ORDER
S. Kalyanam, Member (J)
1. The above applications have been filed for waiver of pre-deposit of duty of Rs. 62,76,416 and a penalty of Rs. 1 lakh on petitioner Coronation Litho Works (C.L.W.) and a penalty of Rs. 1 lakh on petitioner Shri Nataraj Prabhu, levied under the impugned order of the Collector of Central Excise, Madurai dated 21-2-1992, under the provisions of Central Excises and Salt Act 1944, the Act for short.
2. Shri Raghavan Iyengar, the learned Counsel for the petitioner submitted that duty has been levied on the petitioner for the period August 1989 to November 1990 by invoking the longer period of limitation in terms of proviso to Section 11A of the Act, mainly alleging that National Paper Company (NPC) is a dummy unit of the petitioner CLW and the main goods i.e. printed carton was manufactured and cleared only on account of the petitioner and as such CLW being a DGTD unit not entitled to the benefit of Notification No. 175/86 created a dummy unit, viz. National Paper Co. with no infrastructural facilities for manufacturing of printed cartons. The learned Counsel submitted that the adjudicating authority has not correctly appreciated the evidence on record and has indeed misread the evidence, misconstrued the same and misquoted the factual position resulting in an erroneous order not prima facie sustainable either in law or on facts. Referring to para 32 of the impugned order the learned Counsel urged that a finding was given that NPC, the alleged dummy unit received a sum of Rs. 1.5 crores from the petitioner CLW and on that basis the adjudicating authority has held that large financial transactions between the petitioner and NPC had been proved to be in existence which cannot be viewed as a normal commercial transaction between two independent concerns. In this context the learned Counsel urged that the factual finding is incorrect and wrong and submitted that it is only the NPC that had given a sum of Rs. 1.46 crores to CLW and CLW gave back to NPC only a sum of about Rs. 28 lakhs. The learned Counsel further submitted that apart from this incorrect finding on fact and appreciation of evidence this particular aspect has also not been set out in the show cause notice so as to enable the petitioner to traverse the same resulting in violation of the principles of natural justice. The learned Counsel further submitted that petitioner CLW only resorted to printing activities and if at all there is any manufacturing activity it is only by the NPC and notwithstanding the fact that some of the partners are inter se related between the two units, it is well settled law, mere relationship of partners of two units ipso facto would not make the other unit a dummy unit of the petitioner CLW for purpose of clubbing under the Act. The learned Counsel further submitted that petitioner CLW sold its scoring machine way back in December 79 and intimated the same to the Department and all along getting the job work done by various other persons including CLW. The Department never demanded duty holding the suppliers of raw materials as manufacturers and therefore the petitioner obviously was under the bona fide impression and view on the basis of the conduct of the Department and the authorities themselves that the petitioner was not liable to pay any duty and therefore, the invoking of longer period in the above facts and circumstances is not prima facie sustainable in law. The learned Counsel submitted that if the demand is restricted for a period of six months preceding the date of issue of show cause notice, the petitioner would not be liable to pay any duty at all. The learned Counsel assailed the correctness of the finding in para 34 and also the applicability of the ratio of the ruling of the Supreme Court in Mc Dowell case in the factual context of this case. Finally the learned Counsel submitted that the adjudicating authority was no doubt prejudiced during the hearing of the adjudication and even though the petitioner has filed affidavit with reference to views expressed by the adjudicating authority against the petitioner and urged this in support of the plea of bias, the learned Counsel submitted that he would reserve that at the time of final disposal of the appeal.
3. In regard to financial position of the petitioner company, the learned Counsel submitted that the balance sheet for the period ending 31st March, 1992 has not been filed before the Tribunal, but however, the financial position from 1-4-1992 till October, 1992 is produced and contended that even though the unit made a profit of about Rs. 25 lakhs after setting aside for depreciation and subsequent to that the liquidity position of the petitioner has become very bad resulting in a loss of Rs. 19 lakhs.
4. Shri Gregory, the learned SDR adopted the reasoning of the adjudicating authority and submitted that the evidence has been analysed in extenso and findings given and therefore, prima facie there is no case in favour of the petitioner. Regarding the financial position the SDR submitted that the unit is a profit making company.
5. We have carefully considered the submissions made before us. No doubt we heard this petition more than once and went through the entire evidence and heard the Counsel today in extenso, on questions of law and also on the evidence available on record. The issues as to whether the NPC is an extended limb of the CLW and therefore a dummy unit created for the purpose of availing the benefit of Notification 175/86, in the factual background of this case and as to whether the alleged conduct of the Department in not demanding duty in similar circumstances from the suppliers of raw materials and the applicability of bar of limitation on that supplier are all complex issues which would merit deeper consideration and an indepth analysis with reference to evidence and also the legal provisions. Dealing as we do as with an interlocutory application for the limited purpose of finding out the prima facie case in favour of the assessee coupled with other relevant criteria for grant of waiver, we are inclinced to think that those issues which call for deeper consideration should be reserved for consideration at the time of final disposal of the appeal on merits. As such, we do not prima facie find any mistake in the reasoning of the adjudicating authority.
6. We have gone through the provisional balance sheet of the petitioner company. As reflected in the provisional balance sheet, we note that more than Rs. 1.59 crores is due to the petitioner from sundry debtors and this is in addition to more than Rs. 15 lakhs shown under the asset column of the balance sheet as advance and deposits. We also take into account the admitted fact that the petitioner unit made a profit of about Rs. 13.9 lakhs after setting apart a substantial amount of Rs. 25 lakhs towards depreciation. We also take note of the fact that as per the provisional balance sheet for the period 1-4-1992 to 31-10-1992 the liquidity position of the petitioner is not satisfactory and the unit has to discharge debt liability to the tune of about Rs. 40 lakhs to the banks. We also take note of the fact that as on 31-10-1992 Rs. 1.55 crores are due to the petitioner from Sundry debtors. Keeping all these facts in mind, we direct the petitioner to pre-deposit a sum of Rs. 20 lakhs (Rs. Twenty lakhs) on or before 31st May, 1993 and report compliance subject to which pre-deposit of the balance duty and the entire penalty on petitioner CLW and petitioner Nataraj Prabhu would stand dispensed with pending appeal. The matter will be called on 31-5-1993 for reporting compliance.