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No full waiver of pre-deposit unless assessee proves that undue hardship is caused

It is now settled position of law that, while considering the application for waiver of pre-deposit, the Tribunal or the Appellate Authorities are directed to take into consideration three factors namely, prima facie case, undue hardship and the interest of Revenue.

 Brief Facts of the case:

A show cause notice was issued to the appellant (assessee company) and others dated by the Additional Director General, DGCEI, Zonal Unit, Mumbai after it was revealed in the investigation that the appellant received cenvatable invoices from the Jammu based manufacturers in favour of itself without undertaking delivery of the goods mentioned there under. While arriving at the said conclusion, the said authorities recorded the statements of Shri Kesvalchand G. Jain the broker of the appellant, amongst other statements and evidence collected by the said authorities. The Commissioner of Central Excise, Mumbai-II, the respondent herein, after hearing the parties to the show cause notice an order-in-original dated 30th September 2013 thereby confirming and ordering the recovery of wrongly availed CENVAT credit totally amounting to Rs.96,31,754/- on the 20 consignments from the appellant under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A (4) of the Central Excise Act, 1994. It was further ordered that the appellant is also liable to pay the interest on the amount aforestated. The Commissioner of Central Excise in its order-in-original also imposed a penalty of Rs.96,31,754/- on the appellant under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1994.

The said Authority was further pleased to impose penalty of Rs.5 lakhs on the Managing Director of the appellant under Rule 26 of the Central Excise Rules, 2002. The appellant preferred an appeal before the Customs, Excise & Service Tax Appellate Tribunal against the order-in-original dated 30th September 2013. The appellant also preferred an application for stay/grant of waiver of pre- deposit of dues therein. By an order dated 10th February 2014, the said stay application was partly allowed by directing the appellant to make a pre-deposit of 50% of the duty demand confirmed against it within a period of eight weeks, as stated herein above.

The appellant challenged the conditional stay allowed by the CESTAT before the Hon’ble High Court.

 Contention of the Assessee:

The learned counsel for the assessee contended that Commissioner of Central Excise before passing the order-in-original dated 30th September 2013 ought to have allowed the appellant to cross-examine Mr. Kevalchand G. Jain, the broker/supplier of the material of the appellant.

He further contended that the learned Tribunal in appeal should have appreciated the said aspect and should not have directed the appellant to make a pre-deposit of 50% of the duty demand confirmed against the appellant. He further submitted that as the principles of natural justice were not followed by not providing an opportunity to cross-examine the necessary witness. It is therefore, the present matter require reconsideration at the end of Commissioner before passing an order. The learned Senior Counsel in support of his contention relied on the Hon’ble Supreme Court judgment in the case of Swadeshi Polytex Ltd Vs. Collector of Central Excise, Meerut (2000) and few other cases.

Thus, he finally contended that Tribunal in appeal should have appreciated the said aspect and should not have directed the appellant to make a pre-deposit of 50% of the duty demand confirmed against the appellant.

 Contention of the Revenue:

The learned counsel for the revenue submitted that after taking into consideration various aspects of the present case, the CESTAT was kind enough to direct the appellant to make only a pre-deposit of 50% of the duty demand. He further submitted that after taking into consideration the malpractice adopted by the appellant, in fact the learned CESTAT should not have interfered with the directions given in the order-in-original and should have directed the appellant to deposit the entire amount as has been directed in the order-in-original.

He further submitted that the appeal arises out of an interlocutory (non-comparable) order and unless discretion which has been exercised by the learned CESTAT is found to be exercised in perverse manner, this Court would not interfere with the same.

 Decision of the Hon’ble High Court:

The High court after considering the rival submissions observed the question to be decided in the case is that whether prejudice has caused to the appellant by not providing the appellant an opportunity to cross examine the statement recorded from the broker Shri Kesvalchand G. Jain.

It is now settled position of law that, while considering the application for waiver of pre-deposit, the Tribunal or the Appellate Authorities are directed to take into consideration three factors namely, prima facie case, undue hardship and the interest of Revenue.

The court observed that as alleged Octroi firm through which the appellant cleared the goods by paying the Octroi duty while entering into the limits of Mumbai, during investigation, is found to be not in existence itself and/or a bogus entity, and therefore we find that no prejudice of whatsoever nature has been caused to the appellant because of denial of the cross-examination by the Commissioner of Central Excise before passing an order-in-original.

Thus, there has been no undue hardship to be entertained.

In the present case, the Tribunal while considering the application of the appellant has held that, the appellant also failed to bring on record any evidence in support of his contention that it is facing financial hardship as its factory is under closure. The Tribunal has rightly held that in the absence of any prima facie case, the interest of Revenue needs to be protected and therefore rightly directed the appellant to make a pre-deposit of 50% of the duty demand confirmed against the appellant within a period of 8 weeks.

Categories: Excise Duty
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