Calcutta High Court
Tijiya Steel Pvt. Ltd. And Anr. vs Union Of India (Uoi) And Ors. on 3 August, 2006
Equivalent citations: (2007)2CALLT358(HC)
Author: Indira Banerjee
Bench: Indira Banerjee
JUDGMENT Indira Banerjee, J.
1. In this writ application, the petitioner has challenged an order No. 5-500/Kol/2000 dated 19th April, 2006 of the Central Excise and Service Tax Appellate Tribunal, refusing to waive the requirement of pre-deposit of the disputed duty of Rs. 3,10,188/-, but instead, directing the appellant company to deposit Rs. 1,50,000/- within eight weeks from the date of the said order.
2. The petitioner company is engaged it, manufacture inter alia of Mild Steel Ingots, which are excisable goods, at its factory at Howrah.
3. During the period from 1st September, 1997 to 31st March, 2000, the petitioner had paid Central Excise Duty on Mild Steel Ingots under Section 3A of the Central Excise Act, 1944.
4. On 30th March, 2000, the Compounded Levy Scheme under Section 3A of the Central Excise Act was withdrawn. Thereafter, with effect from 1st April, 2000 the company started paying duty under Section 3 of the Central Excise Act, 1944 at the ad valorem rate of duty specified in the Central Excise Tariff Act, 1985 and availing CENVAT credit.
5. By a notification No. 29/2000-CE(NT) dated 31st March, 2000, the Central Government amended the Central Excise Rules, 1944 by insertion of Rules 57AG & 57AB.
6. According to the petitioners, the petitioner company became entitled to avail CENVAT credit as deemed credit on the stocks of Ingots and Billets of non-alloy steel, falling under sub-heading No. 7207.90, lying on 31st March, 2000, on which duty had been paid under Section 3A of the said Act.
7. According to the petitioners, the petitioner company inter alia availed of deemed credit amounting to Rs. 3,10,188/- on ingots manufactured in their factory lying in stock as on 31st March, 2000 and captively consumed for manufacture of the finished product, that is, hot roled products of non-alloy steel falling under Chapter 72 of the Schedule of the Central Excise Tariff Act.
8. A show-cause notice dated 13th February, 2001 was issued alleging that CENVAT credit would not be available to the petitioner and calling upon the petitioner to show-cause why an amount of Rs. 3,14,599/- taken as CENVAT credit on 425.740 MTs. of input materials lying in stock with the assessee on 1st April, 2000 and an amount of Rs. 3,10,188/- taken as deemed credit in alleged contravention of notification No. 29/2000-CE(NT) dated 31st March, 2000 on 209.636 MT of inputs should not be disallowed and an equivalent amount recovered along with interest in terms of Rule 57H of the Central Excise Rule, 1944 read with Section 11A(1) and 11AA of the Central Excise Act, 1944.
9. The Joint Commissioner of Central Excise, Haldia Commissionerate, Kolkata passed an Order No. 52/Jt. Commr./CF/Haldia/Adjn/2005 dated 7th March, 2005, the operative portion whereof is extracted hereinbelow:
Order: In view of the above:
(i) I disallow the credit of Rs. 3,14,597.02 on the inputs lying in stock as on 31.03.2000 as the assessee have failed to produce duty paying documents,
(ii) I disallow the credit of Rs. 3,10,188/- against a quantity of 209.636 MT of Steel Ingot manufactured captively & consumed captively by the noticee,
(iii) I order the recovery of interest at applicable rate from the date of taking the abovementioned credits and
(iv) I also impose penalty of Rs. 2,00.000/- (Rupees Two Lakhs only).
10. The said order being an appealable order under Section 35 of the Central Excise Act, 1944 the petitioner company preferred an appeal therefrom before the Commissioner of Central Excise (Appeal).
11. The Commissioner of Central Excise (Appeal 1), however, by an order dated 29th August, 2005 confirmed the impugned order in so far as the same related to the demand of Rs. 3,10,188/- along with interest but set aside the demand of Rs. 3,14,597/- along with interest and also the penalty of Rs. 2 lakhs.
12. Being aggrieved by the order dated 29th August, 2005 of the Commissioner of Central Excise (Appeal 1) in so far as the Commissioner confirmed the demand of Rs. 3,10.188/-, the petitioner preferred an appeal being Appeal No. 80/HAL/2005 before the Customs Excise and Service Tax Appellate Tribunal, hereinafter referred to as the CESTAT.
13. It is a statutory requirement of Section 35F of the Central Excise Act, 1944 that pending an appeal from a decision or order relating to any duty demanded or penalty levied, the appellant would be required to deposit with the adjudicating authority the duty demanded or the penalty levied as the case might be.
