Escorts Limited And Anr. vs Union Of India And Ors.
1990 Latest Caselaw 513 Del

JUDGMENT

M.K. Chawla, J.

(1) The issue involved in the present writ petition relates to deposit of the amount of impugned demand as a condition precedent to hearing of appeals before the Collector (Appeals). The facts leading to the filing of this petition are that during the relevant period of 31-7-87 to 6-1-88, i.e. the period covered by the impugned order of the Assistant Collector, dated 28-11-89, motorcycle were cleared ex-factory for sales in the wholesale price which was available with the respondent within the meaning of sec. 4(l)(a) of the Central Excise and Salt Act. 1944 (hereinafter referred to as the Act). Apart from the ex- factory sales on wholesale price, the petitioners also sold motor- cycles in retail through their depot in Ghaziabad and in some cases from the factory to various customers all over India. The petitioners' case is that once the ex-factory wholesale price is available. the same would be applicable to all clearances made from the factory and, therefore, it is not permissible in law to determine the assessable value with regard the sales in retail on a different basis. In other words, the assessable value in respect of the sales made in retail would also be the same as the assessable value for sales made in wholesale ex-factory.

(2) As regards the subsequen' period covered by the Assistant Collector's order dated 30-11-89, i.e. period from 7-1-88 to 10-9-89, holding that the normal wholesale price applicable for U.P. State should be the wholesale price charged from' dealers of Up which is in excess of declared wholesale price under Section 4(l)(a) of the Act, the party was directed to file a separate price list of wholesale price for sales in Up State. The further case of the petitioners is that w.e.f. 22-6-88, they had made sales to Up dealers from their Ghaziabad depot after stock transfers from the factory at Delhi to its depot at Ghaziabad, and when the ex-factory prices are available, the same should be taken as assessable value as against ex-depot prices also.

(3) In compliance of the aforesaid orders of the Asstt, Collector, the Superintendent issued a demand order for a sum of Rs. 69,59,353.29P., the alleged duty short paid for the period August, 1987 to October, 1989.

(4) Aggrieved from the said orders of the Assistant Collector, me petitioner preferred two appeals before the Collector (Appeals) together with the applications for stay of deposit of demands pending hearing of appeals and for issuance of appropriate directions. The contention of the petitioners is that respondent no. 2 is not even prepared to give a hearing either on the stay applications or on the appeals while respondent no. 3, i.e. Assistant Collector of Central Excise, Ghaziabad, is pressing hard for immediate payment of the demand. The respondents are also refusing to permit the petitioner to clear the motorcycles on the basis of the assessable value claimed by the petitioners, and this has seriously affected their business. In view of the illegal action of the respondents, and the denial of even a hearing of the stay applications and the appeals, filed before the Collector (appeals), the petitioners invoked the jurisdiction of this court for the issuance of an appropriate writ, order or direction for the quashing the orders of the Assistant Collector dated 28-11-89 and 30-11-89 and also for quashing the demand order of the Superintendent dated 13-3-90 for a sum of Rs. 69,59,353.29 and also for the disposal of their applications and appeals pending before the Collector.

(5) At the preliminary hearing, on 2nd May, 1990, the Division Bench issued a show cause notice to the respondent, limited to the question as to why the application for stay u/s 35F of the Act should not be disposed of. Later on, on 23-5-90. in the presence of counsel for the parties, the Bench passed the following order :- "THE Collector of Central Excise (Appeals), respondent No. 2, will decide the petitioners' application for stay u/s 35F of the Central Excise and Salt Act, within 10 days from today. The petitioner will be present before the Collector ( Appeals). Cbr Building, Indraprastha Estate, New Delhi, on 28-5-90. Liberty is given to the petitioner to move the court after the disposal of the application, if necessary. Until then, the interim order granted shall continue. However, Collector of Central Excise (Appeals), respondent no. 2 will be at liberty to decide the appeals."

