Whether assessee can be directed to pay entire duty and penalty as pre-deposit?

PJ/CASE LAW/2015-16/2826

Case:-S.K. RASPS & FILES PVT. LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH-I

Citation:- 2015 (322) E.L.T. 639 (P & H)

Brief facts:- The appellant prayed for quashing of order dated 6-12-2012 (Annexure A-5), passed by the Commissioner (Appeals) Customs and Central Excise, Chandigarh-I, directing the appellant to deposit Rs. 26,20,150/- as duty and Rs. 10.00 lakhs as penalty, as a pre-condition to the hearing of the appeal. The appellant also challenged order dated 9-9-2014 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, dismissing its appeal.

Appellant’s contention:- Counsel for the appellant submitted that the appellant invested more than Rs. 20.00 crores to set up a furnace and a rolling mill in District Una, Himachal Pradesh, to claim benefit of area based exemptions. The appellant had been denied the benefit of exemptions on the ground that he could not commence production by 31-3-2010 and as a consequence, a claim for duty, penalty and interest was raised. The appellant filed an appeal, but vide the impugned order, the Commissioner (Appeals) directed the appellant to pay the entire amount of duty and almost the entire amount of penalty as a pre-condition to the hearing of the appeal. The order was claimed not only onerous but in essence took away the right of the appellant to seek adjudication of its grievance, namely, that facts relied in the original order were incorrect as the appellant commenced production before 31-3-2010. Counsel for the appellant submitted that the appellant has deposited Rs. 10.00 lakhs, as directed by the Court on 10-12-2014.

Respondent’s contention:-Counsel for the Revenue, on the other hand, submitted that a perusal of the record revealed that the appeal is devoid of any merit. As per the record, machinery essential for commercial production, was received on 31-3-2010 and the electricity connection was obtained on 31-3-2010 at 10.50 P.M. thereby putting paid to any pretense on the part of the appellant that it commenced production before 31-3-2010. The Commissioner as well as the Tribunal had, therefore, rightly directed the appellant to deposit Rs. 26,20,150/- towards duty and Rs. 10.00 lakhs towards penalty.

Reasoning of judgement:- The Commissioner (Appeals) was empowered, as a pre-condition to the hearing of the appeal to call upon an appellant to pre-deposit such an amount as may be deemed appropriate. The Commissioner (Appeals) had directed the appellant to deposit Rs. 26.00 lakhs as duty i.e. the entire amount of duty claimed by the department and Rs. 10.00 lakhs as penalty out of the total penalty of Rs. 26.00 lakhs, while staying interest. The Tribunal had affirmed this order by primarily recording that the appellant was not able to commence production by 31-3-2010 and, therefore, the order passed by the Commissioner (Appeals) did not call for interference. They did not record any final opinion on merits but reiterated that the appellant did raise arguable points relating to commencement of production on or before 31-3-2010. It was also necessary to reiterate that once an appeal was admitted for adjudication the application for stay should not be decided by imposing such conditions as are onerous or penal or tend to negate the statutory right of an appeal. The condition of pre-deposit is meant to secure the interest of the revenue and not to punish an assessee. The appellant had admittedly deposited Rs. 10.00 lakhs as directed vide order dated 10-12-2014. They were satisfied that the interest of the revenue would be suitably saved if the appellant is directed to deposit another sum of Rs. 5.00 lakhs.
Consequently, without expressing any further opinion on the merits of the controversy, the appellant was directed to deposit another sum of Rs. 5.00 lakhs before the date of appearance. Upon deposit of Rs. 5.00 lakhs, recovery of the balance amount of duty, penalty and interest shall remain stayed.

Decision:- Appeal disposed off.

Comment:- The gist of the case is that the condition of pre deposit should secure interest of the revenue and not punish the assessee. Once appeal is admitted, stay should not impose onerous or penal conditions, negating statutory right of appeal. Hence, deposit of Rs.15 lakhs, against demand of duty of more than Rs. 26 lakhs, and penalty of Rs.10 lakhs was found to be sufficient under Section 35F of Central Excise Act, 1944.

Prepared By:- Sharad Bang

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PJ/CASE LAW/2015-16/2826

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