14. The appellant authority, be it the Commissioner (Appeals) or the Appellate Tribunal, might dispense with such deposit, if it is of the opinion that deposit of the duty demanded or penalty levied would cause undue hardship to the appellant.
15. The petitioner made an application before the CESTAT for stay of the impugned order dated 29th August, 2005 pending disposal of the appeal and also for waiver of pre-deposit of the disputed duty.
16. On behalf of the petitioner company, it was argued that the Appellate Authority had, in passing the order under appeal travelled beyond the scope of the show-cause notice as well as the order in original.
17. The allegations in the show cause notice pertaining to deemed credit of Rs. 3,10,188/- against 209.636 M.T. of Mild Steel Ingots procured and consumed captively are extracted hereinbelow:
Further, the said assessee have availed Deemed Credit amounting to Rs. 3,10,188.48 against a quantity of 209.636 MT of M.S. Ingots procured and consumed captively, in terms of Notification No. 29/2000 C.E.(N.T.) dated 31.3.2000. The said Notification, as it appears, envisages procurement of inputs by way of purchase from outside parties. "EXPLANATION" contained or appended to the said notification (notification No. 29/2000 CE (NT) dated 31.3.2000) furthermore reinforces the above view, that the input is required to be procured from outside parties the payment of which is paid either by Bank draft or by a cheque drawn on the assessees account. The said assessee have instead procured their inputs captively and consumed captively.
The said assessee is therefore asked to show cause to the Assistant Commissioner of Central Excise, Howrah, West Division, 4th Floor, 25, Princep Street, Calcutta - 700072, within 30 (thirty days) of receipt of this notice as to why:
(a) ...
(b) an amount of Rs. 3,10,188.48 taken as Deemed Credit, in contravention of Notification No. 29/2000 CE (NT) dated 31.3.2000, on 209.636 MT of inputs as aforementioned:
shall not be disallowed and an equivalent amount recovered from them along with interest in terms of Rule 57AH of Central Excise Rules, 1944 read with Section 11A(1) & 11AA of Central Excise Act, 1944.
18. The Joint Commissioner of Central Excise held as follows:
Regarding the deemed credit of Rs. 3,10,188/- againt a quantity of 209.636 MT of Steel Ingot procured captively and consumed captively I find that the noticee has violated the provisions of Notification No. 29/2000-CE (NT) dated 31.3.2000 in as much as this Notification covers the inputs purchased by a manufacturer and used in production and the inputs procured and consumed captively by a manufacturer are out of scope of this Notification.
19. The Commissioner of Central Excise (Appeal 1) however, held as follows:
Regarding deemed credit to the tune of Rs. 3.10,188/- I find that the lower authority in this case disallowed the said deemed credit on the ground that captive consumption was out of scope of notification No. 29/2000 but I find that deemed credit in case of captive consumption is not specifically excluded from the purview of the said notification and the said notification only imposes some conditions for admissibility of deemed credit in general. I find that one of such conditions is correct declaration of the input price in the invoice regarding which para 5 of the said Notification stipulates that "the provisions of this notification shall not apply to inputs where the manufacturer of the said inputs has not declared the invoice price of the said inputs correctly in the documents issued at the time of their clearance from his factory". In this case the appellant declared the invoice price for captive consumption of M.S. Ingot @ Rs. 10,500/- per M.T. whereas in other cases I find from their submitted RT-12 return for the same month of April 2000 that they cleared 76975 M.T. of the same goods @ Rs. 8,290/- per M.T. Therefore, it is clear that though M.S. Ingot (SH No. 7206.90) is eligible input in this case for the purpose of deemed credit but the appellant did not declare the invoice price of the said inputs correctly in the documents and, therefore, I am of the view that the deemed credit to the tune of Rs. 3,10,188/- is not admissible to the appellant.
20. It was argued that the Commissioner of Central Excise (Appeal 1) had apparently travelled beyond the scope of the show cause notice in arriving at his finding of the petitioner not declaring the invoice price of the inputs correctly, which was not a charge against the petitioner company in the charge sheet.
21. The attention of the Tribunal was drawn to its earlier decision in the case of Commissioner of Central Excise, Ludhiana v. Nav Bharat Engineering , in support of the contention that the Appellate Authority could not have travelled beyond the charge in the charge sheet. Written submissions were filed before the CESTAT.
22. The CESTAT by the order impugned directed the petitioner company to make a pre-deposit of Rs. 1,50,000/- within a period of eight weeks observing that the duty involved was Rs. 3,10,188/- and the petitioner had not been able to make out a prima facie case. The CESTAT directed that on payment of Rs. 1,50,000/- within the time stipulated in the order, pre-disposit of rest of the duty would stand dispensed with.