(6) In compliance of the said directions, the Collector (appeals), Central Excise Allahabad (Camp, Lucknow) heard the two stay applications dated 26-3-90 of the appellants uls 35F of the Act praying for the waiver of the requirement of pre-deposit and stay of the impugned orders passed by the Assistant Collector, Central Excise, Ghaziabad, and dismissed the same on 1-6-90. Immediately, on the receipt of the impugned order dated 1-6-90, the petitioners moved an application u/s. 151 Civil Procedure Code seeking the issuance of directions in these words :- "To continue the interim stay orders granted by this Hon'ble Court, on 2-5-90 and stay the operation of impugned orders and in particular, stay the operation of the orders dated 28-11-89, 30-11-89 and 13-3-90, demand notice dated 13-3-90, order of deposit dated 22-3-90 and to permit future clearances for direct sales to retailers ex-factory available stock transfers to Up depot for sales to Up dealers, on the basis of the current price-list filed by the petitioner under provisional assessment as per Rule 9B of the Central Excise Rules, 1944. herein-after referred to as the (Rules) upon the petitioner furnishing a bond in form B. 13 and upon furnishing security to the satisfaction of the Assistant Collector respondent no. 3 and to direct release of two motorcycles detained as per the aforesaid order dated 22-3-90."

(7) It was further prayed that the Collector (appeals) be directed to hear and dispose of the appeals against the orders dated 28-11-89 and 30-11-89 of the Assistant Collector of Central Excise, Ghaziabad within a specified time.

(8) On this application, the Bench vide order dated 4-6-90, extended the operation of interim orders dated 2-5-90 and 23-5-90 till the disposal of the petition. The respondent was also directed to permit future clearances upon the petitioner furnishing bank guarantee for differential duty, to the satisfaction of the Assistant Collector.

(9) After hearing counsel for the parties, we issue Rule D.B. and with the consent of the counsel proceed to dispose of the main petitio

(10) We straightway refer to the order of the Collector (appeals), Central Excise Allahabad (Camp at Lucknow) by which two stay applications of the petitioners were disallowed. The contention of the appellant before the Collector in brief was that the order of the Assistant Collector are contrary to, the settled law, laid down by the Hon'ble Supreme Court, inasmuch as where an assessed has and established ex-factory price i.e. a price u/s. 4(l)(a) of the Act, then that is the only price which is relevant for the purpose of payment of duty of excise for all clearances from its factory, whether the sales arc made in retail or made ex depot to wholesale dealers in the State of UP. It was further submitted that the demand of Rs. 69.59.353.20 is neither legally tenable nor factually correct, and undue hardship would be caused to them if the impugned orders requiring pre-deposit are not stayed. The petitioners also contended that they have a prima facie case and the balance of convenience also lies in their favor, and as such the impugned orders for deposit of amount demanded be stayed and appeals be directed to be disposed of.

(11) The Collector (appeals) on careful consideration of the submissions held :- "I have carefully examined the stay applications and submissions made at the time of personal hearing, including the case law cited by the appellants. The proviso of Section 35F stipulates the element of hardship caused to the appellant as the only relevant condition for which requirement of pre-deposit and stay could be considered. In the present case, the appellants have not produced any evidence that implementation of the impugned orders would result into undue hardship to them. Financial statements, balance sheets and other relevant documents have not been produced to convince that the impugned orders would affect their legality. In the case of Dunlop India Ltd. , the Hon'ble Supreme Court has held that prima facie by itself is not enough for consideration of grant of stay. The other relevant factors were, balance of convenience, the possibility of irreparable injury and safeguarding the public interest."

The Collector further observed that the appellant is a reputed company operating in the organized section. The waiver of the condition of pre-deposit and grant of stay, sought for would be prejudicial to public interest. In this view of the matter, the appellants request cannot be agreed to. While disallowing stay applications, the Collector directed the Assistant Collector, Central Excise, Ghaziabad, to recheck whether the demand dated 13-3-90 issued in pursuance of the orders dated 28-11-90 and 30-11-90 respectively has been correctly calculated or not.

