Delhi High Court
Golden Tobacco Limited vs Customs Excise Service Tax ... on 23 March, 2018
$~19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Judgment: 23rd March, 2018
+ CEAC 12/2018 & CM Nos.11635-36/2018
GOLDEN TOBACCO LIMITED ..... Petitioner
Through: Mr. Balbir Singh, Senior Advocate
with Mr. Siddharth Garg, Advocate
versus
CUSTOMS EXCISE SERVICE TAX APPELLATE TRIBUNAL &
ANR. ..... Respondents
Through: Mr. Sanjeev Narula, CGSC with Mr.
Abhishek Ghai, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
CHANDER SHEKHAR, J.
This judgment and order shall dispose of the present appeal
under Section 35G of the Central Excise Act, 1944 against the order
passed by the Customs, Excise & Service Tax Appellate Tribunal
(hereinafter referred to as CESTAT/Tribunal) in Misc. Order
No.50078-79/2018 dated 21.2.2018.
2. It is stated in the appeal that the Tribunal has rejected the
application for restoration of appeal on the ground that there was a
delay of more than 22 years, which was extraordinary and the
Tribunal had no power to condone the same. The Tribunal failed to
appreciate that the Appellant had already deposited an amount of
Rs.21.26 crores, which exceeds the amount of Rs.18.83 crores; that
the Tribunal had directed the Appellant to pre-deposit vide its order
dated 19.08.1993. In doing so, the Tribunal failed to consider that in
Kisaan Gramdyog Sansthan and Ors. vs. Commissioner of Central
Excise, Kanpur, (2015) 10 SCC 629, where pre-deposit was made
belatedly, the Supreme Court passed an order directing restoration of
appeal and hearing of appeal on merits in accordance with law, and
without reference to the period of limitation. This principle of law
has also been laid down by the Madras High Court in Classic
Builders (Madras) (P.) Ltd. vs. Customs, Excise & Service Tax
Appellate Tribunal, (2016) 54 GST 435 (Madras) and Madhya
Pradesh High Court in Avtar & Company vs. Union of India, C.E.A.
No. 11/2015 decided on 30.11.2015. The Tribunal failed to
appreciate that it has been held even by Gujarat High Court in Scan
Computer Consultancy vs. Union of India, 2006 (204) EL T 43
(Guj.) that even if no pre-deposit was made, the appeal may not be
heard, but having dismissed the appeal for non-compliance of pre-
deposit does not prohibit the Appellate Authority to refuse to restore
the appeal upon compliance being shown. The Tribunal also failed to
consider that it has been also held in several cases by Supreme Court,
including in Collector, Land Acquisition, Anantnag vs. Mst Katiji &
Ors., (1987) 2 SCC 107, that Courts must adopt liberal and justice
oriented approach in condoning the delay. The Tribunal failed to
appreciate that it was only because the Appellant was facing a
financial crunch that the pre-deposit could not be made within the
prescribed time. The Tribunal failed to consider that the Appellant
was declared a sick unit by Board for Industrial and Financial
Reconstruction („BIFR‟), who had directed to make the pre-deposit
in installments. The BIFR approved the scheme of rehabilitation vide
its Order dated 16.12.2002, which came into existence in the year
2003 and all the liabilities were payable as per the scheme. It was
submitted that accordingly the Appellant has made the pre-deposit in
installments till March, 2011. The present appeal by the Appellant
raises the following questions of law for consideration:
"(i) Whether, the impugned order is passed in violation of the
statutory right of the Appellant to contest the appeal as
provided under Central Excise Act 1944?
(ii) Whether, the dismissal of the restoration application will
cause undue hardship to the Appellant inspite of compliance
of the condition of pre-deposit as per the direction of Ld.
Tribunal?
(iii) Whether, delay in meeting the pre-deposit requirement,
which is procedural will extinguish the primary substantive
right of appeal of the Appellant?
(iv) Whether there is any delay for filing application for
restoration?
(v) Whether the Appellant has a good prima facie case?"
