2014 (5) TMI 681 - HC - Central Excise

High Court Upholds Pre-Deposit Requirement for Excise Act Appeals, Balancing Interests

The High Court upheld the Tribunal's decision that required Symphony Limited and M/s. Polyset Plastics Private Limited to make pre-deposits to proceed ... Waiver of pre deposit - Tribunal insisted on deposit of 20% of the penalty levied by the Commissioner in his Order-in-Original. - Clearances on principal to principal basis v/s job workers to principal basis - duty demand on differential value with interest & penalty - Duty evasion - activity of selling and exporting air-coolers under the brand name ‘Symphony’ - Mis declaration of goods - Tribunal demanded 10% duty as pre deposit - Held that:- neither of the two companies have either pleaded or proved any ground of financial hardship before the Tribunal. Even before us, no such case was made out - The order of the Tribunal does not suffer from any material illegality. At this stage, it is not necessary to examine the contentions of the petitioners finally. A mere fact that the petitioners have prima facie case and some arguable points would not be the ground for insisting on waiver of entire pre-deposit. It was the discretion of the Tribunal in terms of the statutory provisions of Section 35F of the Central Excise Act, 1944 to waive either full or partial pre-deposit requirement. The Tribunal to safeguard the interest of Revenue having imposed certain conditions which cannot be stated to be so onerous that the petitioners cannot weigh them, granted waiver of the pre-deposit. - However, time period to make pre deposit is extended - Decided partly in favour of assessee. Issues Involved:1. Legality of the penalties imposed on Symphony Limited and M/s. Polyset Plastics Private Limited.2. Justification for the requirement of pre-deposit by the Tribunal.3. Consideration of undue hardship and safeguarding of revenue interests under Section 35F of the Central Excise Act, 1944.Detailed Analysis:1. Legality of the Penalties Imposed:The Commissioner of Central Excise, Vadodara, issued an order confirming a duty demand of Rs. 3,09,39,616/- from M/s. Polyset Plastics Private Limited, along with interest under Section 11B of the Central Excise Act, 1944. Additionally, penalties were imposed under Section 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 2002, including a penalty of Rs. 65 Lacs on Symphony Limited. Symphony Limited and M/s. Polyset Plastics Private Limited challenged this order before the Tribunal, which required them to make pre-deposits to proceed with their appeals.2. Justification for the Requirement of Pre-deposit by the Tribunal:The Tribunal, in its order dated 11-9-2012, insisted on Symphony Limited depositing 20% of the penalty imposed and M/s. Polyset Plastics Private Limited depositing 10% of the duty demanded. This was done to enable the companies to argue their appeals on merits. The Tribunal's decision to require a pre-deposit was based on the need to safeguard revenue interests while balancing the appellants' ability to present their cases. The Tribunal found some arguable issues in favor of the appellants but did not find grounds to waive the entire pre-deposit.3. Consideration of Undue Hardship and Safeguarding of Revenue Interests Under Section 35F:Section 35F of the Central Excise Act, 1944, mandates that appellants deposit the duty demanded or penalty levied while filing an appeal. However, the first proviso allows the Appellate Authority to dispense with such deposit if it would cause undue hardship, provided conditions are imposed to safeguard revenue interests. The Tribunal emphasized the dual elements of undue hardship-prima facie case and financial hardship. In the present case, neither Symphony Limited nor M/s. Polyset Plastics Private Limited pleaded or proved financial hardship before the Tribunal or the High Court. The Tribunal's decision to require a pre-deposit was thus within its discretion and aligned with statutory provisions.The Tribunal's approach was supported by precedents, including the Supreme Court's observations in Union of India v. Adani Exports Limited and Benara Valves Limited v. Commissioner of Central Excise, which highlighted the need to balance undue hardship and revenue interests. The Tribunal's order did not suffer from material illegality, and the requirement of pre-deposit was not deemed excessively onerous.Conclusion:The High Court concluded that the Tribunal's decision to require pre-deposits was justified and did not suffer from any material illegality. The petitions were dismissed, but the time for making the pre-deposit was extended to 15-2-2013, allowing the Tribunal to hear the appeals on merits if the pre-deposits were made.