23. Ms. Sanjukta Bose appearing on behalf of the petitioner company submitted that in directing pre-deposit of Rs. 1,50,000/- the Tribunal had, in fact, not considered the prima facie case of the petitioner at all.
24. It is now well-settled that in considering the question of waiver of pre-deposit, the Tribunal is bound to consider the prima facie merits of the case. Prima facie case does not mean a gift edged case as held by this Court in the case of Ruby Rubber Industries v. Commissioner of Central Excise, Calcutta II . The Tribunal is to examine whether the case made out by the appellant is an arguable one.
25. Where an assessee has a good prima facie case and the disputed duty and/or penalty has apparently been charged wrongfully the requirement of pre-deposit of the disputed tax and/or penalty is liable to be waived, since pre-deposit of tax not payable by an assessee would in itself cause hardship to that assessee, as held by this Court in the case of Bongaigaon Refinery & Petrochem Ltd. v. Collector of Central Excise (A), Calcutta, .
26. In considering the question of waiver of pre-deposit, two factors are of paramount importance, the financial ability of the appellant and the prima facie case. The financial capacity of the appellant has to be considered in all cases, irrespective of the prima facie merits of the case. Even where an appellant has the financial capacity to deposit the disputed tax and/or penalty, pre-deposit may have to be waived, if the appellant makes out, a prima facie case.
27. Where there is a very good prima facie case, and/or gilt edged case, pre-deposit would have to be waived altogether. If the appellant has an arguable case, pre-deposit might be waived on such conditions as would protect the interests of revenue.
28. In fact, the CESTAT was conscious of its duty to consider the prima facie case and accordingly recorded a finding of the appellant not being able to make out a prima facie case. The finding is unsupported by any reasons whatsoever. The CESTAT neither recorded nor dealt with the submissions of the parties which the CESTAT was obliged to do.
29. Pre-deposit of duty and/or penalty pending hearing of an appeal is a statutory requirement under Section 35F of the Central Excise Act, 1944. Pre-deposit might only be dispensed with upon satisfaction that pre-deposit would cause hardship and not otherwise.
30. An order disposing of an application for dispensation of the requirement of pre-deposit of the disputed duty and/or penalty has to be reasoned. Even though detailed reasons might not he necessary, some reasons are obligatory. The order should disclose the process of reasoning that led to the decision.
31. In the instant case, as observed above, the CESTAT has neither recorded the submissions made on behalf of the petitioner nor given its findings thereon. Furthermore, the impugned order does not disclose why the petitioner was required to deposit only Rs. 1,50,000/- as against demand of over Rs. 3,00,000/-.
32. The impugned order gives rise to the question of why the CESTAT waived duty of over Rs. 1,50,000/- subject to payment of Rs. 1,50,000/-. There is no finding of financial hardship and/or incapacity.
33. The Appellate Tribunal might waive pre-deposit of disputed duty and/or penalty in part either if it is satisfied that deposit of the entire duty or penalty would cause financial hardship or alternatively if the Tribunal is of the prima facie view that the disputed duty and/or penalty might only be partly sustainable.
34. The Tribunal cannot exercise its power to waive pre-deposit of the duty disputed, even in part, in the absence of reasons. The power of dispensation cannot be exercised arbitrarily or whimsically or for the asking. Satisfaction that pre-deposit of the duty demanded could cause undue hardship is the condition precedent for exercise of the power to dispense with pre-deposit either fully or in part.
35. Mr. Souvik Nandy appearing for the respondents took a preliminary objection to the maintainability of the writ application contending that the order is appealable.
36. Mr. Nandy referred to Section 35G(1) of the Central Excise Act, 1944 inserted in 2003 which is extracted hereinbelow for convenience:
35G. Appeal to High Court.-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among having a relation to the rate of duty of exercise or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.
37. Mr. Nandy argued that the order being appealable to a Division Bench of this Court, the writ application ought to be dismissed.
38. A perusal of Section 35G(1) shows that all orders are not appealable to the High Court but only those orders that involve substantial questions of law. An appeal would lie only if the High Court is satisfied that the case involves a substantial question of law. Where the High Court is satisfied that a substantial question of law is involved, it is incumbent upon the High Court to formulate the question and to hear the appeal only on the question so formulated.
39. The impugned order is really incidental to the hearing of the appeal and, in any case, does not involve any substantial question of law.
