Jai Bhawani Steel Enterprises Ltd. vs Commissioner of Customs (Appeals) and Deputy Commissioner of Customs

M. Jaichandren, J.—Heard the learned Counsel appearing for the petitioner and the learned Counsel appearing for the respondents.

It has been stated that the petitioner is a manufacturer of steel products having high power induction furnaces. The petitioner also imports steel

products for use in the manufacture of finished products. The petitioner had entered into a High Sea sales agreement with M/s. PEC Limited, a

Government of India enterprise, for import of Non-Alloy Steel `Melting Ingot'' of South African Origin. M/s. PEC Limited imported a total

consignment of 8638 metric tonnes and sold the entire consignment in different units to different buyers, under High Sea Sales basis. The petitioner

is one of the High Sea sales buyers having received a quantity of 1079.750 metric tonnes. For the clearance of the consignment the petitioner had

filed an Ex-Bond Bill of Entry No. 21110, dated 12.10.2000. The goods were assessed under the DEPB and subjected to customs duty at the

rate of 5%, under the tariff heading 7204.50, by extending the concessional duty, as per Serial No. 158 of Notification 16/2000-Cus, dated

1.3.2000, which permits concessional duty for steel scrap meant for melting purposes.

It has been further stated that by a notice, dated 9.4.2001, the Assistant Commissioner of Customs (Group 7A) alleged that the ''Non-Alloy

Steel Melting Ingots'' imported by the petitioner was assessed to the concessional rate of duty at 5% and the correct rate of duty applicable is 35%

and therefore, it was proposed to levy duty at 35% amounting to Rs. 24,45,580/-. The said notice had been issued, u/s 28(1) of the Customs Act,

1962. In the said notice it was alleged that the correct duty applicable for sub-Heading 7204.50 is 35% and therefore, the benefit of concessional

duty, under Sl. Nos. 158 and 159 of the Notification 16/2000-Cus, dated 1.3.2000, is not applicable for steel ingots resulting in short levy of Rs.

24,45,580/-.

It has been further stated that the petitioner had filed a reply, dated 25.4.2001, to the show cause notice issued by the Assistant Commissioner

of Appeals (Group 7A), wherein it was submitted that the assessment done earlier is in order, as the imported item was not ingot but it was only

`re-melting Ingots'' eligible for concessional rate of duty as charged. The petitioner had also submitted that the Bill of Entry describes the imported

goods as re-melting ingots. Thus, the re-melting ingots would also satisfy the conditions stipulated in Note 1(g) of Chapter 72 of the Customs Tariff

Act, 1975. Therefore, there was no short collection of duty. It was also stated that similar goods received by other importers, along with the

petitioner, through M/s. PEC Limited were granted the benefit of concessional rate of duty. In such circumstances, it is prayed that the demand

made against the petitioner ought to be dropped.

It has been further stated that the petitioner had appeared in person before the second respondent, on 21.11.2001, to submit that the goods

were covered under Heading 72.04 as `re-melting scrap'' ingot of iron and steel and therefore, the petitioner would be eligible for the benefit of the

notification. However, the second respondent had passed an order in F. No. T.A. VIII-1/2.4.2001, dated 5.6.2002, confirming the duty demand

of Rs. 24,45,580/-, u/s 28(2) of the Customs Act, 1962, along with interest, in terms of Section 28AB of the Customs Act, 1962, holding that the

petitioner has imported only Non-Alloy steel ''Melting Ingot'' and as the notification covers only melting scrap it would not be eligible for the benefit

of the notification. Aggrieved by the said order of the second respondent, the petitioner had filed an appeal before the first respondent, u/s 128 of

the Customs Act, 1962, along with an application for waiver of pre-deposit duty in terms of Section 129E of the Customs Act, 1962. In spite of

various grounds having been raised the first respondent had passed the impugned order, dated 27.1.2003, in File No. C3/493/D/2002-Sea

without appreciating the merits of the case and without application of mind. The first respondent had not considered the various aspects of facts

and law, as laid down by the various decisions of the High Courts and the Tribunals. The first respondent Tribunal ought to have seen that the

petitioner had a prima facie case and the balance of convenience was in favour of the petitioner. Further, the first respondent ought to have noted

that irreparable loss would be caused to the petitioner if it had to comply with the pre-deposit requirement before the appeal, filed before the first

respondent, was heard. However, the first respondent has passed the impugned order, dated 27.1.2003, u/s 129E of the Customs Act, 1962,

refusing to waive the pre-deposit amount ordered to be paid by the petitioner. In such circumstances, the present writ petition has been filed before

this Court, under Article 226 of the Constitution of India.