3. That the Appellant (GTC) was engaged in manufacture of
cigarettes in Baroda. Earlier the Appellant was getting cigarettes
manufactured by its own other factory at Mumbai and from other
franchisee units namely M/s Sri Chandra Tobacco Ltd., Hyderabad
(SCT), M/s Suvarna Tobacco Ltd., Hyderabad (SFTPL) and
Universal Tobacco Ltd, Hyderabad (UTC). The Appellant submits
that they were working with the franchisee's on principal to principal
basis. The Appellant was not at all a manufacturer of the cigarettes at
Hyderabad. However, the Appellant being the brand owner' of
cigarettes manufactured by its other franchisee's in Hyderabad, who
were made a co-noticee in the show cause notices issued by
Commissioner Central Excise, Hyderabad to the franchisee's on
25.03.1988. By way of these notices, all the noticees, including the
Appellant, were called upon to show why duty of central excise
amounting to Rs.12,34,32,231/- from SCT/GTC, Rs. 9,06,49,075/-
from SFTPL/GTC and Rs.1,82,74,850/- from· UTC/GTC should not
be jointly and severally demanded under the provisions of Section 11
A of the Central Excise Act 1944. That pursuant to the Show Cause
Notices, adjudication proceedings took place before the
Commissioner Central Excise (Adj.), Delhi and the then Collector,
Central Excise, Delhi. Order dated 10.07.1992 in Original no.
25/92 confirmed the excise duty demands amounting to Rs.
12,34,32,231/- on SCT/GTC, Rs. 9,06,49,075/- on SFTPL/GTC and
Rs.1,82,74,850/- on UTC/GTC, and imposed a penalty of Rs
9,00,000/- on the Appellant.
4. An Appeal bearing no. 5237 of 1992 was filed by the
Appellant before the Tribunal against the aforesaid Order dated
10.07.1992. The Appellant also filed a stay Application bearing No.
E/STAY /2961/92-D along with the Appeal, seeking stay of the order
dated 10.07.1992 and waiver of the pre-deposit of the excise duty
and penalty imposed therein. The Tribunal vide its order dated
19.08.1993 disposed of the Stay Application with the direction that
the Appellants before it, should deposit Rs 12 crores in the case of
SCT and Rs. 5 crores in the case of SFTPL and Rs.1 ,82, 7 4,850/- in
the case of UTC, totaling to Rs. 18.83 crores, within a period of three
months from the date of receipt of the said order, for consideration of
the Appeal on merits. When the Appellant as well as SCT, SFTPL
and UTC, due to severe financial difficulties, could not comply with
the Order dated 19.08.1993, the time for pre-deposit was further
extended by three months vide Order of Tribunal dated 27.01.1994.
When UTC due to severe financial losses could not comply with the
order of pre-deposit of Rs.1,82,74,850/-, since its factory closed long
back and there was no production at all since 1987-88, it approached
Andhra Pradesh High Court by way of a Statutory Appeal, praying
for a complete waiver of the requirement to pre-deposit the duty,
contending, inter alia, that it was not possible for it to pre-deposit
100% of the duty amount within three months. Andhra Pradesh High
Court after considering UTC's hardship, directed the Ld. Tribunal
vide order dated 04.04.1994, to not dismiss the appeal of UTC for
non-compliance of the Section 35F of the Act, subject to UTC
depositing half of the amount within four weeks from that day. When
UTC's Appeal came up for hearing before the Tribunal, and UTC
was unable to pay the amount, the Tribunal again dismissed the
appeal on 18.07.1994 for non-compliance of the pre-deposit
condition. Thereafter, with regard to SCT, SFTPL and the Appellant,
various proceedings took place before this High Court. Ultimately,
by orders dated 03.05.1994 and 26.08.1994, this High Court
confirmed the order of the Tribunal. Thereafter, when the Appellant
approached the Supreme Court against the order of this High Court,
it granted an extension to Appellant to pre-deposit up to December,
1994. The Appellant made similar application for extension of time
before the Tribunal, as per the direction of the Supreme Court dated
13.01.1995, granting liberty to approach the Tribunal. After hearing
submissions on 19.01.1995, the Tribunal directed the Appellant to
jointly deposit an amount of Rs. 1 Crore upfront within two weeks
and the balance of Rs. 16 crores within four weeks thereafter. With
great difficulty, the Appellant arranged and advanced Rs. 1 crore
each to SCT and SFTPL, that was deposited before the Tribunal on
02.02.1995. Thereafter, the Appellant was unable to deposit the
balance amount of Rs. 16 crores and moved a similar application for
extension of time before the Tribunal, that directed deposit in two
installments of Rs. 8 crores each, one by 29.11.1995 and another by
31.01.1996. Thereafter, the Appellant moved one more application
on 08.12.1995 for extension of time, since the factories of SCT and
SFTPL were closed for several months, due to threats of the Central
Excise Officers to stop clearances and close the factories for non-
payment of the duty amount and the Appellant also did not have
financial resources to pay the said amount of Rs. 16 crores. At last,
the Appellant moved one more application, explaining all problems
of financial hardship for not depositing the· amount and requested
for extension of time, since the Appellant was at the verge of closure.
