Nitco Limited vs Commissioner of C. Ex.

This appeal u/s 35G of the Central Excise Act impugns the order dated 12th September, 2013 passed by the Customs, Excise and Service Tax Appellate Tribunal. The Tribunal while disposing of the application for stay filed by the appellants in the appeal before the Tribunal directed the appellant to deposit an amount of Rs. 3 crores. It is this direction which is impugned in this appeal, Mr. Sridharan, the learned senior counsel appearing in support of this appeal submits that the appeal raises a substantial question of law inasmuch as the Tribunal has completely omitted from consideration the argument of the appellant based on the registration of the head office. It is submitted by Shri Sridharan that head office of the appellant''s unit was not registered as an Input Service Distributor (JSD) for distribution of Cenvat credit during the relevant time. However, the registration has been obtained subsequently. At best, this is a procedural lapse and remediable. Reliance was placed upon several decisions of the Tribunal and particularly in the case of 2013 (288) ELT 291

Mr. Sridharan submits that instead of referring to these orders and in the case of Doshion Ltd., which are rendered by a two Member Bench, the Tribunal choose to rely on the order passed by a single member. This is contrary to law and this itself would give rise to a substantial question of law. Mr. Sridharan submits that the matter should be sent back to the Tribunal for reconsideration on this limited point.

More so, when the Tribunal has found a strong prima facie case in favour of the appellant to the extent of a demand of Rs. 2.88 crores. Further, out of the total demand of Rs. 6 crores, the appellant has reversed the credit to the extent of Rs. 3 crores. Now directing the appellant to deposit a sum of Rs. 3 crores would mean a deposit of the entire amount and thus, the order stands vitiated in law.

Mr. Jetley appearing on behalf of the respondents submits that firstly this is an interim order of the Tribunal. The discretion that is exercised by the Tribunal is in the facts and circumstances of the present case. The discretion is not exercised arbitrarily or capriciously. In that regard Mr. Jetley has taken us through the order of the Tribunal impugned in this appeal and particularly the paras at pages 55 to 57 of the paper book. Mr. Jetley then submits that a fraud has been perpetrated on the public exchequer, and therefore, this is not a fit case for interference in our appellate jurisdiction.

We have from the assistance of the learned counsel appearing for the parties, perused the order passed by the Tribunal. We have also noted the contentions which have been raised before the Tribunal. We have also found that the appellant had placed reliance on the decision of the Tribunal in the case of Doshion Ltd. v. Commissioner of Central Excise.

While, it is true that the total demand was of Rs. 9,77,43,064/- and the Tribunal has found a prima facie case in so far as the demand raised under Annexure-C to the show cause notice dated 28th September, 2011/4th October, 2011 what has been referred to by the Tribunal thereafter is the demand in relation to 3.23 crores. That is pertaining to denial of input service credit on the ground that the services in dispute do not qualify as input service. We have found that out of total demand of Rs. 9.7 crores, the Tribunal has granted the appellant partial relief. The Tribunal has found that acting on intelligence, the Central Excise Officers attached to the preventive section of the Raigad Central Excise Commissionerate initiated an enquiry against the appellant in respect of Cenvat credit availed by the appellant during the period 2006-07 to 2010-11. The enquiry according to the Tribunal revealed that the appellant had availed Cenvat credit of service tax paid on services which were used for trading activity of imported goods and relating to their real estate business and the credit so taken was utilized towards discharge of excise duty on goods manufactured at their factory at Alibag. Prima facie some admissions have also referred and in the statements of the officers of the appellant. Taking an overall view of the matter, the Tribunal has found that out of the duty, interest and penalty demanded a case for complete waiver has not been made out. Prima facie, therefore, we are not in agreement with Mr. Sridharan that omission to take into consideration some decisions of the Tribunal and that too of two Member Bench would vitiate the impugned order. We are not impressed by his argument that this is a case of pure procedural lapse. At this prima facie stage, it would not be proper to comment either way as that would prejudice the case of the parties before the Tribunal. The Tribunal has noted that the allegations are serious and pointing towards a prima facie fraud. Therefore, in order to protect the interest of both sides the Tribunal made the interim order. We are of the opinion that one can''t at this stage break up the demand and hold that in so far as the sum of Rs. 3,23,00,000/- out of the sum of Rs. 6 1/2 crores there is a strong prima facie case. The demand cannot be considered after broken up and in isolation. It may be that the appellant would ultimately succeed. However, what the Tribunal has gone by is the principle that prima facie case is not a case which would ultimately succeed but which merits require serious consideration and deeper investigation. It is in doing that the Tribunal has observed that the interest of both sides can be protected by its interim order.

We are, therefore, not in agreement with Shri Sridharan that the matter deserves to be remitted back to Tribunal for examination of the contentions raised before us and once again. The contentions cannot be seen in isolation and by breaking up the demand at this prima facie stage. For these reasons, we do not think that the appeal raises any substantial question of law. It is accordingly dismissed. However, at the request of appellant time to comply with the Tribunal''s direction is extended till 15th June, 2014. In the event, the direction is abided by the appellant, the Tribunal to take up the appeal for disposal on merits and in accordance with law. In the meanwhile, if the appeal stands dismissed, after compliance by the appellant of the order of the Tribunal within the time frame stipulated by us, the Tribunal shall permit the appellant to revive the appeal and hear it on merits, in accordance with law.