Shivani Synthetics Ltd. And Ors. vs Union Of India (Uoi) And Ors.
2003 Latest Caselaw 335 Del

JUDGMENT

D.K. Jain, J.

1. An order dated 21 January 2003 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (for short the Tribunal) under section 35F of the Central Excise Act, 1944 (for short the Act), directing petitioner No.1 herein, viz., Shivani Synthetics Ltd. to deposit a sum of Rs.20 lacs within a period of 8 weeks from the date of the order as a pre-condition for entertainment of the four appeals filed by the present petitioners, is under challenge in this writ petition.

2. Briefly stated the background facts, giving rise to the petition are: The first petitioner is engaged in the manufacture of Polyester Yarn. The officers of the Directorate General of Anti Evasion visited the office of the said petitioner and one M/s.Haryana Petro Chemicals Ltd., petitioner No.2 herein, and seized bill discounting documents . The said bills of discounting were allegedly in the name of one M/s.Globe Synthetics Ltd and petitioner No.1. It was alleged that petitioner No.1 had clandestinely removed Polyester Yarn from its premises, valued at Rs.2,06,41,358/- without payment of duty under these bill discounting documents during the period from September 1994 to April 1995. After obtaining reply to the show cause notices, the Commissioner of Central Excise, New Delhi confirmed the duty demand of Rs.1,35,44,614/- against petitioner No.1. In addition thereto a penalty of Rs.1 crore was also imposed on them. A penalty of Rs.50 lacs was imposed on petitioner No.2 and penalty of Rs.10 lacs each was imposed on petitioners No.3 and 4, Directors of petitioner No.1. According to the petitioners, on the basis of the same very bills of discounting, a separate show cause notice was also issued to the said M/s. Globe Synthetics Ltd., which resulted in confirmation of demand of over Rs.3 crores, by virtue of an order, dated 5 February 2001, by the Commissioner of Central Excise, New Delhi.

3. All the four petitioners challenged the orders passed by the Commissioner of Central Excise before the Tribunal along with an application for stay of the afore-noted demands. As noted above, by the impugned order the Tribunal has directed petitioner No.1 to deposit Rs.20 lacs, as a condition precedent for entertaining all the four appeals, failing which the appeals are liable to be dismissed. Hence the present writ petition.

4. We have heard Mr.Rajiv Dutta, learned senior counsel for the petitioner and Mr.Maninder Singh, learned Central Govt. Standing counsel, who has put in appearance on advance notice.

5. It is strenuously urged by Mr.Rajiv Dutta that on the basis of the same bill discounting documents, the afore-noted demand of over 3 crores raised against M/s.Globe Synthetics Ltd. was deleted by the Tribunal, inter alia, on the ground that there was no corroborative or supportive evidence to show that said concern had actually manufactured and removed the goods without payment of duty from their factory to petitioner No.2 herein. It is submitted that the Tribunal having already examined the merits of the demand created by the department on same set of documents in the case of M/s.Globe Synthetics Ltd, and having come to the conclusion that there was no basis for it, it was not justified in ignoring its own final adjudication and directing the petitioners to deposit the afore-noted amount. It is contended that in view of the said order, the additional demand created against the petitioners cannot be sustained. Learned counsel also points out that in the case of M/s.Globe Synthetics Ltd., even in the first instance, in their application under section 35F of the Act, the Tribunal had directed the said company to deposit only a sum of Rs.5 lacs when the demand in dispute was over Rs.3 crores, whereas in the present case, when the demand is in the range of Rs.1 crore, the Tribunal has directed payment of Rs.20 lacs. It is asserted that this point was specifically urged before the Tribunal but the Tribunal has failed to take into consideration the submission of the petitioners. It is alleged that the Tribunal has failed to apply its mind on the plea of financial hardship urged by the petitioners before it. It is pointed out that the unit of petitioner No.1 is lying closed since October 1997; petitioner No.2 has also been declared as a sick unit, as observed by the Tribunal itself in its earlier stay order dated 19 November 2001 and a winding up order has also been passed by the Punjab and Haryana High Court on the recommendation of the BIFR; and petitioners No.3 and 4, are also not in sound financial condition. It is, thus, pleaded that having regard to these facts, petitioners appeals should have been heard on merits without imposing any condition of pre-deposit.

