Jayanta Kumar Saha vs Union of India and Others

Harish Tandon, J.—The order dated 24th February 2012 and the order dated 15th May 2012 are the subject matter in this writ petition. On the basis of a show cause notice, issued against the petitioner, the department sought to contend that the petitioner has illegally and wrongfully claimed CENVAT Credit on the basis of a transaction which was shown on paper and sought to recover those credits. The department found that the area of the factory as well as the consumption of electricity does not suggest manufacturing of the final products, as shown by the petitioner, for which CENVAT Credit is availed.

The petitioner stated before the department that the factory is closed since February 2008 because of the financial and other stringencies.

The proceeding culminated into an order imposing duties as well as penalties. The order is appealed before the Tribunal. An application, seeking waiver of the pre-condition deposit was disposed of by directing the petitioner to deposit 25% of the total liabilities imposed in the impugned order.

Subsequently, an application for reconsideration and/or review is taken out which is also dismissed and the Tribunal, while doing so, held that the earlier order has not been complied with and directed the appeal to be dismissed on that score.

Though the orders were passed in the months of February 2012 and May 2012, the petitioner contends that the said orders were not communicated till the month of August 2013 and, therefore, delay in approaching this Court is sufficiently explained.

Mr. Bhardwaj, learned advocate appearing for the Revenue, however, disputes the aforesaid contention as, according to him, the said orders were communicated to the petitioner much earlier and, therefore, the stand of the petitioner is not correct.

Be that as it may, as this Court finds that the delay is not so exorbitant so as to thwart this application being considered at the nascent stage.

Mr. Dutta, the learned advocate appearing for the petitioner, was very much vocal in contending that the Tribunal has acted contrary to the decisions and/or judgments of the Tribunal rendered on the issue that the assessee is entitled to total waiver if it is proved that the factory is closed. In support of his contention that one of the ingredients, while granting total waiver, is if it is proved that the factory is closed he relies upon the following judgments of the Tribunal:

2007 (115) ECC 57

Kalaimangal Alloy Steel Limited -vs.- Commissioner of Central Ex., Coimbatore, reported in 2004(166) ELT 0067 (Tri.-Chennai)

2004 (171) ELT 22

Mr. Dutta further submits that the Tribunal is bound to adhere to the earlier decisions of the Tribunal in the event the case is fully covered by the earlier decision of the Tribunal and any departure therefrom would entail the said orders and judgments unsustainable in law. In this regard reliance is placed on the Division Bench judgment of this Court in the case of J.N. Chemical (Pvt.) Ltd. Vs. CEGAT, and of a co-ordinate Bench judgment in the case of Hindusthan Laminators Pvt. Ltd. Vs. C.C.E., Calcutta-I,

Mr. Dutta further strikes at the merit of the case of the department made against his client by citing various judgments of the Supreme Court on the ground of revenue neutrality as well as on the plea that the buyers, suppliers and transporters have not been made party to the proceedings and, therefore, the said proceedings is liable to be quashed and set aside.

This Court is basically concerned with the order directing the petitioner to pay 25% of the impositions made in an order passed by the Commissioner. There is no dispute that the petitioner took a specific defence that the manufacturing activities have been closed since February 2008 and any order for deposit as condition precedent to the entertain ability of the appeal would cause undue hardship, as has been held to be one of the ingredients for consideration of total waiver. In the aforesaid judgments, rendered by the different Benches of the Tribunal, it has been held that closure of factory is one of the vital ingredients for the purpose of considering an application for waiver of the pre-condition deposit. The Division Bench in the case of J.N. Chemical Private Limited (supra), categorically held that it would not be just on the part of the Tribunal to insist upon payment of due demanded and the penalty levied in the matter. It appears from the earlier decision of the Tribunal that if it is found that the case is fully covered by the earlier decision of the Tribunal, the Tribunal has observed in the following manner:

Against the aforesaid background, in our opinion it was impossible for the Tribunal to arrive at the conclusion that it could not be said that the appellant had a good prima facie case so as to justify the dispensation of the requirement of pre-deposit of the disputed amount of duty and penalty in question. On the facts and in the circumstances of the case, there was full justification for the exercise of the power vested in the Tribunal to dispense with the requirement of pre-deposit inasmuch as the case of the appellant was fully covered by the decision of a Special Bench of the Tribunal and still to insist upon the deposit of duty demanded and penalty levied would indubitably cause undue hardship to the appellant. The power to dispense with such requirement is conferred on the Tribunal to be exercised precisely in cases like these and, if it is not exercised under such circumstances, this Court will require it to be so exercised.

