Special Prints Ltd. vs Union of India (UOI) and Another

H.N. Devani, J.—This petition challenges the orders dated 14/26th September, 2007 and 18th December, 2007 passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (the Tribunal). The substantial relief claimed in the petition is as follows:

[A] Your Lordships be pleased to issue a writ of or in the nature of mandamus or a writ of or in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the Tribunal''s orders dated 14/26.9.2007 and 18.12.2007 at Annexure G and Annexure L respectively and be further pleased to direct the Tribunal to hear the petitioner''s appeal without insisting upon a pre-deposit.

The respondents had issued a show cause notice against the petitioner and Garden Silk alleging that they were related persons and that the petitioner had processed 10,24,92,878 L.Mt. of fabric for Garden Silk on job work basis during 1993-98, hence the petitioner should have paid duty in terms of the wholesale price at which the yarn and processed fabrics were sold by Garden Silk. The respondent No. 2 Commissioner of Central Excise and Customs, confirmed the show cause notice and held that the petitioner was liable to pay duty to the tune of Rs. 21,37,51,202/- for the period 1993-98 as well as interest and penalty to the tune of Rs. 3,92,97,009/- and Rs. 10,12,63,879/- respectively. The petitioner preferred an appeal before the Tribunal. The appeal was accompanied by an application seeking waiver of pre-deposit of duty, interest and penalty amount. After hearing the learned Advocate for the petitioner the Tribunal held as follows:

[4.1] We have carefully considered the submissions from both sides. We notice that the assessable value declared by the SPL is very low compared to the sale price by GSML (for example during the year 97-98, the assessable value declared was Rs. 21.87 and the value charged by GSML is Rs. 45.68). Surprisingly, when the assessable value declared by SPL for excise purposes were coming down, the sale prices by GSML was increasing.

[4.2] Commissioner has recorded his findings in details under various headings like common directors in SPL and GSML, infrastructure owned by GSML was used by SPL without any rent and use of other facilities such as staff of GSML by SPL, coal and lignite used by SPL was purchased by GSML, SPL collected lower job charges from GSML than those collected from other, financial assistance to SPL from GSML, Directors of GSML holding 34.09% shares of SPL and they were the first directors (i.e. at the time of SPL''s inception), SPL earned profit from transaction of yarn through GSML etc. and came to the conclusion that they are related persons.

[4.3] The Commissioner has also taken note of the fact that GSML has spent sizable amount of money on developing designs and supplying the same to SPL without any monetary considerations and came to the conclusion that there are indications of extraordinary relationship between SPL and GSML.

[4.4] Commissioner also has held that SPL have not disclosed the nature of relationship between them and GSML and also GSML have not disclosed the relationship with SPL and felt it is a fit for invoking extended time limit.

[5] Prima facie, the valuation adopted by the Commissioner appears to be in conformity with the ratio of the decision taken by Hon''ble Supreme Court in the S. Kumar''s case. Other submissions having a bearing on the relationship and whether there was suppression are contentious and require to be gone into in detail at the time of final hearing. Therefore, we hold that applicants have not made out a strong prima facie case for total waiver of the dues as per the Order of the Commissioner.

[6.1] Therefore, taking the entire facts and circumstances of the case including the submissions on the financial hardship faced by SPL, we direct M/s SPL to deposit a sum of Rs. 4 crores within 12 weeks from today and to report compliance on 18/12/2007.

The petitioner, thereafter, moved an application seeking modification of the aforesaid order seeking full waiver of pre-deposit and stay against the deposit of entire amount of duty and penalty, mainly on the ground of financial hardship, stating that the petitioner''s company had been registered as a sick unit with the Board for Industrial and Financial Reconstruction (BIFR) and a scheme u/s 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 was under consideration. The Tribunal, in its impugned order dated 18th December, 2007 held as follows:

[2] The application for modification does not contain any fresh ground or any fresh development after passing of the stay order. It merely reiterates the ground that the applicant company is under BIFR and they are not in a position to mobilize the funds to comply with the stay order. We have given detailed reasons in the stay order dated 26.9.07 and held that the applicants do not have a prima facie case in their favour. Accordingly, and after taking into account the financial hardship pleaded by them, we directed them to deposit a sum of Rs. 4 crores against the total demand of duty amounting to about Rs. 21.3 crores besides penalty and interest. Pre-deposit is envisaged before filing appeal and waiver of pre-deposit has to take into account the revenue interests as well. We do not find any merit in the application.

The learned Counsel for the petitioner assailed the impugned orders mainly on the ground that the Tribunal has not addressed itself to the issue of undue hardship as well as regarding the fact that the petitioner was registered as a sick unit with the BIFR. According to the learned Advocate for the petitioner, if the Tribunal had applied its mind to the petitioner having been registered as a sick industrial unit with the BIFR, the Tribunal would have dispensed with the entire pre-deposit. It was submitted that insistence on payment of such a huge sum of pre-deposit would amount to depriving the petitioner of the statutory right of appeal. In support of his submissions the learned Advocate for the petitioner placed reliance upon the following decisions:

[a] The decision of the Supreme Court in the case of Sangfroid Remedies Ltd. v. Union of India 1998 (103) ELT 5 (SC).

[b] The decision of the Supreme Court in the case of Vijay Packaging Systems Ltd. v. Commissioner of Customs and Central Excise, A.P., 2000ECR769(SC) .

[c] The decision of the Supreme Court in the case of Sagarika Acoustronics Pvt. Ltd. v. Union of India rendered in Civil Appeal No. 1202 of 2007, dated 7th March, 2007, a copy of which is annexed to the petition.

