JUDGMENT
R.B. Misra, J.
1. In this writ petition the petitioner has prayed for quashing the order dated 12th April, 2002 passed by the Commissioner (Appeals), Customs and Central Excise, Ghaziabad in respect of the order dated 30th September, 2001 of Deputy Commissioner passed in Order-in-Original No. 36 of 2001 (Annexure No. 1) in so far it relates to the deposit of 50 per cent of the demand. It has been further prayed for erection to dispense with the requirement of pre-deposit of any amount under Section 35F of the Central Excise Act in short ‘Act’ and further direction to hear and decide the appeal of the petitioner on merits without imposing any pre-condition on pre-deposit of any amount under Section 35F of the Act.
2. Heard Sri Bharat Ji Agrawal and Sri Tarun Agarwala, learned Counsel for the petitioner and Sri Ajit Kumar Singh, learned Standing Counsel.
3. By consent of the parties, the writ petition are decided at this stage under Proviso Second to Rule II of Chapter XXII of Allahabad High Court Rules.
4. The brief facts necessary for adjudication of the writ petition are that the petitioner is a company registered under the Companies Act, 1956 engaged in the manufacture of “Complan and Glucon D” for which the basic ingredients as claimed by the petitioner are as below (a) Skimmed milk powder (b) Sugar (c) Vegetable oil containing permitted and oxidants (d) Malto-Dextrin Powder (e) Minerals (f) Vitamins (g) Flavours. From 1st October, 1994, the petitioner, had been paying Central Excise Duty and the petitioner filed a declaration under Rule 173B of the Central Excise Rules, 1944 called ‘Rules’ hereinafter, claiming classifications of Complan under Heading 2107.91 of the Tariff approved by the Central Excise Department however, the classification was changed subsequently to 2108.99 of the Tariff.
5. A show cause notice dated 29th November, 2000 was issued to the petitioner by the Superintendent, Central Excise Range, Aligarh wherein proposing to classify ‘Complan’ under Heading 1901.92 of the Tariff and demanding differential Central Excise Duty for the month of November, 1999. The show cause emphasised that the product “Complan” contains ‘Malto Dextrin’ and to be treated as a food preparation containing malt extract contemplated imposition of penalty under Rule 173Q of the ‘Rules’ and interest read with Section 11AA of the Act. An another show cause notice dated 21st December, 2000 identical to the earlier one was also issued for the period December, 1999 to February, 2000. The petitioner filed replies to the notice (Annexure 6 to the petition) contending that the composition of the ‘Complan’ specifically shows that it contains no malt or malt extract. The product contains substantial quantity of Malto-Dextrine which is different from malt or malt extract and, therefore, the classification of the product under Heading 1901.92 is illegal and cannot be sustained. In support of his contention the petition filed an authoritative clarification opinion dated 23rd February, 2001 given by the Central Food Technological Research Institute, Mysore defining and differentiating Malt and Malto Dextrin and opinion dated 15th January, 2001 given by the Head of Food and Fermentation Technology of University of Mumbai, Department of Chemical Technology,
6. The Deputy Commissioner, Central Excise, Aligarh by its order dated 20th September, 2001 passed in 36-DEM 2001 order-in-original treated the product Complan is classifiable under Heading 1901.92 of the Tariff and making the petition is liable to pay the differential demand of Central Excise Duty amounting to Rs. 3,94,29.312.00 and a similar amount of penalty under Rule 173Q of Central Excise Rules and to pay interest as per Section 11AA of the ‘Act’. Being aggrieved the petitioner filed memo of appeal on 23rd November, 2001 under Section 35 of the Act along with an application under Section 35F of ‘Act’ with prayer to waive dispense the requirement of the pre-deposit of the demand and further stay the operation of the impugned order dated 20th September, 2001 during the pendency of the appeal (Annexure No. 10).
7. It has been contended on behalf of the petitioner that ‘Malto-Dextrin’ is a product different from malt or malt extract according to the Chapter XVII of the ‘Tariff and the H.S.N. Explanatory Notes covering sugar and sugar confectionery. Heading 17.02 of H.S.N. covers other sugar including chemically pure lactose, maltos, glucose and fructose in solid form. H.S.N. Explanatory Notes under Heading 17.02 specifically covers ‘Malto Dextrin’ (Dextri-Maltoses) under the category of other sugar and defines Malto Dextrin as under :
“Malto Dextrins (or dextri Maltoses) obtained by the same process as Commercial glucose. They contain maltose and polysaccharides in variable proportions. However, they are less hydrolysed and therefore have a lower reducing sugar content than commercial glucose. The heading covers only such products with a reducing sugar content, expressed as dextrose on the dry substance, exceeding 10 per cent fall in Heading 35.05. Malto Dextrin are generally in the form of white powders, but they are also marketed in the form of a syrup [See Part (b)]. They are used cheaply in the manufacture of baby food and low-caloric dietetic foods, as extenders for flavouring substances or food colouring agents, and in the pharmaceutical industry as carriers.”
