Acme Global vs Commissioner of Central Excise, Lucknow

Heard learned counsel for the parties and perused the record. The present appeal u/s 35G of the Central Excise Department of 1944 in short ''Act'' has been preferred against the judgment and order dated 15-3-2011 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi in Excise Appeal No. 2094 of 2010, M/s. ACME Global v. Commissioner of Central Excise, Lucknow [2011 271 E.L.T. 80 (Tri.-Del.)].

An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, in case, High Court is satisfied that the case involves a substantial question of law.

While assailing the impugned order, it has been submitted by learned counsel for the appellant that no opportunity of hearing was provided to the appellant with regard to undue hardship on the application moved u/s 35F of the Act. Accordingly the decision with regard to rejection of application by the appellate authority as adjudicating authority was violation of principles of natural justice.

It shall be appropriate to discuss the brief facts of the case on record as noted by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi in short ''Tribunal''.

M/s. ACME Global, 40B, Sarojini Nagar, Lucknow (hereinafter referred to as the ''appellant'') are engaged in manufacturing of ''Ada'' Brand ''Pan Masala'' contained tobacco commonly known as gutka classifiable under Chapter sub-heading 2403 99 90 of the first schedule to the Central Excise Tariff Act, 1985 and as they were found to have failed to comply with the requirement of provisions of excise law, a show cause notice dated 13-7-2009 came to be issued which was contested by the appellant by filing their reply dated 25-1-2010. The adjudicating authority, after hearing the party, confirmed the demand of the tune of Rs. 6,08,875/- alongwith interest and equal amount of penalty under its order dated 19-3-2010. Being aggrieved, the appellant filed the appeal before Commissioner (Appeals) and alongwith appeal filed an application for dispensing with the requirement of pre-deposit which came to be disposed of by the Commissioner (Appeals) under order dated 8-6-2010 requiring the appellants to deposit 20% of the entire amount of duty confirmed and the penalty imposed by the adjudicating authority under his order dated 19-3-2010 within two weeks from the receipt of the copy of the said order. The appellant failed to deposit the amount within the specified period. However, they filed an application dated 22-6-2010 for modification of the order passed on 8-6-2010 on the ground of undue hardship. The appellant also submitted a bank statement dated 22-6-2010. Though, the appellant was given opportunity of being heard in person on 29-6-2010, but, none appeared before the Commissioner (Appeals) and accordingly, the impugned order came to be passed by the Commissioner (Appeals).

However, learned counsel for the appellant has submitted that the appellant was not informed well within time to appear on 29-1-2010. In case, it is so, then it was incumbent upon the appellant to invite the attention of the appellate authority by moving appropriate application which seems to be not has been done.

So far as the present appeal is concerned, in view of statutory provision, this Court has to look into the substantial question of law. Learned counsel for the appellant proceeded to submit that reasonable opportunity of hearing should have been given by competent authority while passing the order u/s 35F of the Act. It is also submitted that undue hardship should have been considered by the appropriate authority while rejecting the appellant''s case. For convenience, Section 35F of the Act is reproduced as under : -

35F. Deposit, pending appeal of duty demanded or penalty levied.

Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of central excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied :

Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of 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 such deposit subject to such conditions as he or it may deem fit and impose so as to safeguard the interests of revenue:

Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of filing.

A plain reading of Section 35F shows that by preferring the appeal against the order passed by original authority, it shall be incumbent on the as-sessee to deposit the tax demand raised. However, under proviso liberty has been given to the appellate authority to pass appropriate order to reduce the deposits. The provision contained u/s 35F of the Act does not provide that before passing order under this provision, opportunity of hearing should be given.

Learned counsel for the respondent, Union of India and another Vs. M/s. Jesus Sales Corporation, , Union of India and another v. Jesus Sales Corporation. In case of Jesus Corporation (supra), it has been held by Hon''ble Supreme Court that it is not necessary to provide opportunity of hearing while considering the undue hardship u/s 35F of the Act. For convenience, clause 5 of the case of Jesus Corporation (supra) is reproduced as under :-