[d] The decision of this Court in the case of Texplast Engineers Ltd. Vs. Union of India (UOI),

On the other hand Mr. R.J. Oza learned Standing Counsel for the Central Government submitted that the Tribunal has taken into consideration all the submissions advanced on behalf of the petitioner as well as the material on record before directing the petitioner to deposit only a fraction of the duty amount. It was submitted that under the provisions of Section 35F of the Central Excise Act, 1944 (the Act), discretionary powers are vested in the Tribunal. While examining the validity of the order of the Tribunal, all that has to be seen is as to whether while exercising discretion, the Tribunal has considered the factors laid down in Section 35F of the Act. It was submitted that the impugned orders passed by the Tribunal clearly show that all the factors envisaged u/s 35F of the Act have been taken into consideration and that the Tribunal has applied its mind to all the submissions advanced on behalf of the petitioner and has thereafter exercised discretion. Hence, there is no warrant for any intervention by this Court.

As can be seen from the impugned order of the Tribunal, the Tribunal has after considering the submissions advanced on behalf of the parties, and after recording certain factual aspects, held that the petitioner has not made out a strong prima facie case for total waiver of the dues as per order of the Commissioner. After taking into consideration the entire facts and circumstances of the case, including the submissions on financial hardship faced by the petitioner, the Tribunal directed the petitioner to deposit a sum of Rs. 4 crores. This amount of Rs. 4 crores has to be considered in the light of the fact that as per the order of the Commissioner, the petitioner was liable to pay duty to the tune of Rs. 21,37,51,202/- as well as Rs. 3,92,97,009/- and Rs. 10,12,63,879/- towards interest and penalty, in all more than Rs. 35 crores. The very fact that the Tribunal, after recording that the petitioner does not have a strong prima facie case, has directed pre-deposit of only 20% of the duty amount, which evidently is a small part of the total amount payable under the order of the Commissioner, indicates that the Tribunal has applied its mind to the financial position of the petitioner as well as the fact that the petitioner is a sick company. Merely because the fact regarding the petitioner being registered as a sick unit with the BIFR has not been specifically referred to while assigning reasons, does not lead to an inference that the Tribunal has not effectively considered the submissions advanced on behalf of the petitioner. Hence, the contention that the Tribunal has not addressed itself to the issue regarding the petitioner being registered as a sick unit with the BIFR does not merit acceptance.

While considering an application u/s 35F of the Act, the Tribunal is required to keep in mind twin requirements viz. undue hardship to the applicant and imposition of conditions to safeguard the interest of Revenue. On the facts of the present case, it is apparent that the Tribunal has considered both the aforesaid aspects while directing the petitioner to deposit a sum of Rs. 4 crores.

The learned Counsel for the petitioner has laid great stress upon the fact that the petitioner was registered as a sick unit with the BIFR, to contend that in the circumstances, the entire pre-deposit ought to have been waived and has placed reliance upon the decisions noted hereinabove. Whereas the learned Counsel for the respondent has placed reliance upon the decision of the Supreme Court in the case of Metal Box India Ltd. Vs. Commissioner of Central Excise, Mumbai, a decision of this Court in the case of Indu Nissan Oxo Chemical Ind. Ltd. v. Union of India 2006(3) GLH 656 which has been confirmed by the Supreme Court vide judgement and order dated 11th December, 2007 rendered in Civil Appeal No. 5795 of 2007.

In the case of Indu Nissan Oxo Chemicals (supra), this Court while dealing with a similar issue has considered the aforesaid decisions of the Supreme Court and held as follows:

[6] In the case of Metal Box India Ltd. (supra) the Supreme Court was called upon to consider the question whether the Tribunal was justified in dismissing the Appeal on the ground that the amount which was required to be deposited u/s 35F of the Central Excise Act, 1944, was not deposited within the period allowed by the Tribunal. While rejecting the contention raised on behalf of the assessee - appellant before the Supreme Court it is laid down by the Apex Court as under:

We are afraid, we cannot accept the contention of the learned Counsel for reasons more than one. First, this aspect was not the subject matter of the order under challenge and, secondly, Section 22 of the Sick Industries Act, provides relief in regard to the proceedings which relate to (a) winding up of the industrial company; (b) execution, distress or the like against any of the properties of the industrial company; (c.) the appointment of a receiver in respect thereof, and (d) proceeding in regard to suit for recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company. Payment of pre-deposit covered u/s 35F of the Central Excise Act, 1944 does not fall under any of the above-mentioned categories in Section 22 of the Sick Industries Act.

[7] Section 35F of the Excise Act is pari-materia with Section 129E of the Customs Act, 1962. In light of the aforesaid authoritative pronouncement of law it is not possible to hold that CESTAT has committed any error in law while passing the impugned order. In absence of any legal infirmity no interference is called for in the impugned order.

[8] Before parting, it is necessary to record that the earlier decision of the Apex Court in the case of Sangfroid Remedies Ltd. (supra) did not specifically deal with the issue as has been dealt with in the later decision of Metal Box India Ltd. (supra). Even if it could be perceived that there is a conflict between two decisions of the Apex Court, the view expressed in the later decision must prevail, more so when the same directly deals with the issue. Rest of the decisions are by different Benches of the High Court and have been rendered without considering the judgment in case of Metal Box India Ltd.(supra).

The aforesaid decision is squarely applicable to the facts of the present case. In the circumstances, the contention of the learned Counsel for the petitioner that by dint of the fact that the petitioner is registered as a sick unit with the BIFR, the petitioner is entitled to full waiver of the amount of pre-deposit, does not merit acceptance. In view of the findings recorded hereinabove, as well as in the light of the principle laid down in the decisions cited hereinabove, no infirmity can be found in the impugned orders of the Tribunal so as to warrant any intervention by this Court. In the result the petition, fails and is accordingly, rejected.

The petitioner is granted four weeks from today to comply with the directions made by the Tribunal in its order dated 26.9.2007.