ORDER
K.K. Agarwal, Member (T)
1. These are applications for modification of stay order No. S/429-458/2007/C-I/EB dated 6.7.2007 filed by M/s. Podar Texchem Limited, M/s. Podar Kintex Limited, M/s. Sarala Polyesters Ltd., M/s. Yangir Synthetics Ltd., Shree Sanand Textile Industries Ltd., Indian Polyfins Ltd., Karan Fibres & Fabrics Ltd. and Virlon Textiles Ltd. The grounds of modification and our findings there on are individually discussed in the paras below.
a) M/s. Podar Texchem Limited and M/s Podar Kintex Limited.
1. The grounds of modification of stay order of the above two applicants are identical and, therefore, they are being discussed together, Ld. Advocate for the applicants Shri Harlwasia submitted that the Tribunal vide its stay order has directed M/s Podar Texchem Limited and M/s Podar Kintex Limited to deposit Rs. 29 lakhs and Rs. 55 lakhs respectively as compliance to Section 35F of the Central Excise Act, 1944. Ld. advocate strongly argued that the facts and circumstances of the case are such that it requires a remand to the lower adjudicating authority as there has been abnormal delay in issuing the order on 19.12.2006, whereas the last hearing was held somewhere in June, 2005 and on account of such delay the order, prima-facie, has to be held as not good in law, as held by the Hon’ble Bombay High Court in the case of Unique coordinators v. Union of India wherein on account of abnormal delay the matter was remanded back to the original authority to pass a fresh order. It was observed by the Hon’ble High Court that whereas justice delayed is justice denied, justice withheld is even worse than that and has also referred to the Hon’ble Supreme Court decision in the case of Madhav Hayawadanrao Hoskot v. State of Maharashtra . Similar decision was passed by the Hon’ble Bombay High Court in the case of Devang Rasiklal Vora v. Union of India wherein also the matter was remanded to the original authority because there was a delay of about two years in passing the Order after closing of hearing and directions were issued to the CEGAT to frame guidelines and issue administrative instructions to prevent delay in delivery of judgments as was laid down by the Apex Court in the case of Anil Rai v. State of Bihar . The Hon’ble High Court of Delhi in the case of Gokaldas Images Ltd. v. Union of India has remanded the matter as there were inconsistency of facts which in Hon’ble Court’s opinion were merely on account of inordinate delay in passing the order. Some Tribunal’s decisions to this effect were also brought to our notice. It was submitted that the decisions of the higher authorities is binding and therefore the decisions of the Hon’ble High Court and the Hon’ble Supreme Court is binding on the Tribunal and the matter, accordingly, needs a remand back to the original authority as there has been an abnormal delay in passing orders and there are certain inconsistencies in the order in as much as in Para 11 of the said order the Bench has concluded that Sri R.C. Sharma of Podar Texchem Ltd. helped in diversion of yarn and operated the account of GCUL in Arab Bangla Desh Bank, whereas, the fact is that no such admission has been made by Shri R.C. Sharma in the statements recorded and relied upon.
2. Attention was also invited to the provisions of Section 11A(2A)(a) which reads as under :
2(A) Where any notice has been served on a person under Sub-section (1), the Central Excise Officer,-
(a) In case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, where it is possible to do so, shall determine the amount of such duty, within a period of one year; and
(b) …
It was submitted that this section requires the adjudicating authority to determine the duty within a period of one year where it is possible to do so. No reasons are forthcoming as to why it was not possible to decide the matter within one year of issuance of show cause notice and in such a situation the order has to be held as bad in law.
3. Lastly, it was submitted that M/s Podar Kintex has became sick and Canara Bank and Bank of Baroda taken over all the assets of the company situated at Hahad. The plant and machinery and other assets at the factory of the applicant have been sold by public auction by the said financial institutions. At present the applicant is without any factory and without any business and therefore, it is impossible for them to pay the pre-deposit and accordingly the order of pre-deposit will amount to infringement of right of Podar Kintex to appeal and denudes its chances of getting justice. These facts were not considered by the Bench, even though as per their say it was brought to the notice of the Hon’ble Bench. Similarly in the case of M/s. Podar Texchem it was submitted that it has been under going continuous losses in business and its activities have been ceased since the year 1999. The land and building, machinery has been taken over by SICOM, a Government of Maharashtra Financial Institution, for non-payment of dues and accordingly they are not in a position to deposit any amount. The plant and machinery and other assets of the factory have been sold by public auction by the said financial institutions and therefore, the applicant is without any factory and without any business. A copy of panchanama regarding the sale of assets by SICOM was submitted along with latest cop of balance sheet. In view of this it was submitted that the pre-deposit should be waived as otherwise it will lead to infringement of its right to appeal and denudes its chances of getting justice.
