Whether plea of the assessee to release property attached to enable him to make pre-deposit acceptable?

CASE: M/S ANNAPURNA IMPEX PVT. LTD SHRI NAVNEET AGARWAL V/S COMMISSIONER OF CENTRAL EXCISE, LUDHIANA

CITATION: 2012-TIOL-1431-CESTAT-DEL.

BRIEF FACTS: The issue relates to the modification application filed by the appellant on account of pre-deposit of Rs. 6 Crores ordered by the Tribunal. The appellant’s property worth Rs. 17 Crores has been attached by the Department and the total confirmed demand is Rs. 28 Crores. The appellant states that they have no other assets and hence seeks release of property so as to enable him to make pre-deposit as ordered by the Tribunal. The case is being heard by 2 member bench and the 2 member have contradictory views on the issue which are detailed as follows:
As per Member (J): The fact of the attachment of the property by the Revenue was not brought to the notice of the Bench at the time of disposal of the stay petition. The Tribunal having already considered that cash deposit of Rs. 6 Crores would be sufficient for the purpose of stay order, Revenue directed to release the property.
As per Member (T): The assessee has stated that they have no other assets. Hence, it is very obvious that the amounts due to the government are at serious risk. So, the discretion to waive pre-deposit should be exercised very carefully and impose suitable conditions. Tribunal should order release of the properties only to the extent it is needed for complying with the stay order and the property should be alienated with the permission of proper officer. Revoking the notice for all the properties should be considered only after the order for pre deposit is complied with. Since the stay order has not taken effect, Revenue should be allowed to complete the process of attachment and its sale to realize Rs. 6 Crores.
On account of the above conflicting opinions, the modification of stay application is required to be seen from two aspects. First, Revenue cannot ask for any modification of the earlier stay order to make it adverse to the assessee because Revenue has not filed any application for modification. Going by the same logic, there is no appeal filed by the assessee against the attachment notice and hence the Tribunal cannot rush to pass order on that issue also. Such order if passed amounts to treating the two parties before the Tribunal unequally. The prayers made by both sides orally should be taken into account and a balanced order passed as the stay order is being reconsidered as per the directions of the High court and in the light of new facts.
Secondly, there is an oral prayer that the attachment may be lifted so that the assessee can raise funds. But there was no undertaking that if attachment is lifted, Rs. 6 Crores will be deposited. The order to lift the attachment of properties would not ensure that Rs. 6 Crores will be deposited. The sequence of events consequent to the order to release of properties would be its alienation, no pre deposit and then dismissal of appeal for non compliance with the order of pre deposit. Hence, there should be safeguard against such a probable sequence of events detrimental to the interest of Revenue.

BRIEF FACTS as per Member (J): Vide stay order No.1085-1086/2011-EX dt.27.9.11, the appellant was directed to deposit an amount of Rs.6 crore as condition of hearing of their appeal, out of total confirmed demand of Rs.28 crores . The said stay order was challenged by the appellant before Hon'ble High Court of Punjab and Haryana at Chandigarh, who vide its order dated 21.11.11, disposed of writ petition. It stands observed by Hon'ble High Court that the petitioner's property has been attached vide communication dated 12.8.10 and that he is not possessed of any means to make cash deposit, Hon'ble High Court observed that no such argument was raised before the Tribunal and as such they granted liberty to the petitioner to make an appropriate application before the Tribunal. In terms of the above direction of Hon'ble High Court, the present modification application stands moved by the applicant/appellant. The matter had earlier come up on record, when the learned SDR appearing for the Revenue was directed to seek comments by the appropriate authority. On matter being called today, learned SDR produces a letter of Additional Commissioner (Review) dt.03.02.2012 admitting attachment of the property worth Rs.17 crores. However, it stands pleaded in the said letter that keeping in view the huge amount of Govt. Revenue at stake and as the party does not deserve any leniency in view of the fraud committed, the detention of the property be continued so as to safeguard the Govt Revenue. The appellants are also directed to make pre-deposit of Rs.6 crores as already ordered vide stay order dated 27.9.11

APPELLANTS CONTENTION: Learned Advocate appearing for the applicant submits that the Tribunal has already considered the merits of the case, at the time of disposal of the stay petition and has considered fit to direct the appellant to deposit Rs.6 crores so as to satisfy the condition of section 35F. He submits that he is ready to deposit said amount of Rs.6 crores but as on account of attachment of property, has not left with the any movable or immovable property so as to dispense with same and deposit amount in question. Accordingly, he submits that the Revenue to be directed to release the property so as to enable him to dispose the same in the market and to be deposited amount in question.

RESPONDENTS CONTENTION: Learned SDP. Appearing for the Revenue submits that as demand of duty in the present case, is to the tune of Rs.28 crores and value of the property is only to the tune of Rs.17 crores., the same should be allowed to be retained by the Revenue so as to safeguard their interest. The appellant should be further (directed to make pre-deposit of Rs.6 crores, in addition to view of retention of the property.

