C.T. Cotton Yarn Ltd. vs CESTAT

Ravi Shankar Jha, J.—Smt. Nandita Dubey learned counsel for the petitioner. Ms. Anuradha Singh, learned counsel for the respondents.

Heard the learned counsel for the parties on the question of admission.

This petition has been filed by the petitioner being aggrieved by order dated 11-6-2007 [2007 (216) E.L.T. 575 (Tri. - Del.)], Annexure P-10, passed by respondent No. 1 Customs Excise and Service Tax Appellate Tribunal, New Delhi, by which the prayer of the petitioner under the provisions of Section 129E of the Customs Act, 1962, for exempting the petitioner from depositing the entire amount of duty of Rs. 18,50,939/- has been rejected.

The brief facts, leading to the filing of the present petition, are that the petitioner who is engaged in the manufacture of cotton yarn and is a 100% Export Oriented Unit, was served with a notice for assessment of payment of Customs duty of Rs. 33,65,344/- under the provisions of the Customs Act. The petitioner, being aggrieved, took up proceedings against the same contending that the petitioner had entered into a Hire Purchase Agreement on 23-3-1998 with M/s. Tata Finance Limited for purchase and import of a machine namely, ''Murata Mach Coner Automatic Cone Winder''. It was submitted that as per the agreement between the petitioner and M/s. Tata Finance Limited, the liability towards payment of custom duty was taken over by M/s. Tata Finance Limited. On the basis of the aforesaid assertion, the petitioner resisted the imposition of custom duty and filed a reply to the demand of duty and penalty.

The authorities, after considering the petitioner''s stand, have rejected the same vide order dated 31-8-2006 being aggrieved by which the petitioner had filed an appeal before the Commissioner. It is submitted that the Commissioner, without going into the question of pre-deposit of duty and penalty, by order dated 14-12-2006 finally decided the appeal and while allowing depreciation and relief under other heads, reduced the liability towards custom duty of the petitioner to Rs. 18,50,939/-.

The petitioner, being aggrieved by the order passed by the Commissioner, filed an appeal before respondent No. 1 Tribunal along with an application under Section 129E of the Act, for exemption from paying the custom duty assessed by the appellate authority. The application, filed by the petitioner, has been dismissed by order dated 11-6-2007, hence this petition.

It is submitted by the learned counsel for the petitioner that as there was a Hire Purchase Agreement between the petitioner and M/s. Tata Finance Limited and as the liability to pay Customs duty had been taken over by the M/s. Tata Finance Limited in accordance with the terms of the agreement, therefore, the petitioner was not liable to pay custom duty and in such circumstances the respondent No. 1 Tribunal has erred in rejecting the petitioner''s application by the impugned order. The learned counsel for the petitioner has further contended that the petitioner is a sick industry and proceedings in that respect are pending before the Board of Industrial and Financial Reconstruction (BIFR). It is also contended that the machine in question was ultimately purchased by M/s. Vamptex Traders and it is infact the responsibility of M/s. Vamptex Traders to pay the duty and, therefore, the liability towards custom duty cannot be enforced against the petitioner. It is submitted that once the authorities themselves have considered this aspect and have stated that ultimately the liability have to be borne by M/s. Vamptex Traders, the Tribunal has grossly erred in law in directing the petitioner to pay the same.

The learned counsel for the petitioner further submits that the petitioner industry has been declared to be a sick industry by BIFR, inspite of which the secured creditors of the petitioner have taken over possession of the assets of the petitioner company under the provisions of Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ''the SARFEASI Act''). It is stated that as the assets of the petitioner have been disposed of, therefore, the petitioner is not in a position to pay custom duty as ordered by the Tribunal. It is also alleged that the petitioner has no cash or bank balance and, therefore, if the impugned order passed by the Tribunal is enforced, the petitioner would be subjected to great hardship.

The learned counsel for the respondent, per contra, has opposed the petition and has stated that the machine in question was permitted to be purchased duty free on account of the fact that the petitioner had executed a bond accepting liability and had undertaken to pay the same and in such circumstances the petitioner is liable to pay the duty. It is submitted that as the petitioner is liable to pay duty under the provisions of law, the attempt of the petitioner to avoid the same on the strength of an agreement between the petitioner and M/s. Tata Finance Limited is misconceived. It is also submitted that the proceedings before the BIFR or the existence of a hire purchase agreement would not have any impact on the liability of the petitioner to pay duty under the law and, therefore, the contention of the petitioner to the contrary deserves no consideration.

Having heard the learned counsel for the parties, it is observed that the assessing authority as well as the First Appellate Authority have both found the petitioner to be liable to pay custom duty. It is also apparent that the respondent No. 1 Tribunal, in the impugned order, has considered the aforesaid aspects as well as the contention of the petitioner and has rejected the same after duly considering them.

It is, however, observed that the respondent No. 1 Tribunal, while rejecting the petitioner''s application for exemption from paying the customs duty at the time of filing the appeal, has not taken into account the fact that the assets of the petitioner have been taken over and sold under the provisions of the SARFASI Act and that the machine in question was taken into custody by the receiver under order of the Mumbai High Court and was sold by the receiver.

In our considered opinion this relevant factor, has been taken into consideration by the Tribunal while deciding the application under Section 129E of the Act, for the purposes of arriving at a conclusion as to whether insistence on pre-deposit of the customs duty would have caused undue hardship to the petitioner. It is also observed that the respondents have not filed any document nor have they controverted the aforesaid assertion of the petitioner.

In view of the aforesaid facts and circumstances and looking to the hardship pointed out by the petitioner, we are of the considered opinion that the petition, filed by the petitioner, deserves to be partly allowed. The impugned order dated 11-6-2007, Annexure P10, passed by respondent No. 1 Customs Excise and Service Tax Appellate Tribunal, New Delhi, is accordingly set aside and it is ordered that in case the petitioner deposits 50% of the customs duty within eight weeks from today and also abides by the conditions that may be imposed by the Tribunal in this regard, the respondent No. 1 may thereafter proceed with the matter in accordance with law.

The petition, filed by the petitioner, stands partly allowed and disposed of in terms of the aforesaid stipulations. C.C. as per rules.