Dewan Tyres Ltd. vs Commissioner Of C. Ex., Delhi
2001 Latest Caselaw 1714 Del

JUDGMENT

D.K. Jain, J.

1. Since in response to the advance notice, Mr. U. Hazarika, Central Government Standing Counsel, has put in appearance and a very short point is involved, we take up this petition for final disposal at this stage itself.

2. Challenge in this petition is to the order, dated 4th September, 2001, passed by the Customs, Excise and Gold (Control) Appellate Tribunal (for short 'the Tribunal'), in Application No. E/S/196/2001-C (Appeal No. E/231/2001-C) under Section 35F of the Central Excise Act, 1944 (for short 'the Act')- The Tribunal while disposing of petition's application seeking exemption from pre-deposit of the entire amount of Excise duty, has directed the petitioner to make a deposit of Rs. 1 Crore within six weeks of receipt of the order.

3. Briefly stated, the relevant facts are :

The petitioner is engaged in the manufacture of Tyres of various sizes, for use in tractor trolleys (for short "IT"), in the Light Commercial Vehicles (for short "LCV") and Jeeps etc. Under Notification No. 41/89-C.E., dated 1st March, 1989, the rate of Excise duty payable per tyre when removed for TT is much less than the duty payable per tyre when removed as LCV. The main allegation against the petitioner is that on inspection of its factory premises by the Anti-Evasion Wing of the Excise department, it was found that Tyres of pattern 7.50 x 16 when removed for export were shown as LCV Tyres but when cleared; for home consumption, the Tyres of the same pattern were shown as TT Tyres and cleared on payment of duty at lower rates although the raw material and the specifications for the Tyres of this size continued to be the same whether the said Tyres were exported or removed for home consumption. There was similar allegation in respect of the Tyres of the size of 6.00 x 16 inasmuch as they were manufacturing Commando and M&S Jeep Tyres but were removing the same as Tractor Front Tyres at lower rates of duty. Besides, some discrepancies in the entries made by the petitioner in RG-I register were also noticed and it was alleged that the petitioner had suppressed the actual production figures shown in the said register. The show cause notice issued to the petitioner indicated that during the period from 1st May, 1993 to May, 1996, the short paid duty on LCV Tyres of the size 7.50 x 16 was Rs. 1,09,83,770/-; on Commando and M&S Jeep Tyres of the size 6.00 x 16 short paid duty amounted to Rs. 2,45,13,400/- and the

amount of duty allegedly evaded by manipulation in the RG-I register for the period from June, 1993 to September, 1996 was Rs. 4,66,21,024/-. Thus, the petitioner was called upon to show cause as to why excise duty amounting to Rs. 8,21,18,0247- be not recovered from them. However, on consideration of the reply filed by the petitioner, the Commissioner of Central Excise (Adjudication), Delhi, vide her order dated 31st October, 2000, raised a demand of Rs. 7,87,84,453/- on the petitioner. This order of the Commissioner has been challenged by the petitioner before the Tribunal.

4. An application for dispensing with the pre-deposit was filed. As noticed above, by the impugned order the Tribunal has directed deposit of Rs. 1 Crore as condition precedent for entertaining the appeal.

5. We have heard learned Counsel for the parties. Mr. Rajiv Nayyar, learned Senior Counsel for the petitioner has mainly submitted that the petitioner is a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 (in short 'SICA') and is currently incurring heavy losses. Drawing our attention to the annual accounts for the period 1999-2000, learned Counsel has attempted to explain.that Tribunal has not analysed the financial position of the company in its correct perspective and it has been swayed only by a high turn over the company, which cannot be the solitary factor for determining the health of a company. Placing strong reliance on a decision of the Supreme Court in Sangfroid Remedies Ltd. v. Union of India & Ors. , learned Counsel has contended that Tribunal's insistence on payment of Rs. 1 Crore is neither legal nor proper. It is, thus, urged that the condition imposed by the Tribunal would cause undue financial hardship to the petitioner and in any case with the present state of financial condition it will not be possible for the petitioner to comply with it. Learned Counsel for the respondent - UOI, on the other hand, has submitted that the company is a running concern; its reference stated to have been filed under SICA has not yet been registered and by resorting to dubious methods, huge amount of excise duty has been withheld. It is asserted that the condition imposed by the Tribunal is very reasonable.

6. Section 35F of the Act provides a conditional right of appeal in respect of an appeal against the duty demanded or penalty levied. It makes it obligatory on the appellant to deposit the duty or penalty, pending the appeal. However, proviso to the Section gives power to the Appellate Authority to dispense with such deposit unconditionally or subject to such conditions, as would safeguard interest of Revenue, in cases of "undue hardship". Language used in the Section is not merely "hardship", it is "undue hardship". "Hardship" connotes something harsher and more severe than trifling inconvenience or temporary loss of profit. For a hardship to become "undue", it must be shown that particular burden, which is required to be discharged, is out of proportion to the nature of the benefit the applicant would derive by complying with it. Therefore, while considering an application under the said proviso, the Tribunal has to bear in mind whether the deposit would cause undue hardship to the applicant.

7. In the impugned order, while forming the opinion that the petitioner has not made out a case for complete waiver of the duty, the Tribunal has noticed three factors pointed out by Counsel for the Revenue, namely, (1)

company's turnover is over Rs. 22.5 crores (ii) expenses to the tune of more than Rs. 458 lakhs have been written off and (iii) the claim of depreciation amounts to more than Rs. 10 Crores. We are conscious of the fact that where the Appellate Authority exercising discretionary power has based its decision on relevant material, it is not desirable for this Court to interfere in the exercise of extra-ordinary jurisdiction under Article 226 of the Constitution. We are in agreement with the Tribunal that it is not a fit case for a complete waiver of pre-deposit The ratio of Sangfroid's case (supra) is not applicable to the facts of the instant case. It has not been laid down as a principle of law that whenever a company is a sick company, pre-deposit has to be dispensed with. It is evident that in that case pre-despite was dispensed with by the Apex Court in the peculiar facts of the case. However, having examined the annual accounts of the petitioner company, for the period 1999-2000, in a little greater detail, we feel, that it would meet ends of justice if the petitioner is directed to deposit a sum of Rs. 70 lakhs. If the said amount is deposited on or before 30th November, 2001, petitioner's appeal shall be heard on merits. The impugned order is modified to that extent.

8. Petition stands disposed of. Copies of this order be issued dusty to Counsel for the parties.