Customs, Excise and Gold Tribunal - Delhi
M/S. Somani Iron & Steels Ltd. vs Cce, Kanpur on 13 June, 2001
ORDER
Lajja Ram
1. The stay application filed by M/s. Somani Iron and Steel Ltd. (hereinafter referred to as 'M/s. Somani), has been posted for re-hearing in pursuance of the directions dated 11.10.2000 of the Hon'ble Delhi High Court. The Hon'ble High Court has observed as under:-
"Without, therefore, expressing any opinion about the acceptability of stand taken by the petitioner company about the consequence flowing from the registration of the case under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the directions relating to restrain on disposal of properties, we direct the Tribunal to consider the application of the petitioner afresh."
Earlier under Stay Order dated 3.6.98, M/s. Somani were directed to pre-deposit a sum of Rs. 1,00,00,000/- towards duty and Rs. 50,00,000/- towards penalty for hearing their appeal. These amounts were required to be deposited before 5.8.98. The terms of the stay order dated 3.6.98 were not complied with even during the extended period of time granted by the Tribunal. The appellants in the meantime filed a civil writ petition in Delhi High Court, and the High Court while allowing adjustment by Rs. 40,00,000/-, which M/s. Somani had deposited by 30.07.98, dismissed the writ petition on 18.03.99. The Company took up the matter to the Hon'ble Supreme Court on 12.05.99 and by order dated 9.8.99, operation of the order dated 18.03.99 of the High Court was stayed by the Hon'ble Supreme Court. When the matter came-up for noting the compliance, the Tribunal after taking note of the fact that the terms of the stay order dated 3.6.98 had not been complied with even within the extended time granted, dismissed the appeal for non-compliance under Final Order dated 26.11.99. The Special Leave Petition filed by M/s. Somani in the Hon'ble Supreme Court was dismissed by the Hon'ble Supreme Court on 29.11.99. The matter again came-up before the High Court and the Delhi High Court under Order dated 11.10.2000 passed the following order:-
"4. We find that on 09.08.1999, order of stay was passed by the Apex Court. Obviously, on 26.11.99, the Tribunal could not have dismissed the appeals for non-deposit. To that extent, we fell the Tribunal's action cannot be maintained. Without, therefore, expressing any opinion about the acceptability of stand taken by the petitioner company about the consequences flowing from the registration of the case under SICA and the directions relating to restrain on disposal of properties, we direct the Tribunal to consider the application of the petitioner afresh."
2. The stay application was re-heard on 23.05.2001 when Shri V. Lakshmi Kumaran, Advocates submitted that the appellants' company has become a sick unit and was not in a position to pre-deposit any further sum, in addition to the amount of Rs. 40,00,000/-, which they had already deposited. A case has already been registered by the Board for Industrial and Financial Re-construction (BIFR). He also submitted that on merits the appellants had a good case. He referred to a number of decisions of the Hon'ble Supreme Court and of this Tribunal, wherein under similar circumstances, the appeals have been ordered to be heard without any pre-deposit. In particular, he referred to the following decisions:-
(i) Real Value Appliances Ltd. and Ors. Vs. Canara Bank and Ors. - (1998) 5 SCC 554 Enquiry under Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 by Board for Industrial and Financial Re-construction (BIFR), commences as soon as registration of reference is completed after scrutiny. From that time, proceedings against company's assets shall remain suspended under Section 22 till final orders of BIFR.
(ii) Vijay Packing System Ltd. Vs. Commissioner of Customs, Central Excise Andhra Pradesh - 2000 (118) ELT 553 (SC) When it was found that the appellants had a prima facie case and the appeal was before the BIFR, it was appropriate and in the interest of justice, if the appeal was heard without the appellants being required to pay the disputed amount of excise duty.