The Tribunal vide Order dated 08.12.1995 directed deposit by two
pay orders and two cheques totaling to Rs. 1 crore, failure to deposit
which would result in dismissal of appeals. However, due to heavy
financial burden on the Appellant itself and also burden of the joint
liability of the job workers of SCT and SFTPL, it could not deposit
the amount as directed by the Tribunal and its appeals were
dismissed on 07.02.1996. Upon the undertaking of the Appellant
before the Andhra Pradesh High Court that it would give Bank
Guarantee of 50°/o of the duty amount imposed on UTC, the High
Court allowed the Appellant to deposit 50% of amount, i.e. Rs
90,00,000/- in four weeks. However, due to financial crunch, the said
Rs. 90,00,000/- was paid by Appellant on behalf of UTC in six
installments of Rs. 15 lakhs each by 26.09.1997. Since, the net worth
of the Appellant completely eroded during the Financial Year 1995-
96, it made a reference to BIFR under Section 15(1) of Sick
Industrial Companies Act, 1985. The Appellant was declared sick in
the year 1997 vide Order no. 17/97 passed by BIFR on 03.04.1997.
Thereafter, a rehabilitation Sanctioned Scheme-02 was approved by
the BIFR vide Order dated 16.12.2002, with cut-off date as
31.12.1998. Paragraph Q of the scheme relates to the dues of the
Central Government, i.e. Income tax and Excise. Paragraph Q(f)
specifically provided that "To agree for refund/withdrawal of
amounts blocked in pre-deposit amounts due to conditions imposed
for hearing the appeals and not to impose such conditions of pre-
deposit in future for hearing of appeals against disputed liabilities
during the rehabilitation period". The Commissioner Excise
preferred an appeal before the AAIFR in the year 2005 challenging
the order dated 16.12.2002, however, the same was dismissed vide
order dated 18.07.2005 'on the ground of limitation. Thus, the Order
of BIFR dated 16.12.2002 attained finality and is binding on the
Respondent. In view of the specific provision in SS-02, the Tribunal
ought to have admitted the appeal of the Appellant without any
imposition of pre-deposit. The net worth of Appellant turned positive
during the financial year ended 31.03.2007 and the BIFR vide its
order dated 29.06.2007 discharged the Appellant from the purview of
SICA/BIFR with a direction, inter alia, that the unimplemented
provisions of SS-02 would be implemented by all concerned
agencies and their implementation would be monitored by the
Appellant under the purview of the BIFR. After the said discharge of
the Appellant from the purview of BIFR, excise duty on plain
cigarettes was increased 5 times in the Union Budget 2008. As a
result of the same, the domestic volume of the Company came down
drastically and the accumulated losses continuously increased.
Hence, the last installment of Rs. 2.06 crores could not be paid. Even
by then, the Appellant had already deposited Rs. 21.26 crores, which
was more than the entire pre-deposit amount of Rs 18.83 crores as
directed by the Tribunal. As per the order of BIFR, the Appellant,
therefore, paid Rs. 21.26 crores in installments till March 2011,
except the last installment. In the meanwhile, in a similar matter with
regard to the appeals of the other manufacturing companies, namely
Kanpur Cigarettes Pvt. Ltd. (KCL) and J&K Cigarettes Ltd. (JKC)
(independent companies, manufacturing for Appellant), the Tribunal
set aside the demand and allowed the appeals of these Companies
and the Appellant on 21.03.2001. Against this order of the Tribunal,
the excise department went in appeal till the Supreme Court, which
vide order dated 31.07.2008, remanded the matter for hearing afresh
with regard to the duty liability and flow back. The Tribunal after
hearing the appeals of KCL, JKC and GTC bearing Appeal nos.
