Calcutta High Court
Smithkline Beecham Consumer ... vs Cce (A) on 15 March, 2000
Equivalent citations: 2000(69)ECC773, 2000(117)ELT539(CAL)
Author: Amitava Lala
Bench: Amitava Lala
ORDER Amitava Lala, J.
1. This is an application in the nature of writ petition on behalf of the company as well as the representative of the company as against the appropriate authority of the Central Excise virtually challenging the impugned order dated 16th June, 1999 passed by the Commissioner (Appeals) Central Excise, Calcutta being No. V(CH.19) 2/ XAP-33-Cal-I/98/2414 in respect of a condition of pre-deposit of Rs. 50 lakhs by applying Section 35-F of the Central Excise Act, 1944.
2. According to the writ petitioners, there are four account of disputes; (a) discounts to the wholesale dealers; (b) distribution expenses incurred at depots; (c) sales tax; (d) notional interest.
3. So far the distribution expenses incurred at depot and sales tax are concerned, the same were upheld by such authority in an appeal following the similar issued vide Order in Appeal No. 74/Cal-I/98, dated 28th November, 1998 and others were remanded back for the purpose of hearing by the appropriate authority.
4. It was further directed that such order of demand will be considered by the concerned Assistant Commissioner as per the guidelines laid down in a circular as given thereunder which has been issued in the light of the decision of the Apex Court in the case of Metal Box (I) Ltd. v. CCE, Madras . However, at the time of passing such order of demand, the appellants are directed to deposit a sum of Rs. 50 lakhs as above only on the confirmed demand of Rs. 1,14,75,120.
5. As a passing comments, the learned Counsel appearing on behalf of the writ petitioners contended that the Original show- cause notice was issued on 3rd October, 1997 by the respondent No. 3 herein and the order was passed on the same date confirming a demand in respect of the claim.
6. In any event from the particulars of the Paragraph 24 herein, it appears that the following are the claim as made by the respondents herein:
______________________________________________________________________________________________ Particulars Order No: V Show Cause Show Cause Total 19(3)AC-78/ Notice No. Notice No. Cal-D/97dt. CE-20/SBCH-P/L CE-20/SBCH-
23.9.97 Cal-D-7/97/ 205 dt. 24.9.97 P/LCal-D-7/ 210 dt. 24.9.97 ______________________________________________________________________________________________ (Rs.) (Rs.) (Rs.) (Rs.) ______________________________________________________________________________________________ Discount 1,63,283.22 60,561.47 1,00,109.21 3,23,953.90 Distribution 1,14,056.31 1,55,620.76 NA 2,69,677.07 Exp.
Sales Tax 13,929.66 44,758.13 91,926.23 1,50,614.02 Loading of 7,12,500.00 6,56,768.00 12,86,294.00 26,55,562.00 Notional Interest
______________________________________________________________________________________________ Total 10,03,769.19 9,17,708.36 14,78,329.43 33,99,806.99 ______________________________________________________________________________________________
7. Therefore, according to the writ petitioners that if the two items of disallowance which is made in earlier appellate order, mainly distribution expenses and the sales tax in the instant case, the maximum demand, therefore, would be Rs. 4,20,291.09 for the entire period. Under no circumstances, there can be imposition of pre-deposit for a sum of Rs. 50 lakhs arising out of the alleged confirm demand of Rs. 1,14,75,120.
8. The scope and ambit of Section 35-F of the Central Excise Act, 1944 is as follows:
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 persons 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 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.
9. According to the petitioners, there is a provision under the Act to apply discretion in respect of pre-deposit of duty demanded or penalty levied which may 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 interest of revenue.
10. According to the petitioners, the imposition of conditions for pre-deposit, although a matter of discretion, should be imposed rationally upon having an appropriate prima facie case and due consideration of hardship. Since the discretion is open for the authority, such person cannot apply the same without such consideration. In such aspect, various judgments have cited by Dr. Debi Prasad Pal, Learned Senior Counsel appearing on behalf of the petitioners. Firstly, he cited a judgment (Ruby Rubber Industries v. Commissioner of C.Ex., Calcutta-II) in its Paragraph 25 to establish before this Court that it will not be out of place to mention here that it is now well settled through judicial precedents that the prima facie case not necessarily means that one must have a gilt edged case which is bound to succeed. Prima facie case always has been held by the Courts to be a case which is arguable and fit for trial and consideration.