8. Thus, Malto Dextrin otherwise known as dextrin maltoses is understood and classified as sugar under Heading 17.02 by the H.S.N.
9. It has also been contended on behalf of the petitioner that Malt extract is defined under Heading 19.01 of H.S.N. Explanatory Notes as under :
“Malt Extract are made by concentrating the solution obtained on macerating malt in water.
They remain classified in this heading whether in block or powder form, or as more or less viscous liquids.
Malt extracts with added lecithin, vitamins, salts, etc., remains in this heading provided they do not constitute medicaments of Chapter 30.
Malt extracts are mainly employed for the preparation of products of a kind used as infant food or for dietetic or culinary purposes, or for the manufacture of pharmaceutical products. The viscous forms may also be used without further preparation in the baking and textile industries.”
10. The petitioner contended that they have a strong prima facie case for the reasons that in the grounds and in the memorandum of appeal and that the balance of convenience was also in favour of the petitioner. Learned Counsel for the petitioner has referred a judgment of Delhi High Court in Writ Petition No. 7472 of 1999 where Tribunal was directed to hear and decide the appeal without insisting on any pre-deposit by order dated 23rd February, 2002 (Annexure-13 to
the writ petition). Similar view has been taken by the Calcutta High Court in 2000 (122) E.L.T. 682.
11. In 1998 (98) E.L.T. 350 (Cal.), Tata Iron and Steel Co. Ltd. v. Commissioner (Appeals), Central Excise, Calcutta, it was held that one of the relevant factors which is required to be considered by the Appellate Authority under Section 35F of the Act is prima facie case on merits and such other relevant factors pertaining to undue hardship while dealing the stay/dispensation of pre-deposit.
12. In Para 4 of Tata Iron and Steel Co. (supra) it was noticed that in the case of Vijay Prakash D. Mehta and Jawahar D. Mehta v. Collector of Customs (Preventive), Bombay, 1989 (39) E.L.T. 178 (S.C.) = A.I.R. 1989 S.C. 2010, their Lordships of the Supreme Court observed while dealing with Section 129E of the Customs Act, which is para materia to Section 35F of the Central Excises and Salt Act, 1944, that the proviso gives the discretion to the authority to dispense with the obligation to deposit in case of undue hardship and that such discretion must be exercised on relevant materials honestly, bona fide and objectively. Their Lordship further observed that in the facts and circumstances of each case, all the relevant factors, viz. The probability of the prima facie case of the appellant and the conduct of the parties have to be taken into consideration by the appellate forum while it is to decide the question whether the deposit has to be dispensed with or not.
13. In 1990 U.P.T.C. 321, Matsushita Television Audio Ltd., India v. Commissioner (Appeals), Customs and Central Excise, Noida, while dealing Rule 57G Central Excise Rules, 1944 in respect of Modvat claimed, the Adjudication Officer issued show cause notice and after obtaining objection claimed of Modvat was disallowed and appeal with stay application preferred against such order, the Appellate Authority was pleased to pass stay in part and condition of pre-deposit of the waived in port. Since Section 129E of Customs Act is identical to Section 35F of Central Excise Act, therefore, High Court directed to the Appellate Authority to re-hear and dispose of the stay application.
14. It was held in Para 9 of M/s. Matshusita Television (supra) that there would not be any dispute about legal proposition that the Appellate Authority while considering an application under proviso in Rule 35F should take a realistic view of the matter in determining whether the prayer for dispensation of precondition of deposit of the amount required to be deposited should be allowed or not and if so allowed what conditions should be imposed upon the person claiming such dispensation.
15. In Para 12 of M/s. Matshusita Television (supra) it was held that however, considering the amount involved and the nature of goods, I am of the view that the authority below ought to have given an opportunity to the petitioner before passing the impugned order to produce material in support of its claim that the appellant has a very good case on merit and if the stay as prayed for is not granted it will cause great irreparable loss/injury and hardship to the appellant. Therefore, this Court feels it expedient in the interest of justice to remand the matter to the Appellate Authority for afresh disposal of the stay application after affording an opportunity to the parties to produce material/evidence in support of the grounds taken in the stay application.
16. In M.C. Gael’s v. Union of India, 1988 (35) E.L.T. 449 related to Excise and Customs Act. Section 129E of the said Act had almost similar provisions as contained in Section 35F of the Central Excise Act had almost similar provisions as contained in Section 35F of the Central Excise Act. Proviso to Section 129E is identical to the proviso to Section 35F of the Central Excise Act. In both the provisos it is mentioned that the person desirous of appealing against the order shall, pending the appeal deposit with the proper officer the duty demanded or the penalty devied. Provisos to Rule 129E of the Customs Act as well as to Rule 35F of the Central Excise Act similarly provide that where in any particular case. The Collector (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person. The Collector (Appeals) or as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of the revenue. On the basis of the said provisions Sri Gulati argued that the pre-condition for dispensing with the precondition of deposit of penalty imposed or credit disallowed is that the Appellate Authority should be of the opinion that deposit of the amount demanded would cause undue hardship to such person. It is submitted that there is no whisper in the stay application that the petitioner filed copy of the annual report and which has been filed with the present petition. Only this much was stated that petitioner herein is also willing to get on the photo copy of the exchange control copy of its Bill of Entry produced by it before the department and to furnish an indemnity bond (copy already enclosed) for the amount of credit in question.