E/5239,E/5238, E/5235-36/92-D, passed Order no. 751-754/2010
dated 27.10.2010, holding that the Appellant was not a manufacturer
and no excise duty liability of the manufacturers KCL and JKC can
be demanded from the Appellant.
5. During the pendency of the scheme, the Income-tax
department issued notice of attachment of properties of the
Appellant. The Appellant filed an application before the BIFR
stating violation of the scheme by the Income-tax department and
withdrawal of the attachment notice. The BIFR was pleased to issue
direction to the Income-tax department to withdraw the notice which
the department challenged before AAIFR. The AAIFR also rejected
the appeal and upheld the order of BIFR. In the meanwhile, the
Appellant filed an application for extension of the sanctioned scheme
on the ground of violation of the scheme by the Income-tax
department by issuing the attachment notices and that it could not
make the last installment before the Tribunal. The BIFR rejected the
claim of the Appellant. Thereafter, the Appellant preferred an appeal
before AAIFR, however, the same was also rejected. Thereafter, the
Appellant challenged the Order of AAIFR before this Court by way
of a Writ Petition, however, the same was withdrawn, and the
statement of counsel was recorded that he would file a Modified
Draft Rehabilitation Scheme (MDRS) as per majority opinion of
AAIFR, before BIFR. Accordingly, the Appellant filed MDRS
before BIFR. In the meanwhile, AAIFR dismissed the application of
the Income-tax department for attaching the properties of Appellant
during the rehabilitation period. The Income-tax department
challenged the order of AAIFR before this Court, however, the
petition was dismissed. Thereafter, the Department preferred S.L.P.
No. 26747 of 2012 (C.A. No. 5038 of 2016), which on 31.08.2012
directed the Department to not alienate the properties of the
Appellant. The Supreme Court disposing of C.A. No.5038 of 2016
(S.L.P. (C) No. 26747/2012) vide Order dated 12.05.2016 held that
the MDRS is not maintainable, and that the Income-tax Department
shall be entitled to take steps for attachment of properties of the
Appellant as per provisions of Income-tax Act and shall be entitled
to sell the same. Accordingly, the Income-tax department attached
the properties of the Appellant. In the meanwhile all the consortium
Banks also took possession of other properties of the Appellant
which were mortgaged to them. Thereafter, Income-tax appeal nos.
5996/Mum/1993, 1055/Bom/94 and 1056/94 preferred by the
Appellant, which were pending before the Income Tax Appellate
Tribunal, were allowed vide Order dated 07.03.2017, holding that
there was no flow back to the Appellant. As soon as the Order no.
751-754/2010 dated 27.10.2010 was passed by the Tribunal, the
management of the Appellant directed the concerned person to file
the application for restoration of appeal, in the present case, who
informed that after consulting the counsel, restoration application
had been filed. However, thereafter the concerned person retired and
left the Appellant. When the restoration application filed by
Appellant was not listed on board before the Tribunal for hearing for
a long period, the Appellant made an enquiry from the Registry of
the Tribunal and learnt that no such application was on its record and
consequently, the applications were not listed for hearing. The
Appellant searched for the relevant files in its office, wherein the
inter office memo informing the filing of the restoration application
was found, but the restoration application was not found. It
transpired that the concerned person had not taken any confirmed
action in the matter and probably did not ensure that the said
restoration application was filed. It is submitted that in fact, there
was no delay at all as the Appellant was under the shelter of BIFR
till May, 2016, and if at all there was a delay, then that is only of 14
months. This was a bona fide mistake and same may be condoned.
The Appellant also filed with the said restoration application before
the Tribunal, an Affidavit in support of its contentions on
condonation of the said delay.
6. Learned Senior Counsel for the appellant submitted that the
Tribunal has erroneously dismissed the application for restoration on
the ground of extraordinary delay, without appreciating the law and
facts of the present case. It is also submitted that there is no concept
of any extraordinary delay in law, particularly when the facts show
the reasonable cause, duly supported by an affidavit. The appellant
was under the shelter of BIFR in May, 2016. It is also submitted that
the appellant was having a good prima facie case in its favour and
the joint liability demand and penalty was imposed without any
cogent evidence and in violation of the principles of natural justice.