40. In the case of Shaw Wallace & Co. Ltd. v. Income Tax Appellate Tribunal and Ors. reported in 240 ITR 579 (Cal) cited by Ms. Bose, A.N. Ray, J. held as follows:
Regarding the point of Section 260A, in my opinion, an appeal would not be permissible from any and every order passed by the Tribunal under this section. If, say, an order of adjournment is passed, the assessee could not come in appeal to the High Court under Section 260A. There are many instances of provisions allowing appeals where words such as ever order, any order, all orders, etc. have been interpreted to mean and include only those orders which are substantially final in some sense or the other, and which finally dispose of or affect the parties' rights in regard to some important point in controversy. In my opinion, the words every order of the Tribunal has to be passed in appeal. Here the impugned order of the Tribunal was not passed in appeal but in a miscelaneous application directed towards rectifying a mistake apparent from the record. If the order under Section 254(2) had taken the shape of modifying by way of amendment or rectification, the original order to some extent, then both of those jointly might have been appealable under Section 260A; but an order of recall is clearly not appealable. Alternatively, even if appealable, the impugned order being also without jurisdiction, the writ application should be entertained in this case, as an exception, in the interest of expedition of the assessment proceedings.
41. In this case of Ruby Industries v. Commissioner of Central Excise, Calcutta II (Cal) also cited by Ms. Basu, Samaresh Banerjea, J. held as follows:
...I am unable to accept the contention of the respondents that the writ petition is not maintainable, as an appeal lies under Section 35L, of the Act against an order passed by the Tribunal disposing of the application for stay and pre-deposit.
Section 35L(b) clearly provides that any order having a relation to the rate of duty of excise or to the rate of duty of excise or to the value of goods for purposes of assessment will be appealable to the Supreme Court. Although much emphasis has been laid on the expression, "among other things", used in the said section by the learned Counsel appearing for the respondent, in my view, such expression does not mean that appeal will lie against all orders passed by the Tribunal including an order passed in the matter of pre-deposit.
42. Section 35F of the Central Excise Act, 1944 provides that, where in any appeal under Chapter VIA of the said Act, the order appealed against relates to any duty demanded in respect of goods which are not under the control of the Central Excise authorities or any penalty levied under the said Act, the person desirous to appealing against such order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied.
43. The first proviso to the said section, however, provides that where the Commissioner Appeals or the Appellate Tribunal, as the case may be, is of the 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 on such conditions as might be imposed to safeguard the interests of revenue.
44. Whether pre-deposit of the disputed duty or penalty would cause hardship, and if so, to what extent, are essentially matters of facts which are to be taken into account considering various factors including in particular the financial capacity of the appellant and the prima facie case in appeal.
45. An order directing the pre-deposit or an order waiving pre-deposit may not involve any question of law, far less a substantial question of law and hence may not be appealable. In any case, such an order cannot be said to be an order in the appeal but is an order incidental to the hearing of the appeal. An order directing deposit of disputed duty or penalty either in full or in part is not ordinarily appealable. It cannot, therefore, be said that the petitioner has an adequate efficacious alternative remedy.
46. Article 226 of the Constitution of India does not impose any limitations on the power of the High Court to issue writs, even where there is an alternative remedy. Where there is an efficacious alternative remedy this Court refrains from exercising its extraordinary jurisdiction. This Court would not reject an application under Article 226 of the Constitution of India where the remedy, if any, of appeal is uncertain as in the case appeals under Section 35G of the Central Excise Act, 1944 which depend on subjective satisfaction of the Division Bench of the High Court of existence of a substantial question of law.
47. In any case, there are, at lease three exceptions to the rule of alternative remedy. A writ application might be entertained where the order is in violation of principles of natural justice, where the order is passed by an authority that has no jurisdiction to pass the order and where the order is passed under a provision of law which is ultra vires. An order which is perverse would also be subject to judicial review of this Court in proceedings under Article 226 of the Constitution of India. In the instant case, the order impugned is apparently non-speaking and, therefore, in violation of principles of natural justice. Furthermore, the decision is not based on any evidence or materials in so far as the same relates to waiver of over 50% of the disputed dues and is perverse in law to that extent.
48. The order impugned is, therefore, set aside. The Tribunal shall consider the question of waiver of pre-deposit afresh in accordance with law, after considering all relevant factors and in particular the submissions of the petitioners with regard to the prima facie case in appeal as also the financial capacity of the petitioner.
49. Needless to mention that it will be open to the Tribunal to dispense with pre-deposit on such conditions that the Tribunal might deem fit to impose to safeguard the interests of revenue. In any case, the appeal may be heard and disposed of expeditiously preferably within eight weeks from the date of communication of this Judgment and order.
50. Urgent xerox certified copy of this Judgment and order be supplied to the parties subject to compliance with requisite formalities.