11. He has also relied a judgment (Sri Krishna v. Union of India) reported in the same volume being a Division Bench of Delhi High Court considered the matter more or less similarly placed situation in respect of the similarly placed Section being 129-E of Customs Act, 1962. There also the Division Bench of Delhi High Court considered that either in Section 129-E of Customs Act, 1962 or Section 35-F of Central Excise Act, 1944, when there is prima facie case in merit which most likely to exonerte him from payment and still tribunal insist of pre-deposit of the amount it would amount to the undue hardship.
12. Dr. Pal also relied a judgment (V.S.T. Industries Ltd. v. Collector of Central Excise, Hyderabad) by making a specific case that notional interest which is part of the claim in the instant proceeding is not addable to the assessable value whereby distinguished the earlier Division Bench judgment of the Supreme Court as Metal Box India Ltd. v. Collectors.
13. He further contended a Single Bench of this Court (Tata Iron & Steel Co. Ltd. v. Commr. (Appeals), C. Ex., Calcutta) in considered the similar issue in paragraph 4 & 5 herein following Supreme Court judgment etc. in respect of Section 129-E of the Customs Act as well as Section 35-F of the Central Excises and Salt Act, 1944 which is pari materia with each other by saying that discretion must be exercised on relevant materials honestly bona fide and objectively. The probability of the prima facie case of the appellant and the conduct of the parties have to be taken into consideration by the appellate forum while it is to be decided to the question whether the deposit have to be dispensed with or not.
14. Mr. N.C. Roy Chowdhury, learned Counsel appearing with Mr. Soumitra Pal on behalf of the respondents/authorities that in speaks that notional interest on advances made by the Customs to assessee addable to purchase as assessable value. There is no necessity to go into the description any further because of the reason that this Supreme Court judgment has been distinguished by a three Judges Bench of the Supreme Court as . Therefore, ratio of the latest Larger Bench will have a binding effect on such judgment and this Court too, in respect of consideration of the matter.
15. Mr. Roy Chowdhury further contended that in view of (Govt. of India v. Madras Rubber Factory Ltd.) a 3 Judges Bench of the Supreme Court already held that distribution expenses incurred in maintaining and running the depots not deductable except cost of transportation including insurance on freight. Therefore, such ratio of the 3 Judges Bench will be applicable in the case of the petitioners in this respect at the time of finalisation of issue.
16. However, the discretion has to be applied by the authority who are the sole judge of the issue and this time as the deposit asked for a sum of Rs. 50 lakhs is proper being less than 50% of the amount in respect of confirmed demand of Rs. 1,14,75,120.
17. In reply, Dr. Pal has submitted that Distribution and sales tax are not the subject matter herein in which the appellate authority has already held as against the petitioners. But their real issues are discounts and the notional interest. Therefore, they have a prima facie case for the same.
18. Considering the pros and cons of the matter and giving an appropriate importance in respect of the revenue earning of the authority, I have taken pain to understand the issue upon hearing at length at a motion stage, I do not think that there is any question involved for giving directions for filing affidavit since it is a question of law which the parties have understood and they have come forward with appropriate cases.
19. From the analysis, I find that the authority is interested about the notional interest for the reason that the claim is much higher than the account of the others like discount, distribution expenses and sales tax. At the same time, it is to be remembered that the appellate authority remanded back the matter of discount and notional interest to the Assistant Commissioner of the Central Excise to hear out the matter. Therefore, a question arose before this Court unless and until there is a prima facie case, there is no scope of remanding any matter to the subordinate authority for the purpose of rehearing the same. Therefore, there is a prima facie case.
20. Therefore, in one hand sending the matter for remand and on the other hand, imposition of penalty under Section 35-F of the Central Excise Act, 1944 is militating with each other, hence the same is not sustainable.
21. Secondly, the judgment of the Supreme Court has categorically held that the notional interest cannot be addable to assessable value by distinguishing by the earlier thought of the Supreme Court.
22. Under such circumstances, the writ petition is disposed of with a direction upon the authority to reconsider imposition of pre-deposit in the light of the judgment within a period of 4 (four) weeks from the date of communication of the order upon giving fullest opportunity of hearing and by passing reasoned order thereon subject to making an application in this respect upon deposit of admitted sum of Rs. 4,20,291.09 Paisa. For the purpose of effective adjudication a copy of the writ petition will also be enclosed with such application.
23. In view of the order passed above imposition of pre-deposit of a sum of Rs. 50 lakhs will not be sustained but subject to the result of the consideration as above.
24. No order is passed as to costs, since no affidavit has been filed by the respondent, no allegation is admitted by them.
25. The parties will be entitled to have the Xeroxed certified copy within a period of 7 days from the date of putting requisition.