(12) The conclusion of the Collector (Appeals), according to the learned counsel, is quite contrary to the latest law laid down in case re : Jayashree Insulators Ltd., Rishra v. Collector of Central Excise, Calcutta-11 1987 (28) E.L.T. 279 (Tribunal)(2). While dealing with the question of waiver of pre-deposit of duty u/s 35F of the Act, the Bench after taking Into consideration the entire case law on the subject, in para 84 of the Judgment held : "AFTER very careful consideration it appears to me that a practicable manner of applying the guidelines given by the Supreme Court and the High Courts would be to consider that where financial hardship has been established, that should suffice for (whole or partial) waiver of pre-deposit, subject to whatever conditions the appellate authority may deem fit to impose. Where financial hardship is not established or not pleaded, it would still be open to the applicant to justify waiver on other adequate grounds. These grounds would be the existence of a prima facie case in his favor, plus balance of convenience. This would normally happen where the applicant lies shown that even on the face of it he has a case which is not merely a prima facie case as ordinarily understood, but something much stronger. One example, which was put to Shri Ajwani (vide para 54 supra), would be where there has been an evident error in calculation of the penalty amount. Another would be as in the case which was before the Allahabad High Court in the case of Hari Fertilizers, (para 42 supra), where the demand is obviously barred by limitation. (Where questions arise as to whether there has been suppression, collusion, etc. and as to whether the normal time limit or the extended time limit would apply, the time-bar may not be accepted as "obvious". Other cases would be where there is a decision of the Courts, or of the Tribunal itself, clearly in favor of the applicant. In all these cases it could be said that the balance of convenience is clearly in granting waiver of pre-deposit. Where on the very face of it, it is clear that an amount is not due from the applicant, the balance of convenience would not appear to lie in requiring him to deposit that amount, only so that it may be refunded to him a week or a month later. Therefore, where the applicant's case is so strong that it is apparent without laboured exposition, it may well be a case where the balance of convenience, over and above a mere prima facie case, calls for the waiver of pre-deposit, notwithstanding that financial hardship is not established or has not been pleaded."

(13) In support of this proposition that the petitioners have a prima facie good case in their favor, learned counsel for the petitioner drew our attention to the order of 3-Member Bench of the Central Excise and Gold (Control) Appellate Tribunal dated 1-9-88 passed in one of the appeals preferred by the Collector of Central Excise against the petitioners. In that order, it was held that so long as the genuine normal price u/s 4(l)(a) is as- certainable, the law does not permit resort to section 4(1) (b) and the Valuation Rules, 1975 and all the goods whether sold to wholesale dealers, related persons, retail consumers or stock transferred to depots have to be assessed at the normal price only. The Tribunal further observed that since in approving the natural price in Para-I for sales to wholesale dealers, the lower authorities did not question the genuineness of the net price charged from the dealers and raised no point regarding any additional consideration, the controversy started in respect of the retail sales under para (v) price-list is irrelevant and misplaced. All removals have to be assessed as per the normal price approved u/s 4(l)(a) only. With this observation, the appeals of the department against the order of the Assistant Collector were dismissed. The above said order dated 1-9-1988, has not been challenged by the respondent Department and has thus become final and binding between the parties

(14) This very order dated 1-9-1988 has not been taken into consideration though specifically pointed out by the learned counsel for the petitioner, by the Collector (appeals) while disposing of the petitioner's application, to waive the requirement of pre-deposit and stay of impugned orders dated 28th and 30th November, 1989. It was a very relevant consideration proving the very existence of a prima facie case in favor of the petitioner. In our opinion, the balance of convenience also lies in their favor inasmuch as the Department is not suffering any financial loss as the petitioners are getting their motorcycles cleared on furnishing a bank guarantee for the differential duty, which is yet to be determined. The Collector (appeals) Central Excise, in our opinion, went wrong in disallowing the applications by taking into account only the financial element and holding it to be the only relevant consideration while disposing of applications under Section 35-F of the Act for exemption of deposit.

(15) In the result, we allow the petition and quash the impugned orders of the Collector (appeals), Central Excise, Allahabad (Camp at Lucknow), dated 1-6-90 and confirm the interim orders of stay granted by this court on 2-5-90, 23-5-90 and 4-6-90. The respondent no. 2 is hereby directed to dispose of the petitioner's appeals against the order of the Assistant Collector dated 28th and 30th November, 1989, as early as possible preferably within a period of 2 months from today without asking of any deposit as a condition precedent for hearing the appeals. No costs.