In the case of Hindustan Laminators Private Limited (supra) the co-ordinate Bench applies the ratio of the Division Bench rendered in the case of J.N. Chemical Private Limited (supra) in these words:

It appears that the documents placed by the company in the modification application to place the financial hardship to be caused to the petitioner has not been properly dealt with by the Tribunal at the time of passing of the said order dated July 6, 2001. It further appears from the order that the Tribunal was also pleased to uphold that the case is of arguable nature from both the sides. Therefore, the fact shows that the petitioner has a strong prima facie case and which has to be determined after hearing the parties. If the petitioner does not get any chance to place their case before the said Tribunal and only on the ground of the pre-deposit, the appeal is dismissed in that case, in my opinion the petitioner will suffer irreparable loss and prejudice. Furthermore, it appears to me that the case of the petitioner was also covered by the decision of the Hon''ble Supreme Court and in my opinion the company must get a chance for the interest of justice to be heard on the point by the Tribunal. It further appears that the case as pleaded by the plaintiff in respect of their financial hardship and the financial position which was also filed before the Tribunal and further placed before this Court which would show that the prior deposit of the duty will cause hardship to the petitioner and furthermore the said aspect has not been taken into account properly in my opinion by the CEGAT at the time of hearing of the modification application or the other application. Accordingly, in my opinion, the plea of financial hardship has to be taken into account by the Court for interest of the justice in favour of the petitioner and I do not have any hesitation to agree with the opinion expressed by the Hon''ble Division Bench of this High Court in J.N. Chemical (Pvt.) Ltd. Vs. CEGAT, where the Court has come to the conclusion which may be reproduced hereunder:-

These judicial pronouncements of high authority show that even where enabling or discretionary power is conferred on a public authority, the words which are permissive in character may be construed as involving a duty to exercise the power is essential. If there is failure on the part of the donee to exercise such power accordingly, the Court will require it to be exercised.

There is no quarrel to the proposition that it is within the discretionary powers of the Tribunal to grant total waiver of the duty demanded and the penalty levied provided it records the reasons relating to undue hardship of the applicant as well as safeguard the interest of the revenues. If the decision of the Tribunal is accepted by the department in some other cases and have been uniformly applied, taking a different view, without indicating the factual difference and/or the special facts may lead to unsettle the settled proposition.

Mr. Bhardwaj tried to impress this Court that since there is no manufacturing activities undertaken by the petitioner; the aforesaid stand that the factory is closed is a pure myth.

From the show cause notice as well as the finding made by the Tribunal it would be evident that the authorities found that there is existence of a factory with plants and machinery. What is stated by the department is that the aforesaid plants, machinery and other infrastructure cannot support the manufacturing activities to such a large extent as has been shown by the petitioner to have been done during the relevant period. Therefore, in view of the aforesaid facts, this Court does not find that it could at all be said that there was never any manufacturing activities undertaken by the petitioner in the said factory but leads to presumption that some manufacturing activities have been undertaken and in absence of any cogent and counter evidence it would further lead to a presumption that the closure was made, as has been contended by the petitioner.

In view of the uniform stand of the Tribunal in granting total waiver of the pre-condition deposit in the event it finds that the factory is closed, this Court, therefore, feels that imposition of 25% of the duty demanded and the penalty levied by the Tribunal is unjustified and cannot be sustained. Furthermore, the Tribunal has not recorded any special facts to depart from the settled proposition. The Tribunal has not recorded any reasons relating to granting waiver to the extent of 75% and imposition of the conditions for deposit of 25% of the duty demanded and the penalty levied. It is no doubt true that if discretion is bestowed on an authority, the same should be exercised rationally, reasonably and within the settled legal sphere and not capriciously and whimsically. There cannot be a straight jacket formula framed for granting waiver which should be judged on the basis of the facts of each case which may not necessarily be identical and similar.

This Court, therefore, finds that the approach of the Tribunal, in dealing with the application for waiver of the pre-condition deposit, is not at all appreciable. This Court, therefore, quashes and sets aside the order dated 24th February 2012. Since the second order dated 15th May 2012 is dependent upon the order dated 24th February 2012, the same cannot stand independently and is also accordingly quashed and set aside.

As a consequence whereof the application, filed by the petitioner seeking waiver, stands allowed. The petitioner is granted total waiver of the pre-condition deposit.

Since interest of the revenue is involved in the event the order of the Commissioner is sustained, this Court feels that the appeal filed before the Tribunal should be disposed of on expeditious basis.

Accordingly, the Tribunal is directed to hear out the appeal and dispose of the same by passing a reasoned order, in accordance with law, as quickly as possible, preferably within four weeks from the date of communication of this order, affording opportunity of hearing to the respective parties.

For abundant precaution it is once again made clear that this order shall not be construed to have been made on the merit of the appeal and the authority shall be free to decide the same independently without being influenced by any observations made hereinabove.

The writ application is disposed of. There shall, however, be no order as to costs.