ORDER
S.L. Peeran, Member (J)
1. The stay applications and appeals arise from Order-in-Appeal Nos. 201 & 202/99 (M-III) dated 10.9.99 rejecting the appeals Under Section 35F of the Act for noncompliance of his Interim order by which he did not grant them any waiver and directed the appellants to pre-deposit the entire duty of Rs. 3,17,636 and penalty of Rs. 1,81,989 Under Section 11AC and further penalty of Rs. 1,00,000 Under Rule 173Q of the Act. The appellants had pre-deposited a sum of Rs. 2.5 lakh and had moved an application for modification before the Commissioner (Appeals) urging him to consider the prayer to accept this deposit and grant them waiver on the ground that they were entitled to Modvat credit on duty paid on the inputs used in the manufacture of the final products on which the duty had been demanded. In the impugned order, Commissioner has merely held that they are not entitled to the benefit of Modvat and hence rejected their prayer, but did not give them further time to pre-deposit the balance and instead, proceeded to dismiss the appeal itself. On such a rejection of the modification application, Commissioner ought to have informed the appellants about such rejection and ought to have given them further time to comply with the order and thereafter could have dismissed the appeals. However, the Commissioner has straightaway rejected the modification application and also the appeals. Therefore the appellants are aggrieved with this type of order and submits that the Joint Commissioner also has in his Order-in-Original has not considered their prayer for the benefit of Modvat credit claim, despite the appellants having brought to the notice of the Joint Commissioner as well as to the Commissioner (Appeals) the Apex Court judgment rendered in the case of Formica India Ltd. as wherein the Apex Court had considered the plea for grant of Modvat credit as there is a violation of procedural aspect.
2. Heard Ld. Counsel Shri T. Ramesh who urges for grant of stay and waiver of pre-deposit and stay of its recovery and also seeks for remand of the case to the Commissioner so that they can argue the case on merits. He submits that they have sufficiently complied with the order of deposit to the extent of depositing Rs. 2.5 lakhs out of the duty claim of Rs. 3,17,636. He submits that for the purposes of Section 35F of the Act normally there is no order for pre-depositing of penalties. He further submits that in all similar cases of dismissal of appeals Under Section 35F of the Act by the same Commissioner, the Tribunal has been remanding it with appropriate directions for decision on merits. He seeks a similar order in the matter.
3. Heard Ld. DR Shri S. Kannan, who submits that the Commissioner’s rejection of appeal is justified as he was taken into consideration all the grounds made out in the modification application. He submits that the Commissioner has noted that the appellants had not asked for further extension of time to pre-deposit the balance and therefore the rejection of modification application and the appeals simultaneously Under Section 35F of the Act is justifiable.
4. On a careful consideration of the submission, we notice that the appellants had pre-deposited Rs. 2.5 lakhs out of duty demand of Rs. 3,17,636 and had brought out an application for modification urging very good grounds for consideration. The Commissioner certainly has right to reject on same grounds. However, after rejecting modification application, as a matter of common sense appellants should have been informed as the application was decided ex parte about the rejection and granting them some time to comply with the Interim order to pre-deposit the balance. But Commissioner has chosen to dismiss both the modification application and stay application, therefore there is a clear violation of principles of natural justice. Further, the Joint Commissioner has also not considered the prayer of the appellants with regard to the availability of Mod vat credit of the duty paid on the inputs used; in the manufacture of final products. The said plea had been brought to the notice of the Commissioner (Appeals) and the Supreme Court judgment had been cited which has been noted by the Commissioner (Appeals) in para 4 of the order. Yet, Commissioner (Appeals) has not chosen to examine the implications of the Apex Court order, therefore there is a clear violation even on this aspect of the matter. In that view of the matter, we accept the pre-deposit made by the appellants and grant them stay and waiver in the matter. As the Commissioner (Appeals) has not decided the case on merits, therefore the impugned orders are set aside and remanded to the Commissioner (Appeals) with a direction that the matter shall be heard on merits without insisting for further pre-deposit in the matter. Thus both the appeals are allowed by way of remand.