Customs, Excise and Gold Tribunal - Delhi
Modi Alkalies And Chemicals Ltd. And ... vs Collector Of Central Excise on 28 June, 2000
Equivalent citations: 2001(73)ECC638
ORDER Jyoti Balasundaram, Member (J)
1. The above applications for waiver of pre-deposit and stay of recovery of duty and penalty arise out of the order of the Commissioner of Central Excise, Delhi who has confirmed a duty demand of Rs. 20,58,752 on M/s. Modi Alkalies & Chemicals Ltd. (hereinafter referred to as MACL), together with interest under the provisions of Section 11AB of the Central Excise Act, imposed a penalty of an amount equal to the duty amount under the provisions of Section 11AC and imposed a penalty of Rs. 1 lakh each on M/s. Mahabaleshwar Gas and Chemicals P. Ltd. (hereinafter referred to as MGCL), M/s. Shri Charnundi Gas and Chemicals P. Ltd. (hereinafter referred to SCGCPL) and M/s. Nippon Gas & Chemicals P. Ltd. (hereinafter referred to as NGCPL) and a penalty of Rs. 50,000 each on Shri Ashok Kumar, Chief Operation Officer of MACL, Shri Ritesh Beotra, Director of SCGCPL, Shri V.K. Agarwal Director of MGCPL and Shri Pankaj Jain Director of NGCPL, under 209A of the Central Excise Rules. The duty demand has been confirmed on the ground that MACL who are engaged in the manufacture of hydrogen gas falling under CET Sub-heading 2804.19 had floated 3 front companies viz. MGCL, SCGGCPL and NGCPL to compress and bottle the hydrogen gas (by product arising during the manufacture of caustic soda) with the intention of misusing SSI exemption under Central Excise Notification 1/93 dated 28.2.93 and evading payment of duty. The Commissioner has also upheld the charge that MACL had evaded duty by resorting to under-valuation by collection cash from the customers of hydrogen gas over and above the price shown in the invoices.
2. We have heard Shri A.K. Jain, learned Advocate, who pleads financial hardship on behalf of MACL, submitting that MACL's application for being declared as a sick company has been registered by the BIFR and that the factory of MACL has been lying closed since May 1999, electricity connection has been cut off, the company is facing several law suits in various courts and is unable to comply with the statutory requirement of PF contribution and is also unable to pay salaries to its employees. As far as the merits of the case are concerned, he submits that the other units are not dummy units registered under the Central Excise law and comply with the formalities under the Sales Tax Act, etc., and in the absence of any allegation or finding of flow back of profits, learning Counsel submits that the other 3 units cannot be treated as having been set up by M/s. MACL. Asfar as the penalty under Section 11AC is concerned, he submits that the entire period of demand is prior to the introduction of this Section. As for the pentalties on the 3 units, he submits that once the Commissioner has held that they are dummy units, they could not be held liable to penalty and as far as the individuals, he states that penalty has been imposed without clearly bringing out the role of any of the individuals in the alleged evasion of duty. In these circumstances, he prays for waiver of pre-deposit of duty and penalty pending the appeals.
3. The prayer is opposed by Shri Satnam Singh, learned SDR, who cotends that the registration of application by the BIFR is not sufficient for dispensing with the requirement of pre-deposit which is a statutory requirement for hearing of the appeals. Regarding the merits, he reiterates the findings of the adjudicating authority, highlighting the aspect that payment for cylinders made by MGCL from the money received from MACL or from the security deposits received from the customers for cylinders given by MACL and that during the period 1.4.96 to 31.3.97, MGCL had received over Rs. 1.5 crores from MACl. Even after repayment, the amount outstanding on 31.3.97 was nearly Rs. 75 lakhs. He draws our attention to paragraph 18 of the impugned order wherein there is a clear finding that MACL provided all assistance for establishing the three units and, therefore, they have been rightly treated as a camouflage for the purpose of enabling MACL to wrongly avail of SSI exemption under Notification 1/93, through these units. Regarding financial hardship, he submits that although he admits that MACL has huge losses, he submits that the sales income and loans and advances are high and that the financial condition is, therefore, not so poor as to prevent MACL from complying with the requirement of pre-deposit. Regarding penalty on the 3 units and upon the individuals, he reiterates the findings of the Commissioner.
4. We have carefully considered the rival submissions. The question as to whether the evidence on record is sufficient for holding that the three units were dummy units set up by MACL for the purpose of wrongful availment of SSI benefit is highly contentions and can be decided only when the appeals are taken up for regular hearing. It cannot be said that the applicants have made out a strong prima-facie case for waiver on merits. We do not also prima-facie agree with the submission that the registration of MACL's application for declaration as a sick company by the BIFR is in itself sufficient ground for totally dispensing with the pre-deposit. We, therefore, direct M/s. MACL to deposit Rs. 5 lakhs towards duty within a period of 8 weeks from today. Pre-deposit of penalty imposed on MACL and the 3 gas agencies viz. MGCL, SCGCPL and NGCPL is dispensed with and the recovery is stayed during the pendency of the appeals. We direct Shri Ashok Kumar, Shri Ritesh Beotra, Shri Pankaj Jain and Shri V.K. Agarwal to deposit Rs. 10,000 each within 8 weeks. On such deposit, the requirement of pre-deposit of balance duty by MACL and balance penalty by the 4 individuals shall stand waived and their recovery stayed pending the appeals. Failure to comply with this direction, shall result in vacation of stay and dismissal of appeals without further notice.
5. Compliance to be reported on 18.9.2000.