Whether Tribunal was correct in law in directing the appellant to pre-deposit without considering the Tribunal decision on similar issue?

PJ/Case law/2013-14/1882

Case:- MADHUKAR SAHAKARI SAKHAR KARKHANA LTD Vs THE COMMISSIONER OF CENTRAL EXCISE, NASHIK

Citation:- 2013-TIOL-842-HC-MUM-CX

Brief Facts:- The appellant is engaged in manufacture of Denatured Ethyl Alcohol and Ethyl Alcohol out of duty paid Molasses. The appellant had taken cenvat credit of duty paid on molasses used in the manufacture of its final products and utilized the same on payment of duty on Denatured Ethyl Alcohol. So far as Ethyl Alcohol was concerned no duty was payable and therefore in terms of Cenvat Credit Rules, 2004, the appellant paid/reversed 6% on the sale value of Ethyl Alcohol. The revenue was of the view that credit of duty on molasses could not be taken by the appellant as it was used in manufacture of Ethyl Alcohol. This was on the basis that Ethyl Alcohol is non excisable goods. Consequently the revenue demanded the credit so taken on the molasses used in manufacture of Ethyl Alcohol. The Adjudicating authority confirmed the demand holding that Ethyl Alcohol is not subject to Central Excise Levy but to State Excise levy and therefore is not exempted excisable goods. Consequently the demand raised in respect of credit taken on Molasses used in the manufacture of Ethyl Alcohol was confirmed by the Adjudicating authority along with equivalent penalty. Being aggrieved the appellant filed an appeal to the Tribunal and sought dispensation from pre-deposit of duty and penalty for the purpose of its appeal being heard on merits. However, by the impugned order the Tribunal directed the appellant to pre-deposit for hearing the appellant's appeal on merits in accordance with the proviso to Section 35F of the Act. Being aggrieved the appellant filed an appeal to the High Court.

Appellant’s Contention:- The appellant submits that the issue in appeal stands concluded in the appellant's favour by a decision of the Tribunal in the matter of Ugar Sugar Works Ltd. (supra). The Adjudicating Authority after noting the above submissions ignores the same on the ground that the decision of the Tribunal in Ugar Sugar Works Ltd. (supra) is sub silento and thus cannot be applied. At the hearing of the stay application before the Tribunal, the appellant on instructions informs High Court that reliance was again placed upon the above decision but the Tribunal ignored the same. Therefore, in the above facts a complete waiver of pre-deposit was warranted.

Respondent’s Contention:- The revenue supports the impugned order and states that this deposit is only at the stage of hearing of stay application. The contentions of the appellant would be considered at the time of final hearing and no interference at this stage is warranted.

Reasoning of Judgment:- The High court finds that in 2005 the Central Excise Tariff Act 1985 was restructured. The case of the revenue is that prior to restructuring of the tariff, Ethyl Alcohol was excisable goods as it found mention in the tariff but not after restructuring of the tariff. The Tribunal in the matter of Ugar Sugar Works Ltd. (supra) seems to have dealt with the period post 2005. Therefore, without going into the merits of the appellants contention that the decision of the Tribunal in Ugar Sugar Works (supra) is applicable to the present facts, the High Court are of the view that when the basic defense of the appellant is the decision of Tribunal in Ugar Sugar Works Ltd. (supra), the Tribunal ought to have dealt with the same. This is particularly so as it goes to the root of the dispute.

In view of the above facts, the High Court set aside the impugned order and directed the Tribunal to decide the stay application afresh. However, while considering the stay application the decision of the Tribunal in the matter of Ugar Sugar Works (supra) would inter alia be considered to take a prima facie view whether the same is applicable to the facts of the present case before directing the amount of pre-deposit required to be made by the appellant for the purpose of entertaining its appeal on merits. All contentions of both parties are left open to be urged before the Tribunal.

Decision:- The appeal is disposed of with the above directions.

Comment:- The essence of this case is that without going into the merits of the appellant’s contention, the Tribunal can-not decide the stay application. When the basic defense of the appellant wherein reliance on the decision of the Tribunal on similar issue has been placed was not heard by the Tribunal, the order of pre-deposit is not justifiable and the same should be reconsidered.

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PJ/Case law/2013-14/1882

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