17. In 1999 U.P.T.C. 423, Kaushal Industries, Agra v. Commissioner (Appeals), Customs and Central Excise, Ghaziabad, it was held in reference to Section 35F, Central Excises and Salt Act, 1944, that prima facie case on merits and the financial condition to be looked into and decide the application for waiver and
stay.
18. In 1998 (104) E.L.T. 330 (Cal.), Ruby Rubber Industries v. Commissioner of Central Excise, Calcutta-11, while dealing the stay dispensation of pre-deposit the work prima facie case and its meaning was elaborated and Calcutta High Court has indicated that it is now well settled through judicial precedence that prima facie case is a relevant factor for deciding the question of undue hardship. It is also well settled similarly prima facie case does not necessarily mean that one must have (sick) edges case which is bound to succeed where as the prima facie case always has been held by the Courts to be a case which is arguable and fit for trial and consideration and the Court find that there was non-application of mind to prima facie case by the Tribunal, the Court set aside Tribunal’s partial stay orders and remanded the matter for afresh decision expeditiously.
19. It was also held that the matter of stay/dispensation of pre-deposit and alternative remedy of appeal is not provided for against stay orders passed under Section 35F of Central Excise Act, 1944, therefore, the writ petition against stay order is maintainable under Article 226 of Constitution.
20. In 1998 (104) E.L.T. 325, Sri Krishna v. Union of India, the following A.I.R.,1970 S.C. 713, Malkiat Singh v. State of Punjab; A.I.R. 1989 S.C. 1789, State of M.P. v. Narayan Singh; A.I.R. 1972 S.C. 1610, Nasir Sheikh v. State of Bihar; 2003 (153) E.L.T. 36 (S.C.) = A.I.R. 1976 S.C. 1527, S.I. Coir Mills v. Addl Collector, while dealing the stay/dispensation of pre-deposit and undue hardship, the Tribunal is obliged to consider the same and the order of the Tribunal should show if the pleas raised before it have any prima facie merit or not and if appellant has such a strong prima facie case as it most likely to exonerate him from payment and still the Tribunal insist on pre-deposit of the amount it would amount to undue hardship.
21. Para 17 of 1997 (91) E.L.T. 13 (S.C.), Collector of Central Excise, Hyderabad v. Bakelite Hylam Ltd., this Court while considering the Central Excise Tariff Act of 1985 has held that looking to the Statement of objects and reasons the Central Excise Tariff under the 1985 Act is based on the Harmonised System of Nomenclature (H.S.N.) and the internationally accepted nomenclature has been adopted to reduce disputes on account of tariff classification. Accordingly, for resolving any dispute relating to tariff classification, the internationally accepted nomenclature emerging from the H.S.N. is a safe guide, this being the expressly acknowledged basis of the structure of, the Central Excise Tariff in the 1985 Act and the tariff classification made therein. In case of any doubt, the H.S.N. is a safe guide for ascertaining the true meaning of any expression used in the Act.
22. It has been contended on behalf of the petitioner that the order dated 12th April, 2002 (Annexure-1) is not a speaking order and the merits of the case was not considered and therefore, order is not sustainable, more so without keeping in mind the financial difficulties of the petitioner, the above order has been passed.
23. I have gone through the facts and pleadings of the writ petition, I find that the above order is not speaking order. The Commissioner has not considered the appeal of the petitioner on merits of the case, therefore, the judgment referred above are protecting the cause of the petitioner. Therefore, the order of Commissioner, Excise is liable to set aside and Commissioner is directed to reconsider the entire question under Section 35F of the Act upon the prayer of the petitioner for dispending with the requirement of deposit of the amount in question and after hearing the parties in question on merits and in the light of the observations made above and the law on the subject to pass, afresh order. Till the respondent No. 2 considers and disposes of afresh the petitioner’s application for dispensation with the deposit, the recovery of the amount demanded shall stay and thereafter the order that the Commissioner passes shall take effect. The respondent No. 2 shall very expeditiously dispose of the matter relating to the question of deposit and in any event within two months.
24. The petition is finally disposed of. No order as to costs.
25. A copy of the order shall be furnished to the learned Counsel for the petitioner on payment of usual charges and the copy of this order shall also be furnished to the learned Standing Counsel. A certified copy of the order shall be presented by the petitioner himself before the Commissioner (Appeals) within one week after receipt of the order.