In the counter affidavit filed on behalf of the second respondent the averments made on behalf of the petitioner in the writ petition have been

denied. It has been stated that the present case is to be decided with reference to Notification 16/2000, which does not specify `Melting Ingots''

for the concessional rate of duty. There is a specific entry in CTH 7204.50 applicable to ''Re-melting Scrap Ingots'', under which the impugned

goods of the petitioner had been classified. Therefore, Notification No. 16/2000 would not be applicable to the impugned goods and therefore, the

petitioner''s liability to the differential duty of Rs. 24,45,580/- has been established. Further, the Commissioner of Customs (Appeals), the first

respondent herein had verified the balance sheet of the petitioner and had come to the conclusion that the case of the petitioner would not warrant

waiver of pre-deposit. The first respondent had fully applied her mind before passing the order, dated 27.1.2003, challenged by the petitioner in

the present writ petition. Since ''Steel Melting Ingots'' were mis-declared as ''Remelting ingots'' and the concession rate of duty had been availed by

the petitioner, resulting in short payment of duty of Rs. 24,45,580/-, the said amount was rightly demanded from the petitioner. In such a case, the

writ petition filed by the petitioner is liable to be dismissed, as devoid of merits.

The learned Counsel appearing on behalf of the respondents had relied on a decision of the Supreme Court, in Union of India v. Adani Exports

Limited 2007 (13) SCC 207 , in support of his contention that there cannot be dispensation of the pre-deposit by the petitioner before the appeal,

pending on the file of the first respondent, is heard and disposed of, on merits. He had also relied on the decision of the High Court of Mysore,

made in V. Vembu Iyer Vs. Union of India (UOI) and Others, to show as to how the discretion should be exercised by the Appellate Authority to

dispense with the condition of pre-deposit of duty or penalty or to reduce the quantum.

Further, the learned Counsel appearing on behalf of the respondents had insisted that the petitioner ought to make the pre-deposit before the

appeal, pending on the file of the first respondent, in File No. C3/493/D/2002-Sea is taken up for hearing on merits. The learned Counsel had also

submitted that the question as to whether or not a pre-deposit should be waived or dispensed with, in toto or in part, is entirely the discretion of the

Tribunal. A Writ Court exercising its powers, under Article 226 of the Constitution of India would not, ordinarily, interfere with such exercise of

discretion, unless it is clearly shown that it has been done in an arbitrary manner, as held in Jaypee Rewa Plant v. Union of India and Ors. 2005

(71) RLT 701.

In the present case it is found that the first respondent had passed the impugned order, dated 27.1.2003, without showing sufficient reasons for

rejecting the request for waiver of the pre-deposit amount, even though the petitioner had raised various grounds while claiming that the pre-

deposit amount should be waived and that the appeal should be heard on merits and disposed of in accordance with law.

The decisions relied on by the learned Counsel for the respondents do not apply to the facts and circumstances of this case. Even though it is

clear that the first respondent has the discretionary power to waive the pre-deposit amount in toto or to reduce the quantum to be so deposited or

to reject the request of such waiver or reduction by showing proper reasons, such exercise of power should be based on sufficient reasons.

However, in the present case the first respondent has rejected the request of the petitioner to waive the pre-deposit amount, without giving proper

reasons for such rejection.

In view of the submissions made by the learned Counsels appearing on behalf of the petitioner, as well as the respondents and in view of the

fact that this Court had granted an interim stay of the impugned order, which has been continuing till date and in view of the fact that the first

respondent had passed the impugned order without giving sufficient reasons to reject the request of the petitioner to waive the pre-deposit, this

Court is of the considered view that the ends of justice would be met if the first respondent is directed to dispose of the appeal pending before the

first respondent in File No. C3/493/D/2002-Sea, on merits, and in accordance with law within a period of eight weeks from the date of receipt of

a copy of this order, without insisting on the petitioner making the pre-deposit.

Accordingly, the writ petition is disposed of, with the above directions. No costs.