REASONING OF JUDGEMENT as per Member (J): The fact of attachment of the property by the Revenue was not brought to the notice of the Bench at the time of disposal of the stay petition on 27.9.11. As such, the direction of the Tribunal to deposit an amount of Rs.6 crores is without considering the fact of attachment. In such scenario, we find no merits inthe department's request for continuance of attachment and directed the appellant to deposit an amount of Rs.6 crores. It has to be kept in mind that the Revenue has not filed any modification application seeking modification of stay order. The stay order directed the appellant to deposit Rs.6 crores. We are not modifying the said condition of deposit. It is only the appellant's submission that the attachment of the property by the Revenue should be ordered to be released so as to enable him to dispose the same and deposit Rs.6 crores as directed by the Tribunal. We find merits in the prayer of the applicant; the Revenue cannot be expected to retain property as also to have cash deposit of Rs.6 crores. The Tribunal having already considered that cash deposit of Rs.6 crores would be sufficient for the purpose of stay order, we direct the Revenue to release the property within a period four weeks from the date of receipt of this present order. We direct the appellant to deposit of Rs.6 crores within a period of four weeks thereafter so as to comply with the direction of the Tribunal. The Modification application is disposed of in above terms.

BRIEF FACTS as per Member (T): The facts of the case are already stated in the order recorded by Member (Judicial). So it was proposed to add only some few more facts. This is a case of duty evasion during April 2002 to July 06 adjudicated in' Dec 2008. The case is that the Applicants have caused revenue loss through fraudulent documents showing duty payments. The Applicants were in activities requiring minimal investment in plant and machinery, a set up suited for vanishing quickly after committing fraud. As on date it is informed that the Applicants have closed down.
There is a confirmed duty arrear of about Rs.26 crores from the Applicants. The Tribunal has passed an order that Rs.6 crores should be pre-deposited for hearing their appeal. Before the issue of the order for pre-deposit, Revenue has issued a notice of attachment for four pieces of immovable properties of approximate value Rs. 2.25 crore , Rs.2.30 crores , Rs.8.50 crores and Rs.4 crores totaling to Rs.17.05 crores. Applicants have filed an application for modification of stay order requesting that the attached property may be considered as sufficient security for hearing the appeal. In the modification application there is an undertaking by the Applicants not to dispose of properties worth at least Rs. 8 crores. So member (T) do not understand the need to withdraw the notice of attachment for all the properties when there is an undertaking from the Applicants itself not to dispose of property worth at least Rs. 8 crores. If at all there is a case for such an order, member (T) is of the view that such a request can be considered only after deposit of Rs.6 crores.

REASONING OF JUDGEMENT as per Member (T):There is an oral prayer that the attachment may be lifted so that the assessee can raise funds. But there was no oral undertaking during hearing that if attachment is lifted, Rs. 6 Crores will be deposited. The order to lift the attachment of properties would not ensure that Rs. 6 Crores will be deposited. Such oral undertaking if given also cannot result in collection of money. The sequence of events consequent to the order to release of properties would be its alienation, no pre deposit and then dismissal of appeal for non compliance with the order of pre deposit. Hence, there should be safeguard against such a probable sequence of events detrimental to the interest of Revenue.
There is an argument that Revenue cannot ask for any modification of the earlier stay order to make it adverse to the assessee because Revenue has not filed any application for modification. Going by the same logic, there is no appeal filed by the assessee against the attachment notice and hence the Tribunal cannot rush to pass order on that issue also. Such order if passed amounts to treating the two parties before the Tribunal unequally. The prayers made by both sides orally should be taken into account and a balanced order passed as the stay order is being reconsidered as per the directions of the High court and in the light of new facts.
It was also pointed out that the Tribunal has enough powers to impose conditions that are necessary to safeguard the interest of Revenue as may be seen from the first proviso to section 35F which reads as under:
“Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be , the Appellate Tribunal, may dispense with such deposit subject to conditions as he or it may deem fit to impose so as to safeguard the interest of revenue.”
Since the applicants state that they have no other assets, it is very obvious that the amounts due to the government are at serious risk. So there is every reason to exercise the discretion very carefully and impose suitable conditions.
Therefore, Tribunal should order release of the properties only to the extent as is needed for complying with the order and the property should be alienated with the permission of proper officer as envisaged in Rule 9 of the said Rules. Revoking the notice for all the properties should be considered only after the order for pre-deposit is complied with. Since the stay order has not taken effect, the Revenue should be allowed to complete the process of attachment and its sale to realize Rs. 6 Crores.

DECISION: Matter referred to third member.

COMMENT:The Revenue is refraining from releasing the property attached as the issue under consideration is of fraud and huge duty of around Rs. 28 Crores is at stake and the total assets of the assessee are only Rs. 17 Crores. But, the pleading of the assessee to release property for the purpose of compliance of pre deposit also cannot be ignored.

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PJ/Case Laws/2012-13/1315

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