Whether the appeal automatically dismiss when once a Tribunal waived the pre-deposit of penalty or not?

PJ/Case Laws/2012-13/1182

Citation: 2012-TIOL-599-HC-P&H-CX

Case:M/s SHREE RAM STEEL INDUSTRIES Vs COMMISSIONER OF CENTRAL EXCISE AND ANOTHER

Issue:Whether the appeal automatically dismiss when once a Tribunal waived the pre-deposit of penalty or not?

Brief Facts:Petition has been filled against the stay order dated 09.02.2012 passed by the customs, Excise and Service Tax Tribunal, New Delhi holding that the appeal of the petitioner would be dismissed automatically without any further hearing in the case on account of non-deposit of an amount of Rs, 2.5 crore by M/s Vishwakarma Alloys Ltd. As directed in the inpungned order datd 09.02.2012 and order dated 08.05.2012 directing the petitioner to deposit the whole amount of penalty imposed by the respondent- Commissioner.

The petitioner was dealer and registered with the Central Excise. Revenue conducted Investigation to one of manufacturer (Buyer) of the petitioner. During search, shortage of raw material was noticed and a show cause notice regarding the same was issued. During enquiry regarding past transactions of the said Manufacturer, it was found that the said Manufacturer was purchasing raw material from various registered dealers including the petitioner and was taking cenvat credit on the basis of invoices issued by the said dealers. During the period in question the Petitioner has also sold scrap involving duty amounting to Rs. 798000/- the said Manufacturer. After completion of investigation, show cause notice issued to petitioner as to why penalty under Rule 25 of the Central Excise Rules, 20002 be not imposed upon him. It was also mentioned in the show cause notice that the petitioner and other dealers have only supplied invoices to manufacturer and have not sold the material.

The Revenue imposed penalty equal to the amount of credit passed to the said Manufacturer. The said Manufacturer as well as the petitioner and various other dealers and transporters filed appeals before the Tribunal. Along with the appeals, stay applications were also filed. The Tribunal directed to the said Manufacturer to make predeposit. However, the requirement of pre-deposit in the case of all the dealers was dispensed with and it was ordered that in case of the said Manufacturer fails to make pre-deposit, the appeals of all the parties would stand automatically dismissed.

The said Manufacturer failed to deposit the amount. On misc. Application having been filed by the revenue, the matter of the petitioner as well as other parties was taken up by the Tribunal. The Tribunal directed the petitioner and others to deposit the penalty amount imposed on them. Hence, the petitioner filed writ against the impugned orders.

Petitioner’s contention:-The petitioner submitted that the similar order dated 9.2.2012 has been modified by this Court in M/s Victory Impex v/s Commissioner of Central Excise, Ludhiana and another decided on 31.5.2012 wherein it has been held that the appeal filed by the petitioner cannot be dismissed for want of pre-deposit by said Manufacturer of the petitioner. Further, urged by the petitioner that once the Tribunal had waived the condition of pre-deposit of penalty in case vide order dated 9.2.2012, the Tribunal was not justified in passing order on miscellaneous application on 8.5.2012 directing us to deposit the penalty amount imposed on them by reviewing its earlier order.

Reasoning of Judgement:The High Court heard both the parties and consider that the order dated 8.5.2012 requiring the petitioner to deposit the penalty amount imposed on them by reviewing the order dated 9.2.2012 exempting the petitioner from pre-deposit is not justified.

The High Court further finds that once the Tribunal had waived the condition of pre-deposit of penalty imposed u/r 25 of CER, 2002 on the registered dealer for the alleged supply of “invoices” without material, there cannot be an automatic dismissal of his appeal on account of non-payment of the pre-deposit by the manufacturer.

Decision:-Order set aside and Tribunal directed to hear appeal on merits.

Comment:- this was very unique case where in the appeal of dealers was linked with pre-deposit of manufacturer. When the separate appeals are filed by them and they are separate parties then the failure of pre-deposit by manufacturer cannot lead to dismissal of appeals by dealers. High Court has taken the right view and set aside the order of the tribunal.

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PJ/Case Laws/2012-13/1182

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