The Court must adopt liberal and justice oriented approach in
condoning the delay. The Tribunal failed to consider that the right to
prefer an appeal is a statutory right touching the substantive right of
the appellant. The Tribunal failed to appreciate that the appellant had
already deposited an amount of Rs.21.26 crore, which exceeds the
amount of Rs.18.83 crore. The impugned order is not only perverse
and erroneous but also has failed to take judicial precedents in its
true spirit.
7. We have gone through the order of the Tribunal. The Tribunal
noticed in the impugned order that there is a delay of more than 22
years, which is extraordinary and the Tribunal has no power to
condone such extraordinary delay. Hence, the application for
condonation of delay in filing the restoration application was
rejected. Consequently, the application for restoration was also
dismissed.
8. There is no doubt, as is evident from the record that the delay
in filing the application for restoration of appeal is about 22 years.
The appellant has filed the restoration application as per convenience
and after two decades. They were granted sufficient time by the
Tribunal in the light of the order of the Supreme Court for extension
of time for making the pre-deposit, but they failed to deposit even
after a lapse of three years from the date of passing the pre-deposit
order dated 19.1.1993.
9. The list of dates and events filed by the appellant itself
demonstrate sheer negligence and lack of bona fide, and is as under:-
A DATE Description Remarks
1. 10.07.1992 Order passed by the
Commissioner confirming
demand of duty of around
Rs.23 crores besides
imposing penalty.
2. 19.1.1993 Stay Order passed Tribunal Directed pre
deposit of Rs.18.83 Crores
3. 7.2.1996 Appeal dismissal Order
passed by the Tribunal.
4. 3.4.1997 BIFR Order declaring
appellant sick Company.
5. 16.12.2002 BIFR Order sanctioning Excise duty liability in
Scheme question was taken into
account.
6. 18.7.2005 Central Excise Department
challenged BIFR Scheme
before the AAIFR which
was dismissed
7. 1995 to 2011 Appellant deposited an
amount of Rs.21.26 crores
8. 27.10.2010 Tribunal in identical case
involving appellant and
other job worker
manufacturers held that
duty liability is only to be
confirmed against the
manufacturer job worker
and appellant cannot be
made liable to duty.
9. December 2010 Managing Director
directed Vice President
(Law) to file restoration
application with the
Appellate Tribunal.
10. 28.08.2011 Vice President Confirmed
that Restoration
application has been filed.
11. 2017 On coming to know that
there is no restoration
application pending,
Appellant filed fresh
Restoration Application on
account of compliance of
pre-deposit.
12. 21.02.2018 The Tribunal vide its
impugned order dated
21.02.2018 has held that
"Tribunal has no power to
condone this
extraordinary delay".
10. We have quoted the facts, as narrated in the grounds of appeal,
in paragraphs 2 to 6 above, and would observe that the appellant has
tried to obfuscate facts. The appellant having suffered an adverse
Order in Original dated 10th July, 1992 deciding the show cause
notices dated 25th March, 1988, had filed appeals before the tribunal
with applications seeking waiver of pre-deposit. As per the Order in
Original, the appellant was liable to pay Rs.23.22 Crores in all, the
break-up being Rs.12.34 crores, 9.06 crores and Rs.1.82 crores in
respect of transactions or manufacture undertaken by SCT, SFTPL
and UTC respectively. Penalty imposed was in addition. Tribunal by
order dated 19th August, 1993 had directed the appellant to deposit
Rs.12.0 crores, Rs.5.0 crores and Rs.1.82 crores in the three
cases(Rs.18.83 crores in all) within three months as a pre-condition
and stipulation for hearing the appeals on merits.
11. The appellant had challenged the pre-deposit order before the
High Court and the Supreme Court, with alternative prayer for
extension of time for compliance. Extension of time was granted and
terms were also modified. However, the terms imposed were not
adhered to and complied as only part payments were made. Non-
compliance is admitted.
