Pre-deposit exemption turned on net loss and sick-unit status; mistaken reading of accounts could not justify denial of relief.

A pre-deposit under Section 35F of the Central Excises and Salt Act, 1944 could not be insisted upon where the company's financial records showed a net loss rather than profit and its sick-unit status was undisputed. The HC found that the refusal of complete exemption rested on an erroneous reading of the balance sheet and profit and loss account, and that this factual mistake made the pre-deposit order unsustainable. Applying the same approach adopted in the company's earlier matter, the court granted total exemption from pre-deposit in favour of the petitioner company.

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Issues: Whether the petitioner company was entitled to total exemption from pre-deposit under Section 35F of the Central Excises and Salt Act, 1944 in view of its financial position and sick-unit status.

Analysis: The impugned order was found to have proceeded on an erroneous reading of the company's records. The balance sheet and profit and loss account did not disclose a profit but indicated only gross profit with a net loss. The company's status as a sick unit was also not disputed. In these circumstances, the basis for denying complete exemption was not sustainable, and the same principle applied in the petitioner's earlier matter warranted similar relief.

Conclusion: Total exemption from pre-deposit was granted in favour of the petitioner company.

Ratio Decidendi: Where the financial records disclose a net loss and the assessee is a sick unit, a pre-deposit order based on a mistaken reading of those records cannot be sustained, and total exemption may be granted.

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