The High Court has primarily considered the question as to whether denying an opportunity to the appellant to be heard before his prayer dispense with the deposit of the penalty is rejected, violates and contravenes the principles of natural justice. In that connection, several judgments of this Court have been preferred to, it need not be pointed out that under different situations and conditions the requirement of compliance of the principle of natural justice vary. The courts cannot insist that under all circumstances and under different statutory provisions personal hearing have to be afforded to the persons concerned. If this principle of affording personal hearing is extended whenever statutory authorities are vested with the power to exercise discretion in connection with statutory appeals it shall lead to chaotic conditions. Many statutory appeals and applications are disposed of by the competent authorities who have been vested with powers to dispose of the same. Such authorities which shall be deemed to he quasi-judicial authorities are expected to apply their judicial mind over the grievances made by the appellants or applicants concerned, but it cannot be held that before dismissing such appeals or applications in all events the quasi-judicial authorities must hear the appellants or the applicants, as the case may be. When principles of natural justice require in opportunity to be heard before an adverse order is passed on any appeal or application, it does not in all circumstances mean a personal hearing. The requirement is complied with by affording an opportunity to the person concerned to present his case before such quasi-judicial authority who is expected to apply his judicial mind to the issues involved. Of course, if in his own discretion if he requires the appellant or the applicant to be heard because of special facts and circumstances of the case, then certainly it is always open to such authority to decide the appeal or the application only after affording a personal hearing. But any order passed after taking into consideration the points raised in the appeal or the application shall not be held to be invalid merely on the ground that no personal hearing had been afforded. This is all the more important in the context of taxation and revenue matters. When an authority has determined a tax liability or has imposed a penalty, then the requirement that before the appeal is heard such tax or penalty should he deposited cannot be held to be unreasonable as already pointed out above. In the case of Shyam Kishore v. Municipal Corpn. of Delhi it has been held by this Court that such requirement cannot be held to be harsh or violation of Article 14 of the Constitution so as to declare the requirement of pre-deposit itself as unconstitutional. In this background, it can be said that normal rule is that before filing the appeal or before the appeal is heard, the person concerned should deposit the amount which he has been directed to deposit as a tax or penalty. The non-deposit of such amount itself is an exception which has been incorporated in different statutes including the one with which we are concerned. Second proviso to sub-section (1) of Section 4M says in clear and unambiguous words that an appeal against an order imposing a penalty shall not be entertained unless the amount of the penalty has been deposited by the appellant. Thereafter the third proviso vests a discretion in such appellate authority to dispense with such deposit unconditionally or subject to such conditions as it may impose in its discretion taking into consideration the undue hardship which it is likely to cause to the appellant. As such it can be said that the statutory requirement is that before an appeal is entertained, the amount of penalty has to be deposited by the appellant, an order dispensing with such deposit shall amount to an exception to the said requirement of deposit. In this background, it is difficult to hold that if the appellate authority has rejected the prayer of the appellant to dispense with the deposit unconditionally or has dispensed with such deposit subject to some conditions without hearing the appellant, on perusal of the petition filed on behalf of the appellant for the said purpose, the order itself is vitiated and is liable to be quashed being violative of the principles of natural justice.

While disagreeing with the argument advanced by the learned counsel for the respondent relying upon the Jesus case (supra), learned counsel tor the appellant has invited attention of this court to the Circular dated 30-3-1999 issued by the Central Board of Excise and Customs relying upon the judgment of Madras High Court. The circular has been struck down by the Madras High Court in its judgment with the finding that the opportunity of hearing shall be necessary. Madras High Court has relied upon the judgment reported in Mrs. Maneka Gandhi Vs. Union of India (UOI) and Another, , the provision of principles of natural justice is required to be complied with in every matter where person''s right is affected. In the present case, it borne out that discretion has been given to the appellate authority to take a decision with regard to compliance of principles of natural justice with due opportunity of hearing to the appellant. Moreover, in Jesus case (supra), Hon''ble Supreme Court itself had interpreted Section 35F of the Act by recording different finding, hence it is not open for the High court to take a different view. The judgment and order passed by Hon''ble Supreme Court is binding under Article 141 of the Constitution of India. The judgment of Supreme Court in the case of A.K. Kraipak v. Union of India and Menaka Gandhi v. Union of India (supra) though deals with the principles of natural justice, the hands of the Court are tight when Hon''ble Supreme Court itself interprets statutory provision and gives different meaning.

Learned counsel for the appellant has further relied upon the case reported in (2006) 13 SCC 347 : Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, . In case of Benara, their Lordship of Supreme Court has held that while deciding the issue with regard to undue hardship appellate authority has to apply its mind and pass reasoned order, there should not be a mechanical application of mind. The provision contained in case of Benara Valves (supra) does not seem to be applicable under the facts and circumstances of the present case, that too when the petitioner has not raised grievance against the original order passed u/s 35G of the Act at initial stage. Only at later stage, he moved an application for waiving of 20% with regard to pre-deposit of amount. At the face of record, it reflects that he was having no grievance against the original order passed by the appellate authority. In case, he had any grievance, he could have approached the higher forum against the original order passed u/s 35F of the Act. He represented with regard to subsequent order for waiving of 20% deposit. The appellate authority has rightly rejected the application for waiving of 20% deposit without providing opportunity of hearing. There is no other aspect of the matter. It is not a case, where the appellate authority had not applied its mind with regard to appellant''s undue hardship. In the present case, the appellate authority himself had directed the appellant to deposit 20% of the duty as well as penalty. It means the appellate authority himself has considered the appellant''s undue hardship on the basis of material on record. Accordingly, the ratio of the judgment of Hon''ble Supreme Court in the case of Benara Valves (supra) is not applicable.

Learned counsel for the appellant has relied upon another judgment of Hon''ble Supreme Court reported in 2009 17 SCC 626 : 2009 249 E.L.T. 321 (S.C), Dinesh International Ltd. v. Union of India and Another. In the case of Dinesh International Ltd. (supra), their Lordship of Hon''ble Supreme Court has held that dismissing the appeal on account of assessee''s delay in making pre-deposit ordinarily be condoned and the appellant may be permitted to make deposit. The judgment of Dinesh International Ltd. (supra) seems at all not applicable under the facts and circumstances of the present case.

In view of above, no substantial question of law is involved in the present case, which may require for interference by this Court u/s 35G of the Act. The controversy is based on the finding of fact, hence there appears no good ground to interfere with the impugned order passed by the Tribunal, it is dismissed accordingly. However, it is provided, in case, the appellant deposits the pre-deposit amount within one month from today, in case already not deposited, then the appellate authority may hear the appeal on merits, expeditiously.