SKS Ispat and Power Ltd. vs Commissioner of Customs and Excise

Satish K. Agnihotri, J.—By way of this petition, the petitioner seeks quashing of the order dated 16-9-2011 (Annexure P/6) passed by the Customs, Excise & Service Tax Appellate Tribunal (Principal Bench), New Delhi (for short ''the Tribunal'') whereby the petitioner has been directed to deposit an amount of Rs. 1 crore within a period of 12 weeks from the date of the order and report compliance on 25-1-2012 and subject to the said deposit, the pre-deposit of the balance amount of duty and the entire amount of penalty shall stand waived and its recovery stayed during pendency of the appeal. The petitioner further seeks a direction to the Tribunal to reconsider the stay application/waiver of pre-deposit application. The facts, in brief, as projected by the petitioner are that the petitioner company is a limited comply incorporated under the provisions of the Companies Act, 1956, engaged in manufacture of Iron and Steel products falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. The petitioner company is availing the facility of Cenvat credit under the Cenvat Credit Rules, 2004. During the period from February 2008 to March 2009, the petitioner has availed Cenvat credit on structural items viz. Angle, Channel, Plates, Joists, Flats etc. and on Welding Electrodes and Oxygen gas which were used by them for erection and fabrication of various parts/accessories/supporting structure to the plant and machinery. The petitioner company was issued a show cause notice on 21-8-2009 (Annexure P/1) by the respondents demanding recovery of Cenvat credit amounting to Rs. 4,61,86,541/- availed on the aforesaid items under Rule 15 of the Rules, 2004, read with Section 11A of the Central Excise Act, 1944, recovery of Central Excise Duty amounting to Rs. 1,04,92,980/- including cess, u/s 11A of the Act, 1944, levy of interest under Rule 14 of the Rules, 2004 read with Section 11AB of the Act, 1944 and levy of penalty under Rule 15 of the Rules, 2004 read with Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Act, 1944. The said notice was replied by the petitioner company on 18-12-2009 (Annexure P/2). The respondent No. 1 confirmed its demand along with interest as proposed in the show cause notice and imposed penalty equal amount of duty demand u/s 11AC of the Central Excise Act with Rule 15 of the Rules, 2004 by order dated 28-5-2010 (Annexure P/3). Being aggrieved, the petitioner Company filed an appeal u/s 35F of the Act, 1944 along with an application for stay u/s 25 of the Act, 1944 before the Tribunal.

Shri Shashank Dubey, learned senior counsel with Shri Neelabh Dubey, learned Advocate for the petitioner would submit that Section 35G read with Section 35C of the Act, 1944 clearly establishes that only the order on merit can be appeal against before the High Court u/s 35G. Section 35G of the Act, 1944 specifically uses the term ''if the case involves a substantial question of law''. The issue of waiver of pre-deposit u/s 35F of the Act, 1944 has a factual aspect to it and in most of the cases does not involve a question of law. It is further submitted that the impugned order is no order on merit. The twin test for waiver of pre-deposit i.e. prima facie case and undue hardship, has not been considered, and as such, may not involve a question of law. The ratio laid down in Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcement and Another, is distinguishable from the present facts as Rajkumar Shivhare was considering the provisions of Section 35 of the Foreign Exchange Management Act, 1999 (for short ''the FEMA'').

On the other hand, Shri Sharma, learned counsel appearing for the respondents, relying on a decision of the Supreme Court in Rajkumar Shivhare (supra), would submit that only appeal is maintainable against the order of the Tribunal. In the present case, the petitioner has an alternative, efficacious remedy available under law. In Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, , has dealt with question of undue hardship to the assessee in the event of imposition of pre-deposit and held to strike a balance with regard to safeguarding the interest of revenue also. The plea of the petitioner that demands are time barred and the liability of the petitioner would only be in respect of items used in manufacture of structures of Capital Goods is incorrect.

Section 35C of the Act, 1944 reads as under :

35C Orders of Appellate Tribunal. - (1) The Appellate Tribunal may, after giving the parries to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary.

Section 35F of the Act, 1944 reads as under:

35F. Deposit, pending appeal, of duty demanded or penalty levied. -

Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of central excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied :

Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.