In reply, Shri Rajeev Tandon, SDR submitted that while Rs. 40,00,000/- had already been deposited by the appellants and this sum could be adjusted towards the amounts to be deposited, no case had been made out by the appellants for any further relief. Serious allegations of illicit manufacture and clandestine removal had been made and found established against the appellants. he also submitted that there was no declaration that the appellants' company was a sick unit. He relied upon the Allahabad High Court decision in the case of Amrit Banaspati Co. Ltd. Vs. Commissioner of Central Excise (Appeals), Ghaziabad - 2000 (119) ELT 524 (Allahabad).
3. We have carefully considered the matter.
The appellants were engaged in the manufacture of mild steel ingots, runners and risers, steel casting and steel Mulds falling under Heading No. 72.06 and Heading No. 84.54 of the Central Excise Tariff. They were having electrically operated, industion/arc furnaces. Serious allegations of suppression of production and clandestine removals were made against the appellants company. A number of private records were seized. Statements of persons concerned with the affairs of the company were recorded, who admitted the production figures as recorded in the private records and which production has not been entered int eh excise records. The various figures recorded in the private accounts were interpreted by the officers as per their understanding as the appellants did not cooperate. The suppressed production figures were arrived at accordingly by the Central Excise officers on the basis of the relevant information and records. We have gone through the impugned order and we find that the matter involves a great deal of appreciation of facts.
4. The extended period of lamination has been invoked. The case regarding seizure and demands within the normal period of limitation had ben separately adjudicated and dealt with. That matter is reported to be presently before the jurisdiction Commissioner of Central Excise (Appeals).
5. A reference under Section 15 (1) of the Sick Industrial companies (Special Provisions) Act, 1985 (in short SICA) had been made by the appellants' company on 15.01.2000 to the BIFR and as indicated by the BIFR under their number dated 11.2.2000, the reference has been registered as case no. 86/2000. Section 15 (1) of the SICA is extracted below:-
"15(1) Where an industrial company has become a sick industrial company, the Board of Directors of the Company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company:
Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make reference to the Board for the determination of the measures which shall be adopted with respect to the company."
Orders had been passed by the BIFR restraining the company/its promoters form disposing of any fixed or current assets of the company without the consent of the BIFR (refer para 2 of the High Court's order dated 11.10.2000). It is however seen that the unit has not been declared as a sick unit. Para-12.2 of the summery recorded of the proceedings of the hearing held on 21.08.2000 before the BIFR is extracted below:-
"12.2 The Bench noted that doubts were raised by the secured creditors on the accounts of the company for the financial years ended 31.12.1999 (on the basis of which the company had filed its reference to the BIFR) and it had been stated that they did not reflect a true and fair view of the company's state of affairs as on 31.12.99. The company had not given satisfactory explanations on the doubts expressed by the secured creditors. Accordingly, the Bench did not declare the company as a sick industrial company."
6. From the order dated 11.10.2000 of the High Court, the following observations are pertinent:-
(i) By 30.07.98, the company had deposited Rs. 40,00,000/-, which was not taken note of by the Tribunal (refer Pare-1 of the order dated 11.10.2000 of the High Court).
(ii) ON 9.8.99, order of stay order was passed by the Apex Court. Obviously on 26.11.99, the Tribunal could not have dismissed the appeal for non-deposit.
(iii) The High Court has directed the Tribunal to consider the application of the petitioners afresh.
7. While reference before the BIFR does not automatically provide justification and ground for granting stay for hearing the appeal by the Tribunal, in the facts and circumstances of the case, in particular after taking note of the observations of the Hon'ble High Court in their order dated 11.10.2000, we consider that at this prima facie stage, the balance of convenience is in favour of M/s. Somani. BIFR had already restrained M/s. Somani and its promoters form depositing of any fixed-up current assets of the company, without the consent of the BIFR. We direct that this restriction will remain in force till the disposal of the present appeal (para-2 of the High Court order dated 11.10.2000 refers). Further, a sum of Rs. 40,00,000/- already deposited by M/s. Somani (refer para-1 of the High Court order dated 11.10.2000) will remain with the Department till the disposal of the appeal.
8. With these directions, we waive the requirement of pre-deposit of the balance amount of duty/penalty and stay its recovery till the disposal of the appeal.
The appeal to come-up for hearing in its own turn.