Ess Ess Metals Enterprises vs Cegat
2003 Latest Caselaw 796 Del

ORDER

D.K. Jain, J.

1. An order, dated 15th May, 2003 passed by the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi (for short "the Tribunal") in petitioner's stay application No. 116/2003-NB-C in E/Appeal No. 20/2003-NB-C is under challenge in this writ petition.

By the impugned order the Tribunal has directed the petitioner to deposit a sum of Rs. 50 lakhs within eight weeks from the date of the said order as a condition precedent for entertaining their appeal.

2. The material facts giving rise to the present writ petition are as follows :-

On the basis of some intelligence report that the petitioner was engaged in the manufacture of excisable goods, namely, Nickel, Tin and Lead alloys in their factory, without obtaining Central Excise license L-4 and was removing/clearing the same without payment of Central Excise Duty and without observing certain prescribed formalities, a notice was issued to the proprietor of the petitioner concern to produce the relevant records. On scrutiny of the records, so produced, which included the sales tax declarations, the adjudicating authority came to the conclusion that though there was no direct evidence regarding the manufacture of the said alloys by the petitioner but the circumstantial evidence did indicate that they had been manufacturing the said alloys. Accordingly, he determined a total central excise duty liability of the petitioner at Rs. 2,81,35,533.67 paise, which comprised of Rs. 2,64,85,127.95 paise as basic excise duty and Rs. 16,50,405.72 paise as special excise duty. In addition thereto a penalty of Rs. 10 lakhs was also imposed under erstwhile Rule 9(2) and Rule 173Q of the Central Excise Rules, 1944 read with Section 8A of Central Excise Act, 1944 (for short "the Act").

3. Being aggrieved, the petitioner preferred appeal to the Tribunal with an application for stay of the additional demand created against them. As noted above, by the impugned order the recovery of the entire demand has been stayed by the Tribunal, subject to petitioner's depositing a sum of Rs. 50 lakhs. Hence the present petition.

4. We have heard Mr. O.S. Bajpai on behalf of the petitioner and Mr. P.R. Behl on behalf of the respondents.

5. It is vehemently submitted by Mr. Bajpai that there is not even an iota of evidence with the Department to come to the conclusion that the petitioner was engaged in the manufacture of Nickel/Tin and Lead alloys in their factory and the entire exercise by the adjudicating authority is based on conjunctures and surmises. Learned Counsel would submit that having regard to the facts of the case, requirement of the pre-deposit is an unreasonable restriction on the right of the petitioner to file appeal against an illegal demand. Referring us to the additional affidavit, filed pursuant to our direction, with regard to the financial status of the petitioner and his family members, Mr. Bajpai submits that in view of the precarious financial condition of the family of the petitioner, they would not be in a position to comply with the stringent condition of deposit of Rs. 50 lakhs imposed by the Tribunal, with the result that the petitioner's right of appeal would be rendered illusory. Mr. Behl, learned Counsel for the respondents, on the other hand, submits that bearing in mind the fact that the total demand against the petitioner is over Rs. 2 crores, the condition imposed by the Tribunal cannot be said to be unreasonable and, therefore, the impugned order does not warrant any interference.

6. Section 35F of the Act provides that any person desirous of appealing against any order, shall deposit with the adjudicating authority the duty demanded or the penalty levied. Thus, the deposit of the amount in dispute is a condition precedent for entertainment of an appeal. However, under proviso to the said Section a discretion is conferred on the appellate authority to dispense with such deposit and entertain the appeal, if it is of the opinion that the deposit of the duty demanded or penalty levied would cause undue hardship to appellant. Of course, the interest of the Revenue is of prime importance. The provision is mandatory and unless the appellate authority exercises its discretion under the said proviso, an appeal without deposit of the entire amount in dispute is incompetent.

7. It is well settled that while considering an application for dispensing with the deposit, the appellate authority is not required to embark upon detailed enquiry to find out whether the stand of the appellant is on a strong footing or not. What is required to be considered at that juncture is as to whether the appellant has made out a prima facie case in his favor; the balance of convenience qua the deposit or otherwise lies in whose favor and whether the deposit of the duty demanded is likely to cause undue hardship to the appellant? Therefore, at this stage, we are not concerned with the merits of the controversy whether the petitioner was engaged in the manufacture of the aforementioned alloys, a highly disputed question of fact. The only question with which we are concerned is whether the Tribunal has exercised discretion in directing the petitioner to deposit a sum of Rs. 50 lakhs on sound legal principles, by taking into consideration all the relevant facts.

8. Having perused the order passed by the adjudicating authority, we are of the view that while making the aforenoted direction the Tribunal has ignored a vital aspect of the matter, namely, that the entire case of the Revenue is based on circumstantial evidence. We say no more on the merits of the petitioner's case at this juncture, lest it may cause some prejudice to either side. To that extent the Tribunal has rightly refrained from commenting on the same. Having regard to the facts of the case, where admittedly the allegation against the petitioner is based only on circumstantial evidence and keeping in view their financial status, we are of the view that the ends of justice would be met if the petitioner is directed to deposit a sum of Rs. 20 lakhs instead of Rs. 50 lakhs as directed by the Tribunal in the impugned order, as a condition precedent for entertainment of their appeal. If the petitioner deposits the said amount on or before 30th September, 2003, their appeal shall be heard by the Tribunal on merits.

9. The petition stands disposed of in the above terms.

10. Copies of the order be given dusty to Counsel for the parties.