C.C.E. & C., Surat-I vs Shree Jagdamba Dyeing & Printing Mills P. Ltd.

Akil Abdul Hamid Kureshi, J.—We have issued notice for final disposal under our order dated 12-11-2014 in view of the fact that a short question is involved in these appeals. Learned counsel Mr. R.J. Oza stated that the affidavit of service has been filed before the Registry.

Though served, no one appeared for the respondent.

The appeal is considered for following substantial question of law:

Whether Customs, Excise and Service Tax Appellate Tribunal committed an error in allowing the assessee''s appeal on merits when in such appeal the assessee had challenged the decision of the Commissioner dismissing its appeal for non-fulfillment of the pre-deposit requirement?

We may record brief facts from Tax Appeal No. 989 of 2014. A show cause notice was issued on 17-12-2008 against the respondent-assessee calling upon why Cenvat credit of Rs. 17,59,073/- wrongly taken and utilized on fake or bogus invoices as also of inadmissible invoices should not be recovered with interest and penalty. The adjudicating authority passed an order dated 30-3-2009 confirming such duty demand with interest and penalty. The assessee preferred appeal against such order before the Commissioner. Along with the appeal, the assessee also preferred an application for waiver of pre-deposit titled as a "Stay Application" under Section 35F of the Central Excise Act. On such application, the Commissioner passed an order dated 11-8-2009. He noticed that the duty demand of Rs. 17,59,073/- had been confirmed with interest and matching penalty along with personal penalty of Rs. 1,75,907/-. He required the assessee to deposit a sum of Rs. 3.5 lacs by way of pre-deposit and gave an option to furnish bank guarantee of the said sum instead of cash deposit. He passed following order:

"3. This is a case of Cenvat Credit against invoices, the writer of which are fictitious person. The case is of fraud and forgery by some unknown persons. Considering the nature of the case and failure of the appellant to furnish the details called for, the appellant are directed to deposit an amount of Rs. 3.5 lakhs (Rupees Three Lakh Fifty Thousand Only) payable against the liability arising from the final order in Appeal which may be passed. The appellant shall have option to furnish the Bank Guarantee for the same instead of cash payment. On furnishing the evidence/compliance on or before 9-9-2009, the requirement of balance duty, penalties are dispensed as condition to hear appeal.

On failure to comply with the directions above, the appeal would automatically stand dismissed for non-compliance of the condition. The appellants shall produce evidence of compliance. The case is listed for hearing on 16-9-2009 at 11.30 hrs. for evidence."

When despite sufficient opportunities, the appellant did not fulfill the pre-deposit requirement, the Commissioner dismissed the appeal only on this ground by his order dated 15-9-2009. Against such order, the appellant preferred further appeal before the Customs, Excise and Service Tax Appellate Tribunal. The Tribunal, in the impugned judgment dated 9-11-2013 allowed the appeal in its entirety. The Tribunal recorded that the issue is covered by the judgment of the High Court in case of Prayagraj Dyeing and Printing Mills Pvt. Ltd. Vs. Union of India, . The Tribunal''s brief order reads as under:

"1. When all these cases were called out, we find that the issue involved is regarding availment of ineligible Cenvat Credit on the invoices which were raised by unknown/non-existing firms. It is undisputed in these cases that appellants herein filed monthly returns/ER-1 returns to the departmental authority indicating therein the availment of Cenvat credit on such invoices. It is also undisputed that these invoices were found to be non-existence during the relevant period.

Both sides agree that issue involved in these cases is covered by the judgment of Hon''ble High Court of Gujarat in the case of Prayagraj Dyeing and Printing Mills Pvt. Ltd. Vs. Union of India, in assessee''s favour. On perusal of the said judgment, we find it so.

Since the issue involved in these cases is covered by their lordship decision, respectfully following the said decision, we set aside the impugned orders and allowed the appeals with consequential relief."

Learned counsel Mr. Oza submitted that the appeal before the Tribunal was against the order passed by the Commissioner dismissing the appeal of the assessee on the ground of non-fulfillment of the pre-deposit requirement. The Tribunal, therefore, ought to have decided this issue instead of entertaining the appeal on merits. He submitted that the Revenue''s stand has been that the issues were not covered by the judgment of this Court in case of Prayagraj Dying & Printing Mills Pvt. Ltd. v. Union of India (supra). In similar other cases, when such contention was urged, this Court, in view of the concession of the counsel for the Revenue recorded by the Tribunal, permitted the Revenue to approach the Tribunal for rectification or recall. In any case, according to the counsel, the Tribunal could not have expanded the scope of appeal.

Section 35F of the Central Excise Act, 1944 pertains to deposit pending appeal of duty demanded or penalty levied. The said provision provides inter alia that where in any appeal, 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 the 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. First proviso to the said section, however, authorizes the Commissioner or the Appellate Tribunal as the case may be to dispense with such deposit subject to such conditions as deem fit to impose so as to safeguard the interests of Revenue, if such appellate authority is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person.

Thus, in any appeal, where the decision under challenge relates to any duty demanded instead of goods, which are not under the control of the excise authorities or in respect to any penalty levied, the appellant has the duty to deposit with the adjudicating authority such duty demanded or the penalty levied. Unless such pre-deposit requirement is waived either completely or partially either unconditional or on such condition as may be imposed such requirement would have to be fulfilled. It was, in this background, that the Commissioner, while substantially waiving the pre-deposit requirement, insisted that against a duty demand of Rs. 17.59 lacs (rounded off) with matching penalty, the appellant should either deposit a sum of Rs. 3.50 lacs or offer bank guarantee for such sum. It was because that the appellant did not fulfill this requirement that the appeal came to be dismissed by the Commissioner. When the appellant therefore filed further appeal before the Tribunal, the question before the Tribunal was, whether the Appellate Commissioner committed an error in imposing such condition and subsequently dismissing the appeal of the appellant [for] not fulfilling such a condition. Unless and until the Tribunal held that such condition was illegally or erroneous and set aside the same the question of examining merits of the appellant''s claim did not arise. Even if the Tribunal was of the opinion that the entire pre-deposit requirement was to be waived in view of a strong case of the assessee or any other such ground, the Tribunal ought and should have passed such an order placing the appellant back before the Commissioner for his consideration. In the present case, the Tribunal, instead of adopting such a route, virtually converted itself into the first appellate authority. The Tribunal is the final fact finding authority. Any further appeal against the decision of the Tribunal before the High Court would be available only on substantial question of law. When the statute provides for two layers of screening at the appellate stage, for questions of law and facts, it would even otherwise be not desirable to by pass the first appellate stage and permit the Tribunal to entertain the appeal as first appellate authority. For all these reasons, the impugned judgments are quashed. Proceedings are placed back before the Tribunal for fresh reconsideration of the questions arising in the appeals. All appeals are disposed of accordingly.