Section 35G of the Act, 1944 reads as under;

35G. Appeal to High Court. - (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after 1st Day of July 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment) if the High Court is satisfied that the case involves a substantial question of law.

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(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which -

(a) has not been determined by the Appellate Tribunal, or

(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision of such question of law as is referred to in sub-section (1).

Section 35 of the FEMA reads as under :

Appeal to the High Court. - Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such order.

On bare perusal of Section 35G of the Act, 1944 which is analogous to Section 35 of the FEMA, as both provides for appeal to the High Court on any question of law, arising out of such order. Section 35G of the Act, 1944 reads that "if the High Court is satisfied that the case involves a substantial question of law". Section 35 of the FEMA reads that "any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court on any question of law arising out of such order." The import and effect of both the provisions are same. The Supreme Court, recently, while considering Section 35 of the FEMA, in Rajkumar Shivhare (supra) held as under :

Therefore, in our judgment in section 35 of FEMA, any ''order'' or ''decision'' of the Appellate Tribunal would mean all decisions or orders of the Appellate Tribunal and all such decisions or orders are, subject to limitation, appellable to the High Court on a question of law.

Intention of the legislature is clear and as such, no process which goes against the intention of the legislature be adopted. In the aforesaid case, the Supreme Court, observed as under :

When a statutory forum is created by law for redressal of grievance and that too in a fiscal Statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go bye by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating the aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction.

Section 35G of the Act, 1944 provides for an appeal against any order passed by the Appellate Tribunal. Thus, the litigant cannot be permitted to seek redressal of his grievances by invoking the forum of judicial review under the writ jurisdiction on the ground that there may not be any question of law as required u/s 35G of the Act. Sub-section (5) and (6) of Section 35G deal with the substantial questions of law. In respect of question of law, which may arise, sufficient prescriptions have been made in sub-sections (5) and (6) of Section 35G of the Act, 1944. This Court is not expressing any opinion on the involvement of question of law, more so, substantial question of law, as the writ petition is seeking judicial review under writ jurisdiction, which is not maintainable.

The question raised by the petitioner that the appeal as contemplated u/s 35G of the Act, 1944 is only against the final order, has been negated by the Supreme Court in Rajkumar Shivhare (supra), observed as under :

The argument that u/s 35 only appeals from final order can be filed has been advanced on a misconception of the clear provision of the Section itself. The section clearly says that from ''any decision or order'' of the Appellate Tribunal, appeal can be filed to the High Court on a question of law.

The opening of Section 35G of the Act 1944 which reads that "An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal" clearly manifest that there is no distinction between the order passed finally or interim order. The most important word is "every order passed in appeal". The order dated 16-9-2011 (Annexure P/6) sought to be impugned with regard to the direction to deposit an amount of Rs. 1 crore within a period of 12 weeks from the date of the order and report compliance on 25-1-2012 and subject to the said deposit, the pre-deposit of the balance amount of duty and the entire amount of penalty shall stand waived and its recovery stayed during pendency of the appeal, clearly indicates that the same was passed in an appeal pending consideration.

A Division Bench of the High Court of Bombay, in Indoworth India Ltd. Vs. Customs, Excise and Service Tax Appellate Tribunal and Commissioner of Customs and Central Excise, observed that the order of deposit is an order made in appeal.

So far as question of consideration of prima facie case and undue hardship is concerned, this is on merit. If the petitioner is aggrieved on the fact that the same was not considered, the petitioner may take recourse to alternative statutory forum under the provisions of the Act, 1944.

Counsel appearing for the rival parties have cited several decisions in respect of consideration of prima facie case and undue hardship, which I do not find proper to refer at present on the question of maintainability, as the judicial pronouncements cited by the parties deal with the cases on merit.

Thus, in view of the availability of statutory appellate forum, this Court is of the view that the writ petition is not maintainable against the impugned order. No other extraordinary circumstances have been pointed out by the petitioner except undue hardship to entertain a writ petition directly exercising its discretion in favour of the petitioner.

Accordingly, the writ petition is dismissed. There shall be no order as to costs.