undue hardship. It is to be noted that under the amended section 35-F of C.E.A, there is no provision for making any application for waiver of pre-deposit before the learned CESTAT, as was available under the pre-amended section 35-F. Therefore, the application for waiver of pre-deposit before the learned CESTAT, Kolkata was misconceived and not maintainable as has been categorically held by the Coordinate Bench of this Court in the case of Sri Satya Nand Jha (Supra). On being specifically asked, learned counsel for the petitioners Mr. Gadodia referred to the prayer no. ii in the writ petitions which in our opinion, is only consequential to the prayer no. 1 i.e. for a direction upon the learned CESTAT to hear and decide the appeal on its own merit without insisting upon pre-deposit. The instant batch of writ petitions therefore appear to suffer from a fundamental defect as no such prayer to invoke extraordinary jurisdiction of this Court for waiver of mandatory pre-deposit under section 35-F of C.E.A has been made.
12. We now advert to the second issue, whether any exceptional grounds of undue hardship have been made out by the petitioners to seek waiver of the mandatory pre- deposit in preferring the appeal before the learned CESTAT, Kolkata? Section 35-F, as quoted above, regulates the right to appeal under section 35 and 35-B and is conditional upon making pre-deposit under Section 35-F. Therefore, there would be 7 no appeal in the eye of law in absence of such pre-deposit under the amended Section 35-F. We have culled out the specific grounds inter-alia pleaded by the petitioners in their application before the learned CESTAT for waiver of mandatory pre-deposit. In substance, the plea is based upon financial hardship of the Director Gyan Chand Jaiswal who has expressed his financial difficulty in making pre- deposit in all the three appeals. There is no material or document to support inability of the petitioner Company to make mandatory pre-deposit. Petitioner Gyan Chand Jaiswal as a Director and Raj Jaiswal also as a Director of the Company and son of Gyan Chand Jaiswal, have urged identical grounds for seeking waiver. It cannot be lost sight of that it is the petitioner Company upon whom central excise duty, interest thereupon and penalty of Rs. 11,73,32,395/- has been imposed, whereas two Directors, Raj Jaiswal and Gyan Chand Jaiswal (petitioners) have been imposed with a penalty of Rs. 1.00 crore and Rs. 2.00 crore respectively under rule 26 of C.E.R, 2002. As stated above, there are no averments or documents to support financial hardship of the Company in making pre-deposit under section 35-F, whereas other two petitioners being Directors of the Company have also not been able to justify their plea on any tenable factual or legal grounds.
13. Learned counsel for the petitioners has urged certain other grounds such as, credibility of the Panch witnesses in whose presence search was conducted. He also points out that the premises in which search was conducted, was actually a go-down owned by M/s Cadbury and M/s Bournvita with which the petitioner Company had nothing to do.
We refrain from expressing our opinion on merits of the grounds urged in appeal as they do not constitute undue hardship of such an exceptional nature for exercise of our discretionary jurisdiction in favour of the petitioners.
14. Learned counsel for the petitioners submits that financial hardship is not alone ground to seek waiver, rather other such grounds which project undue hardship for the petitioner Company and its Directors due to fall in business and shortage of production also constitute factors which may be taken into account by this Court in exercise of its discretionary power under section 226 of Constitution of India for waiver of pre-deposit. In support of this, reliance has been placed on the judgment rendered by Delhi High Court in the case of Pioneer Corporation (Supra), para-7 & 8 thereof. A perusal of the judgment of Delhi High Court in Pioneer Corporation (Supra), on the other hand, indicates that the plea of waiver was raised before the Writ Court in view of financial hardship of the Company. Moreover, the grounds pleaded before the learned CESTAT and relied upon before this Court are bereft of any substance to establish that the petitioner Company and 8 its two Directors suffered from such undue hardship which merits waiver of pre- deposit.
15. Learned counsel for the Respondent Revenue has also opposed the prayer for the same reason. It is the firm case of the Revenue that application for waiver of pre- deposit under section 35-F of C.E.A was not maintainable before the learned CESTAT. It has been further argued that no exceptional ground to constitute undue hardship have either been made out on the part of the petitioners for seeking waiver of such pre-deposit.
16. Having considered the submissions of the parties and the facts and circumstances noted above in the light of legal position, we do not find that petitioners have been able to make out any exceptional grounds of undue hardship for waiver of mandatory pre-deposit under section 35-F of C.E.A, 1944, as amended with effect from 06th August 2014 in exercise of writ jurisdiction. The writ petitions being devoid of merit, are accordingly dismissed.
(Aparesh Kumar Singh, J) (Anubha Rawat Choudhary, J) Ranjeet/