Hira Packaging vs Commissioner Central Excise and Customs

We have heard Counsel for the appellant and the respondent. The appellant assails order dated 24-1-2014 passed by the Customs, Excise & Service Tax Appellate Tribunal (hereinafter called ''the Tribunal'') in Excise Appeal No. 914 of 2012. The Tribunal, by the impugned order declined to interfere with its earlier order dated 10-7-2013 dismissing the appeal upon failure of the appellant to comply the interim order 7-9-2012 granting waiver of pre-deposit under Section 35F of the Central Excise Act (hereinafter called ''the Act'') to the extent of 50% only of the Excise duty assessed at Rs. 1,64,56,452/-.

Learned Counsel for the appellant submits that aggrieved by the classification of Tobacco Dust/Refuse mixed with lime combined with water packed in pouches and the consequent levy of Excise duty, it had preferred Appeal No. 565 of 2012. The aforesaid demand dated 27-12-2011 of Excise duty was based on this erroneous classification. The latter was challenged in Appeal No. 914 of 2012. On 29-8-2012, Appeal No. 565 of 2012 was directed to be heard along with Appeal No. 914 of 2012. The latter appeal alone was taken up for consideration on 7-9-2012 and orders passed under Section 35F for waiver of pre-deposit to the extent of 50% of the duty amount assessed at Rs. 1,64,56,452/-. Aggrieved, the appellant filed an application for modification of order dated 7-9-2012 with regard to the amount of pre-deposit waiver granted. The Tribunal rejected the same on 30-1-2013 without considering the grievance on merits with regard to undue hardship and the inability of the appellant to deposit the amount to the extent of pre-deposit waiver granted due to financial constraints. The appeal was dismissed on 10-7-2013 for non-compliance of order dated 7-9-2012. The appellant then filed an application for rectification of the mistaken order dated 10-7-2013 which has been rejected by the impugned order dated 24-1-2014.

In the meantime, the appellant had approached this Court in Tax Case No. 19 of 2013 against the order dated 7-9-2012 which was withdrawn on 12-3-2014 as infructuous in view of the subsequent dismissal of the appeal itself on 10-7-2013.

Learned Counsel submitted that grave prejudice has been caused to the appellant by the failure of the Tribunal to hear Appeal No. 565 of 2012 along with Appeal No. 914 of 2012 while disposing the application for waiver of pre-deposit under Section 35F of the Act. The classification of the goods, and on basis of which duty had been assessed was itself under challenge in the former appeal. It was a relevant consideration to be taken into account while deciding appropriate amount of waiver of pre-deposit. It was next submitted that the appellant shall be put to undue hardship as he is not in a position at all to deposit the amount in question. Reliance has been placed on a Division Bench decision of the Madras High Court in C.M.A. No. 907 of 2013 dated 3-4-2013.

It was next submitted that amendment had been made in Section 35F of the Act with effect from 6-8-2014 and he was ready to deposit 7 1/2 % of the duty as assessed by the authorities. The appeal may be restored subject to that condition and directed to be disposed on merits. Reliance has been placed on an order dated 30-10-2014 by a Division Bench of the Rajasthan High Court in Civil Miscellaneous Writ Petition No. 10740 of 2014.

Learned Counsel for the respondent opposing the appeal submitted that under Section 35F of the Act, pre-deposit is required to be made as directed by the Tribunal on basis of the assessment of duty made by the authorities. The order dated 7-9-2012 granting waiver of pre-deposit to the extent of 50% of the duty assessed is well considered and reasoned. No undue hardship was demonstrated by the appellant before the Tribunal. No prejudice can be said to have been caused to the appellant if Appeal No. 565 of 2012 was not listed along with Appeal No. 914 of 2012 on 7-9-2012. The appellant did not comply the interim order dated 7-9-2012 and on the contrary filed an application for modification of the order. The modification application also made out no ground of undue hardship much less did it allege any error committed by the Tribunal while passing order dated 7-9-2012. The modification application was nonetheless taken up for consideration on 30-1-2013. The appellant did not enter appearance on that date. Notwithstanding the same the Tribunal suo motu extended the time for deposit by another eight weeks. On the next date also no one appeared for the appellant. The Tribunal, in the circumstances, committed no error by dismissing the appeal on 10-7-2013 for non-compliance of the interim order dated 7-9-2012. The Appellant then filed another application styled as for rectification of mistake which has also been rejected on 24-1-2014. The orders of Gujarat High Court and Madras High Court sought to be relied upon have no application. The appellant in the aforesaid manner has successfully evaded not only payment of duty till now but also even the pre-deposit to the extent of waiver granted. The law shall now take its course for recovery of the entire duty assessed. It was lastly submitted referring to an order in Tax Case No. 17 of 2013 (M/s. Crest Steel & Power Private Ltd. v. Commissioner, Customs and Central Excise) that if the appellant complies the order dated 7-9-2012 along with 9% interest, the appeal may be directed to be heard on merits and disposed in accordance with law.

We have considered the respective submissions on behalf of the parties.

Section 35F of the Act provides for waiver of pre-deposit when an appeal is preferred against duty assessed, in case of undue hardship. It is primarily a question of fact in each case whether undue hardship exists and the nature of the same. The onus for demonstrating undue hardship undoubtedly lies on the person seeking to take shelter under the statutory provisions. Section 35F itself manifests that waiver of pre-deposit cannot be granted as a matter of course and the interest of the revenue has also to be adequately taken into consideration.

