Swamsar Industrial Services vs CESTAT

G. Rohini, J.—These appeals are preferred u/s 35G of the Central Excise Act, 1944 (for short, ''the Act'') aggrieved by the order dated 4-2-2013 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench in two appeals being Nos. 25032 and 25031 of 2013. At the outset, it is necessary to mention that Section 35G of the Act has been repealed by the National Tax Tribunal Act, 2005. However, the learned counsel for the appellant submits that in the absence of the requisite notification, the amendment has not been enforced so far. The said fact has not been disputed by Sri V. Gopalakrishna Gokhaley, the learned counsel, appearing for the respondents and therefore, we proceeded on merits.

The facts in brief are as under:

By orders dated 5-5-2010 and 6-5-2010, the Commissioner of Customs, Central Excise and Service Tax held that the writ petitioners are liable to pay Service Tax specified therein together with the interest thereon and penalty imposed u/s 77 of the Finance Act, 1994. Aggrieved by the same, the petitioners preferred two appeals before the CESTAT. It is to be noticed that u/s 35F of the Act, the person desirous of appealing against an order of demand of duty is liable to deposit with the adjudicating authority the duty demanded or the penalty levied. However, as per the proviso, the CESTAT is conferred with the power to dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the interest of the revenue. In the present cases, it was pleaded by the appellants that they were unable to deposit the amount as required u/s 35F of the Act and after considering the same, the CESTAT by a common order dated 13-4-2011 directed the petitioners to pre-deposit a sum of Rs. 60,00,000/- within a period of eight (8) weeks and report compliance on 6-6-2011 to the Assistant Registrar. It was also made clear in the said order that subject to such compliance being reported, the applications for waiver of pre-deposit of the amounts involved were allowed and recovery thereof was stayed till the disposal of the appeals. Contending that the condition imposed by the CESTAT was arbitrary, illegal and onerous, the petitioners filed W.P. Nos. 14260 of 2011 and 14329 of 2011.

Though this Court had initially granted interim stay of the order of the CESTAT, ultimately the writ petitions were dismissed by a Division Bench of this Court by common order dated 6-12-2012, by granting extension of time for four weeks holding as under:

For the aforesaid reasons, the writ petitions are without merit and are accordingly dismissed. Consequently the interim stay granted on 18-5-2011 is dissolved. On condition of the petitioners depositing the amount of Rs. 60,00,000/- each as directed by the impugned order of the Tribunal within four weeks from today and furnishing proof of such deposit to the Assistant Registrar of the CESTAT, Bangalore Bench within the period aforestated, the Tribunal shall take up adjudication of the appeals preferred by the petitioners, waiving the amount of pre-deposit in each of the appeals. In default of the petitioners depositing Rs. 60,00,000/- each within the time stipulated herein, the appeals shall be returned for default in furnishing the pre-deposit amounts and the respective Orders-in-Original passed by the 2nd respondent in respect of the petitioners shall become operative proprio vigore.

However, the petitioners failed to deposit the said amount of Rs. 60,00,000/- each even within the extension of time granted by the Division Bench. Ultimately, the matter came up before the CESTAT on 4-2-2013. Having taken into consideration the fact that there was no compliance with the conditional order passed by the Tribunal within the time granted by this Court in W.P. Nos. 14260 of 2011 and 14329 of 2011, the CESTAT held that the appeals were liable to be dismissed for non-compliance of Section 35 of the Act as applicable to the Service Tax Appeals. Accordingly, both the appeals were dismissed. Hence, the present Appeals u/s 35G of the Act.

Sri C. Nageswara Rao, the learned counsel appearing for the appellants placing reliance upon a decision of a Division Bench of the Karnataka High Court in M.I. Metal Sections Pvt. Ltd. Vs. Collector of C. Excise, Bangalore, contended that though it is a fact that the appellants could not comply with the conditional order, the Tribunal is under an obligation while hearing the main appeal to reconsider the plea of the appellants that they could not comply with the order because of financial difficulties and circumstances beyond their control. It is submitted by the learned counsel that since the CESTAT failed to follow such procedure and the financial difficulties explained by the writ petitioners were not taken into consideration and that the appeals were dismissed merely on the ground that the petitioners failed to comply with the requirement u/s 35F of the Act, the matter requires reconsideration. Thus, according to the learned counsel, the impugned orders are liable to be set aside and the matter may be remanded for consideration on merits.

Having carefully gone through the judgment of the Division Bench in M.I. Metal Sections Pvt. Ltd''s case (supra), we respectfully disagree with the opinion expressed by the Division Bench of the Kerala High Court. According to us, the condition prescribed u/s 35F of the Act that the person desirous of appealing against the order shall deposit the duty demanded or the penalty levied is mandatory. However, the power to dispense with such condition has been conferred on the CESTAT only where it is satisfied that the deposit of the duty demanded or penalty levied would cause undue hardship to such person. Such discretion has already been exercised by the CESTAT and an order came to be passed on 13-4-2011. The said order has also been upheld by this Court in W.P. Nos. 14260 of 2011 and 14329 of 2011. Therefore, according to us, it is not open to the appellants to reagitate the issue. In fact, if the contentions now raised by the appellants are accepted, it would amount to reviewing the order passed by this Court earlier in W.P. Nos. 14260 of 2011 and 14329 of 2011. It is also relevant to note that when the appeals were taken up by the CESTAT on 4-2-2013, the appellants did not say that they were under financial crisis nor there was any plea about the hardship being faced by them to comply with the condition u/s 35F of the Act.

Viewed from any angle, we are of the opinion that the CESTAT cannot be held to have committed any error in dismissing the appeals without going into the merits of the case. Moreover, the case does not involve any substantial question of law warranting interference by this Court.

Accordingly, both the Appeals are dismissed. No costs. Consequently, Miscellaneous Petitions, if any, pending in these appeals shall stand closed.