6. On the other hand, Mr.Maninder Singh, learned Central Govt.Standing counsel, while supporting the order passed by the Tribunal as just and fair has submitted that the order in the case of M/s.Globe Synthetics Ltd. was based on different material and, therefore, decision of the Tribunal in that case has no relevance insofar as order of pre-deposit in the case of the petitioners is concerned.

7. In the present petition, we are not concerned with the merits of the controversy as to whether the demands, as confirmed against the petitioners, could be sustained on the basis of the bill discounting documents recovered from the premises of the petitioners. This issue will be gone into by the Tribunal when the appeals are taken up for hearing on merits. The only question with which we are concerned at the moment is whether the Tribunal has exercised the discretion vested in it under section 35F of the Act, in directing the petitioners to make the afore-noted deposit, on sound legal principles by taking into consideration all the relevant facts.

8. There is no denying of the fact that while dealing with the application for stay it is neither desirable nor proper for the Tribunal or any other authority to embark upon a detailed inquiry to find out whether the stand of the appellant before it is correct or not because expression of any opinion on merits at that juncture, without full fledged hearing and consideration of entire material, is likely to cause prejudice to either side. But at the same time, the authority concerned is required to consider whether with reference to the material placed before it, a prima facie case for grant of stay is made out or not and the balance of convenience lies in whose favor. Similarly, it has to consider whether with reference to the pleadings and the material placed before it to substantiate the case, any undue hardship is likely to be caused to an assessed in case the stay is not granted or when a conditional stay is granted because if the conditions imposed are so onerous that the assessed is incapable of complying with the same, the right of appeal would be rendered illusory. There is no gain saying that while making such an order, the interest of the revenue has also to be kept in mind. If anyone of these vital aspects are ignored by the Tribunal, interference by this Court would be warranted even under a limited scope of judicial review.

9. On a consideration of the instant case, in the light of the material placed before us, briefly referred to above, we are of the view that the impugned order lacks proper application of mind by the Tribunal on the facts of the case inasmuch as the order does not make even a passing reference to the plea of the petitioners with regard to the view expressed by the Tribunal in Globe Synthetics Ltd.'s case. We may, however, hasten to add that we are not for a moment suggesting that the said decision of the Tribunal was or would be binding on the Tribunal while examining the case of the petitioners, and this aspect will be considered at the time of final adjudication by the Tribunal but what we propose to emphasize is that the order of the Tribunal does not reflect even an awareness of the Tribunal of such a decision. In our view, therefore, the non-consideration of the said order has resulted in vitiating the impugned order of the Tribunal and it cannot be sustained.

10. Having come to the conclusion that the impugned order is vitiated, two options are available to us at this stage, namely, (i) the matter of stay be remitted back to the Tribunal for reconsideration and (ii) to direct the Tribunal to hear the appeals of the petitioners on merits on such terms and conditions as we deem fit. We feel that to cut short the life of litigation, we should prefer the latter course.

11. Accordingly, having regard to the facts and circumstances of the case and keeping in view the order of pre-deposit passed by the Tribunal in the case of M/s. Globe Synthetics Ltd., we direct that on petitioners' depositing a sum of Rs.5 lacs on or before 30 April 2003, their appeals shall be heard by the Tribunal on merits.

12. The writ petition and the application seeking interim relief stand disposed of in the above terms. There will be no order as to costs.

13. To report compliance, the parties or their counsel shall appear before the Tribunal on 5 May 2003.

Copies of the order be issued dusty to counsel for the parties.