Nicco Corporation Ltd. vs Commissioner of C. Ex.

Harish Tandon, J.—Heard the learned counsel for the parties. Three applications filed by the petitioner seeking waiver of the pre-deposit of the duty demanded are disposed of by the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as "CESTAT") by directing, the petitioner to deposit 25% of the duty demanded within a period of eight weeks from the date of communication of the order.

In a supplementary affidavit petitioner disclosed that pending the writ petition and because of non-deposit of the 25% of the duty demanded in terms of the said order, the Appellate Tribunal has recorded the dismissal of the appeals.

At the time of admitting the writ petition, the judgment of the Bombay High Court and the Supreme Court was placed by the respective counsel, which, prima facie, appears to have taken a divergent view. The matter was directed to be decided on a later date and interim order was passed by this Court.

The petitioner''s main thrust in assailing the order passed by the CESTAT in this writ petition is that the Tribunal has not recorded its satisfaction relating to the net worth of the company which is less than the liability.

In support of the aforesaid contention a reliance is placed upon a judgment of the Apex Court in case of Sagarika Acoustronics Pvt. Ltd. v. Union of India (2010 (256) E.L.T. A61 (S.C.)), wherein the Apex Court directed the Tribunal to consider the application for modification afresh and to record the findings regarding net worth of the company. A SLP was filed before the Apex Court against the order of the Bombay High Court in case of Sagarika Acoustronics Pvt. Ltd. v. Union of India reported in 2008 (229) E.L.T. 203 (Bom.) where the Bombay High Court refused to interfere with the order of the Tribunal disposing of an application u/s 35F of the Central Excise Act, 1944 directing the appellant to deposit a sum of Rs. 1,40,00,000/- by 30th September, 2005.

The Bombay High Court while passing the order took note of another judgment of the Apex Court rendered in case of Metal Box India Ltd. Vs. Commissioner of Central Excise, Mumbai, which is relied upon by the respondents in support of their contention in this matter.

In case of Metal Box India Ltd. (supra) the Apex Court held that Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 cannot have any manner of applicability in a proceeding before the CESTAT and there is no impediment on the part of the Tribunal to direct pre-deposit of the duty demanded u/s 35F of the Central Excise Act, 1944.

The respondents, however, further relied upon a judgment of the Apex Court rendered in case of Indu Nissan Oxo Chemicals Ind. Ltd. Vs. Union of India (UOI) and Others, to contend that while considering an application u/s 35F of the Central Excise Act, 1944, the Court must be guided by the principle that there must be an existence of a strong prima facie case and the undue hardship.

In the said report the Apex Court held that one of the essential ingredients of Section 35F of the Central Excise Act, 1944 is that the appellant must satisfy the Tribunal that imposition of, any pre-deposit would cause an undue hardship, which is required to be judged if there is a strong prima facie case. The Apex Court further held that the undue hardship could not be restricted to the financial hardship only though it is one of the constituents thereof, but not the sole determinant factor. The Apex Court took note of the judgment rendered in case of Metal Box Limited (supra) and held:-

"It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief grave irreparable private injury or shake a citizens'' faith in the impartiality of public administration, interim relief can be given."

As indicated above the sheet anchor of the argument of the petitioner in this writ petition is on the strength of the observations made by the Apex Court in case of Sagarika Acoustronics Pvt. Ltd. (supra) as there is no finding recorded by the Tribunal relating to the net worth of the company.

It is no doubt true that the powers conferred u/s 35F of the Central Excise Act, 1944 so far as it relates to the dispensation of the pre-deposit of the duty demanded, is a discretionary one. The discretion should be exercised judicially and not capriciously and/or arbitrarily. While exercising the discretion the Court must record the reasons therefore, which should withstand on the settled legal parameters and does not lead to an inference which no reasonable man could arrive at.

The order impugned suggests that the Tribunal has recorded respective submissions and disposed of the aforesaid applications by giving dispensation of deposit of 75% of the duty demanded meaning thereby petitioner is directed to deposit 25% within a stipulated period. There is no reflection in the said, order relating to the net worth of the company or relating to the existence of a prima facie case which is one of the facet for consideration whether the appellant would suffer undue hardship, if the duty demanded is directed to be deposited.

In absence of the aforesaid finding, this Court feels that the order impugned is not sustainable. The same is hereby quashed and set aside.

The matter is remanded to the CESTAT for consideration of the aforesaid three applications afresh in the light of the observations made hereinabove and it is expected that the Tribunal would make all endeavour to dispose of the said applications within a period of six weeks from the date of communication of this order.

Since the petitioner did not comply the said order dated 29th April, 2013 by which the three applications were disposed of with a direction to deposit 25% of the duty demanded within eight weeks from date, the CESTAT has dismissed the appeals as well.

The order of dismissal of the appeal is founded on the basis of the said order dated 29th April, 2013 and upon setting aside of the said order the subsequent order being dependant thereupon cannot stand on independent footing. Accordingly, the order, by which the appeals filed by the petitioner is dismissed, is also set aside. The appeal shall be treated to have been restored to its original file and number.

The writ petition is disposed of on the basis of the above findings. There will be no order as to costs.