12. The Tribunal on 7th February, 1996 dismissed the appeals for
failure of the appellant to make the pre-deposits. The order of
dismissal and non-compliance was made nearly three and a half
years after the Order in Original dated 10th July, 1992 and the order
of the Tribunal directing pre-deposit dated 19th January, 1993. Thus,
sufficient time and opportunity was granted
13. The order of dismissal of the appeal dated 7 th February, 1996
was not challenged for 22 years. In 2017, the appellant woke from
slumber and moved a miscellaneous application for restoration of the
appeal primarily on the pretext that disputed tax had been paid. This
delay of 22 years cannot be condoned on vague assertions and
general statements that law of condonation of delay is liberal and
justice would prevail if the appeals are heard on merits for payments
have been made. Such pleas are specious and deserve rejection.
14. As noticed above, show cause notice for clandestine
manufacture/sale etc. was issued on 25th March, 1988. The Order in
Original was passed on 10th July, 1992. Recoveries obviously had to
be made, especially once the Order in Original had become final.
Mere recoveries or even payment after years cannot result in
restoration of the appeals or justify condonation of delay in moving
the restoration application.
15. Appellant states that, pursuant to the orders passed in October,
2010 in cases of independent companies, in December, 2010, Vice-
President (Law) was asked to file restoration application in the
appeals before the Tribunal. The plea is not substantiated. It is
accepted that no restoration application was filed. Contention that the
appellant company was not aware of default by the Vice-President
(Law) and had assumed that the restoration application had been
filed, is moonshine, doctored and apparently false for it is accepted
that till 2017 no attempt was made to ascertain and verify whether
the application was listed and the order passed. Copy of the
application is not on record and could never be located.
16. Contention that proceedings were pending before BIFR and
therefore, restoration application could not be filed, is again not the
true reason and cause for not filing restoration application. Tribunal
had dismissed the appeals for non-payment of the pre-deposit on 7th
February, 1996, a year before the appellant was declared as sick
company by BIFR vide order dated 3rd April, 1997. Exact date when
the reference application was filed before the BIFR is not indicated.
Reference application before the BIFR was registered as Case
No.17/97. A scheme was approved and sanctioned on 16th
December, 2002. As per the appellant, BIFR had directed refund/
withdrawal of pre-deposit and had directed non imposition of pre
deposit during the rehabilitation period. No application was filed
before the Tribunal for revival of the appeals. Net worth of the
appellant turned positive during the financial year ending 31st March,
2007 and the BIFR vide order dated 29th June, 2007 had discharged
the appellant from purview of the enactment relating to sick
companies, though as per the appellant direction to implement
provisions of the scheme and monitoring before the BIFR had
continued. Even thereafter, no application was filed before the
Tribunal for ten years, till 2017. The appellant clearly accepted the
order of the Tribunal and did not seek revival of the appeals and
hearing on merits.
17. In view of the aforesaid discussion, we do not find any valid
ground or reason to interfere with the impugned order. The appellant
has been grossly negligent and derelict. Their inaction reflects
acceptance and abandonment. The appellants have failed to show
good cause and justification. On the other hand, their conduct lacks
bona fide and manifests recklessness. This careless attitude and
indifference is unacceptable.
18. There is no doubt that liberal construction of the words
„sufficient cause‟ can be put when there is neither negligence nor
inaction nor want of bona-fides imputable to the applicant. However,
in this case, there is not only negligence, but also inaction as well as
the petition lacks bona-fides. There is virtually no explanation for a
substantial portion of period spanning over 22 years. The list of dates
and events itself demonstrate that for years, the appellant was
inactive and in a state of acceptance and a vague description of
events is submitted, which only demonstrates their lack of bona fide
and gross negligence. Hence, we do not find any flaw or infirmity in
the order of the Tribunal, rejecting the application for condonation of
delay in filing the restoration application and accordingly dismissing
the application for restoration. Judgments relied by the appellant are
based on facts, hence, are not of any help, in view of the facts of the
present appeal, which are glaring and deserve no indulgence and
leniency.
19. In view of the aforesaid discussion, we do not find any ground
to issue notice in the present appeal impugning the order dated
21.2.2018, dismissing the application for condonation and to direct
restoration of Excise Appeal No.5237/1992 to hear the same on
merits. As the appeal is dismissed without issue of notice, we do not
impose costs. All the pending applications are also dismissed.
CHANDER SHEKHAR, J
SANJIV KHANNA, J
MARCH 23, 2018
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