Partial pre-deposit in clandestine removal disputes may secure revenue while preserving a hearing on merits.

A partial pre-deposit may be directed where the record shows a prima facie case and the revenue can be adequately secured without insisting on full deposit. In this note on clandestine manufacture and clearance of MS ingots, the Tribunal considered the demand to be within the normal limitation period and noted that the penalty on the assessee arose under Rule 25, while the director faced penalty under Rule 26 rather than section 11AC. On that basis, it reduced the pre-deposit, required a limited deposit towards penalty, and remitted the appeals to the Commissioner (Appeals) for disposal on merits after compliance and in accordance with natural justice.

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Issues: Whether the appellants were required to make only a partial pre-deposit of the duty and penalty amounts before the Commissioner (Appeals) and whether the appeals should be remanded for disposal on merits.

Analysis: The demand arose from alleged clandestine manufacture and clearance of MS ingots. The Tribunal noted that the assessee's modus operandi was materially similar to that considered in an earlier stay order and that the demand was within the normal period of limitation. It further noted that the penalty on the assessee was not under section 11AC but under Rule 25, and the penalty on the director was under Rule 26. In these circumstances, the Tribunal held that full pre-deposit was not warranted and that a partial deposit would sufficiently secure the revenue while allowing the appeals to be heard on merits. It also directed a limited pre-deposit towards the Rule 25 penalty and required the Commissioner (Appeals) to decide the appeals in accordance with law and natural justice after compliance.

Conclusion: The pre-deposit requirement was reduced to 50% of the duty amount and Rs.10 lakhs towards penalty, and the matter was remanded for disposal of the appeals on merits.

Ratio Decidendi: Where the facts disclose a prima facie case justifying partial relief, the appellate authority may modify the pre-deposit requirement and remand the matter for decision on merits after compliance with the reduced deposit.

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