The order dated 7-9-2012 is interim in nature. It is otherwise well considered and reasoned. The Tribunal held that the appellant had not been able to make out a good case to dispense with the condition of pre-deposit of entire amount. No financial hardship had been pleaded except for oral submissions made that it was a small scale manufacturer and that the company was closed. No documentary evidence was produced in support of the submissions. Directions were therefore given for waiver of 50% of the duty amount to be deposited within a period of 12 weeks subject to which recovery shall remain stayed. The time for deposit was also suited according to the convenience of the appellant as mentioned in the order itself. The Tribunal thus displayed adequate consideration to the appellant.

The appellant then filed an application seeking review/modification of the order dated 7-9-2012. The Act does not provide for any review jurisdiction in the Tribunal. Nonetheless the Tribunal did consider the application. Notwithstanding the fact that no one appeared for the appellant to press the application, the Tribunal suo motu on 30-1-2013 extended the time for pre-deposit by another eight weeks. We have gone through the application for review/modification. Suffice it to observe that it does not make out any case for undue hardship by pleading of facts in support of the same. A bald pleading has been made that there can be no hard and fast rule and the appellate authority was required to consider balance of convenience, financial hardship, irreparable injury while considering prayer for pre-deposit. It then states that the appellants advocate had failed to argue his case. We consider the same an argument of desperation. It is not the case of the appellant that any prayer had even been made by it before the Tribunal on 7-9-2012 to hear both appeals together and which was declined. If the appellant considered it necessary for both appeals to be heard together even at the stage of pre-deposit waiver, it was for it to have urged that ground. Even otherwise, we are of the opinion that no prejudice has been caused to the appellant as waiver of pre-deposit or the extent of the same is to be considered under Section 35F of the Act on the duty as assessed and not the correctness of the assessment which is to be decided in the substantive appeal.

The Tribunal was more than reasonable and fair to the appellant when after going through the pleadings in the modification application, it suo motu extended the time for deposit by eight weeks on 30-1-2013 despite no representation by the appellant.

It was again the conduct of the appellant itself by subsequent nonappearance on 10-7-2013 coupled with failure to deposit 50% of the duty amount within the extended time granted which left the Tribunal with no option but to dismiss the appeal itself for non-compliance of the order dated 7-9-2012. We find no infirmity in the same.

The appellant then filed another application for rectification of mistake in order dated 10-7-2013. We have gone through the pleadings in that application also. Quite apart from the fact that the Tribunal which is the creation of a Statute has no such inherent powers, the application again baldly states that the appellants financial position was too weak to comply the stay order. Nothing has been urged with regard to the nature of undue hardship except reiterating that both the appeals should be heard together. Nonetheless, the Tribunal on 24-1-2014 considered the application for rectification and rightly rejected the same correctly opining that the assessment of duty was the subject matter of Appeal 914 of 2012 alone.

The order dated 7-9-2012 was an interim order discretionary in nature. We find no reason to interfere with the discretionary order which does not appear to be arbitrary or exercised without due application of mind. The order is reasoned in nature disclosing full application of mind on materials as placed before the Tribunal seeking pre-deposit waiver. Merely because, we may have the power to take a different view in the matter as a superior Court cannot be sufficient justification to interfere with the discretionary order passed within jurisdiction unmindful of the interests of the revenue as also mandated under Section 35F of the Act.

The appellant has had more than sufficient opportunity to demonstrate any undue hardship and which it has failed to do. It has till date, by filing successive applications after 7-9-2012 evaded payment of duty assessed as far back as 27-12-2011 and even avoided deposit of 50% of the duty assessed granted to it by waiver.

Undoubtedly, the Division Bench of the Madras High Court in the case of Mr. Md. Shaffiq (supra) did consider fresh materials placed before it and opined to grant appropriate relief rather than remanding the matter to the Tribunal but the facts of the present case are completely distinguishable from the nature of conduct attributable to the appellant himself when the Tribunal has granted indulgence to it on more than one occasion. Likewise, in the case of M/s. Prosafe International (supra), the subsequent amendment on 6-8-2014 in Section 35F was considered while granting relief as virus of the enactment was under challenge which is not the case presently. Even otherwise, we are not persuaded to give a retrospective effect to a legislation expressly made prospective in nature and that too while considering a limited issue against an interim order. The readiness to deposit at 7 1/2% of duty assessed appears incongruous to the earlier stand of the appellant that come what may it was not in a position to deposit anything. It certainly leaves a doubt in our minds.

In the case of M/s. Crest Steel & Power Private Ltd. (supra) the facts were somewhat identical as the order for pre-deposit waiver to the extent granted was also not complied with. A similar argument with regard to undue hardship was made. Reference was made to Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, (2006) 113 ECC 314 : (2006) ECR 314 : (2006) 204 ELT 513 : (2006) 12 SCALE 303 : (2006) 9 SCR 341 Supp : (2008) 12 STR 104 : (2006) 2 UJ 1526 : (2009) 20 VST 297 holding as follows-

"12. As noted above there are two important expressions in Section 35F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka that under Indian conditions expression "undue hardship" is normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances."

This Court after noticing 2010 (249) E.L.T. 321 (S.C.) (Dinesh International Ltd. v. Union of India) ordered that if the petitioner therein deposited the amount in question with interest at the rate of 9% the Tribunal shall adjudicate the appeal on merits. We therefore, in the present case also, direct that if the pre-deposit amount as directed on 7-9-2012 is deposited along with interest at the rate of 9% per annum from 7-9-2012 within a maximum period of 30 days from today, the Tribunal shall proceed to adjudicate the appeal on merits. The appeal is dismissed with the aforesaid observation and conditional direction.