Ramaswamy Naidu Textiles Ltd. vs CEGAT

The writ petition has been filed aggrieved by the order dated 8-8-2000 made in the stay application pending appeal before the Customs, Excise

and Gold (Control) Appellate Tribunal in Stay Order No. 672 of 2000.

The point to be resolved before the Tribunal is that whether there is violation under Rule 57R(8) of the Central Excise Rules, 1944 which make

the petitioner liable for penalty under Rule 57U(6).

The brief fact is that in respect of capital goods imported by the petitioner, during November, 1995, the petitioner originally filed the returns

under the provisions of the Income Tax Act claiming depreciation. In the original return filed for the year 1996-97, the petitioner claimed

depreciation in respect of the imported capital goods for relevant financial year ended 31-3-1996. Subsequently, the petitioner filed a revised

return on 26-6-1998, wherein the claim of depreciation has been withdrawn. In the meanwhile, the petitioner claimed Modvat credit during April,

1996 to July, 1996 and March, 1997. The Commissioner of Central Excise was of the view that the claim of depreciation under Income Tax Act

would disentitle the petitioner for the benefit of Modvat credit and the petitioner is also liable to pay penalty under Rule 57U(6) and as such the

Modvat credit has been reversed and penalty in a equal sum of Rs. 27,47,003/-has been levied. The correctness of the said order was carried on

appeal before the CEGAT. The petitioner filed an application for stay of reversal of the Modvat credit and imposition of penalty u/s 35F(4) of the

Central Excise Act. The Tribunal granted the relief in respect of the penalty however, directed the petitioner to pay the entire amount of Modvat

credit as a condition precedent for entertaining the appeal. The correctness of the said order is now questioned before this Court.

This Court admitted the writ petition and ordered interim stay in the year, 2001. Now the respondent has come out with an application for

vacating the stay. Since the issue involved in the present writ petition lies in a very narrow compass, with the consent of the Counsel appearing for

the respective parties, the writ petition itself is taken up for final disposal.

Mr. Jayachandran, learned Counsel appearing for the petitioner very strenuously contended that the Full Bench of the Tribunal has taken the

view that if the assessees file revised return withdrawing the depreciation claimed in the original returns, such assessees are entitled to the benefit

under the Modvat. For the purpose of verification, whether such revised return has been filed before the Income Tax authorities, the matters have

been remanded by the Tribunal by setting aside the order of the Commissioner. In the present case also such revised return has been filed before

the Income Tax authorities and that has been accepted by the Tribunal, which is evident from Para 2 of the order of the Tribunal, which is

impugned. If the appeal is directed to be taken for final disposal without the precondition of deposit the petitioner will also have the very same

benefit of remittal order from the Tribunal. He further contended that the financial position of the petitioner is also not in appreciable position. For

the assessment years 1996-1997 to 1999-2000 and continuously the petitioner is sustaining loss in a sum of Rs. 55 lakhs, 81 lakhs, 35 lakhs and

76 lakhs respectively. Hence taking into consideration of the financial loss also, the Tribunal may be directed to dispose of the appeal by waiving

the pre-deposit of Rs. 27,47,003/-. For that purpose he very much relied on the Division Bench judgment of this Court in Tamil Nadu Jai Bharath

Mills Ltd. Vs. Commr. of C. and C. Ex. (A), Trichy, wherein this Court has held as follows :-

The first respondent has refused to grant the waiver u/s 35F of the Act on the ground that prima facie, the petitioner has no case in the appeal.

Secondly, the petitioner/appellant cannot be held to suffer undue hardship if it is made to pay the duty as assessed. This conclusion the 1st

respondent has arrived at, after looking into the balance sheet produced by the appellants for the year ending 31-3-1995, even though the said

balance sheet shows less. However, the balance sheet for the year ending 31-3-1996 had not been produced, even though it cannot be said that it

could not have been available. As the financial position of the appellant as on the date of consideration of the application has to be considered in

order to find out whether undue hardship would be caused to the appellant, in the event, it is directed to pay the entire duty assessed, we are of the

view that it is necessary that the appellant seeking waiver u/s 35F of the Act, must place before the Authority the latest financial position.

Therefore, we are of the view that the appellant should be given an opportunity to produce the latest balance sheet and profit and loss account for

the year ending 31-3-1996.

As seen from the judgment cited, it is evident that the consideration necessary for granting relief u/s 35F(4) is prima facie case and the financial

position of the petitioner. The contention of the learned Counsel for the petitioner that the Tribunal in similar cases set aside the order of the

Commissioner has not been refuted by the departmental Counsel and hence prima facie the petitioner has made out a case in his favour. The

financial position of the petitioner is also not in a appreciable position as it was sustaining loss from the year 1996-97 to 1999-2000. Hence, I am

of the view that an equitable order in favour of the petitioner has to be passed.

For this course of action learned Counsel for the respondent is not having any objection. Having regard to the facts and circumstances as stated

above and in the light of the law laid down in the above judgment by the Division Bench of this Court, I am of the view that the order of the

Tribunal directing the petitioner to deposit a sum of Rs. 27,47,003/- has to be set aside and is hereby set aside and the Tribunal is hereby directed

to take the appeal on file and dispose of the same on merits within a period of eight weeks from the date of receipt of copy of this order. The

petitioner is directed to cooperate with the dispose of the appeal.

With this observation, the writ petition is disposed of. Consequently, W.M.P. No. 4745 of 2001 and W.V.M.P. No. 626 of 2002 are closed.

No costs.