4. Ld. Jt. CDR, Shri B.K. Singh submitted that all the pleas now being raised, except financial hardship, were never raised by the applicants in their stay applications filed along with the appeal and no new plea can be raised at the time of modification. He invited our attention to the decision of the Hon’ble Bombay High Court in Baron International Ltd. v. Union of India wherein it was clearly held that modification can only be asked in the event of change of circumstances. It was also held by the Hon’ble High Court that CESTAT has no power to review its order and no application for review in the garb of prayer for modification can be entertained by the Tribunal. Tribunal shall first make prima-facie enquiry before considering any modification application, whether any change in circumstances after the previous order shown with sufficient material in that behalf or any other reason prima-facie exists warranting modification of previous order which ground was not available earlier. The Tribunal shall be justified in rejecting frivolous application at threshold. In view of this it was submitted that all these pleas, which are now being made, were available to the applicants on the earlier occasion, when the stay order of which modification is being sought, but were never raised and therefore there is no change in the circumstances and accordingly the modification application needs out right rejection. The plea of financial hardship was noted by the Tribunal in its order and therefore, it has to be taken that it was considered by it and accordingly the amount of pre-deposit was quantified. As regards delay in passing of the order, it was submitted that the delay was on account of stay granted by the Hon’ble High Court, when one of the appellants approached the Hon’ble High Court, and after the stay was vacated the order was passed within two months. A common order was passed by clubbing the various show cause notices on account of the fact that all the show cause notices pertain to common investigations, where the evidence was also, more or less, the same. Reference was invited to the decision of Hon’ble Karnataka High Court in the case of Commissioner of Central Excise, Bangalore-III v. McDowell & Co. Ltd. 2003 (186) ELT 145 (Kar.) wherein it was held that even while Tribunal is fully satisfied that requirement of pre-deposit, may cause undue hardship to the appellant, if pre-deposit is insisted, while dispensing that, Tribunal should necessarily take into consideration interest of revenue, in the sense that, interest of revenue should be safeguarded i.e. payment of duty, subject matter of appeal, should be secured to revenue in the event appeal fails.
5. In the rejoinder, ld. advocate invited our attention to the decision of the Tribunal in the case of Sagarika Acoustronics Pvt. Ltd. v. CCEx, Belapur vide Order No. M/1175/MUM//2007-C-I (EB) dated 10.9.07 in which the Tribunal noted the observation of the Hon’ble Supreme Court in Civil Appeal No. 1202 of 2007 dated 7.3.2007, which reads as under.
The appeal of the assessee has been dismissed by the Tribunal for non-deposit of Rs. 1.40 crores. The assessee complains that it had already made an application pointing out to the Tribunal that the Company is under DIFR. According to the assessee, its application dated NIL September, 2005, being Modification Application No. …/2005, is pending even today before the Tribunal. In the circumstances, we direct the Tribunal to record, its findings regarding the net worth of the company. If the net worth of the company is found to be negative, then the Tribunal will consider restoration of the appeal it its file and in which event the matter will have to be decided on merits. If, however, the net worth is found to be a positive figure, the Tribunal will say so, give its reasons and dispose of the modification application in accordance with law.
It was accordingly submitted that financial hardship can always be a ground of modification of stay order once evidence is produced that the assessee has no means to pay the pre-deposit.
6. We have considered the submissions. We find that all the pleas raised by the applicants were never urged by them either in their original stay applications or during the course of hearing of the stay application and the pleas now being raised were available to them at the time of original stay application also and have not arisen out of change of circumstances. Even the plea of financial hardship was also noted by the Tribunal, and therefore, as per the Hon’ble Bombay High Court decision, such pleas cannot be entertained for modification, which can only be asked in the event of change in circumstances. It will be useful to reproduce para 8 of the Hon’ble Bombay High Court in the case of Barron International Ltd. which reads as under :
8. Our experience shows that in almost all the applications moved to seek modification of the Tribunal’s order contain only grounds of review. They are freely entertained by the CEGAT and the same are sometime accepted or rejected on merits with detailed order. Such exercise, apart from labour, must be consumed major part of its working hours. This wastage of labour and working hours can easily be saved by the CEGAT, if application moved in this behalf is prima facie, examined by CEGAT to find out whether any change in circumstances after the previous order, is shown with sufficient material in that behalf; or any other reason prima facie; exists warranting modification of the previous order on the ground which was not available when the previous order was made. At the threshold, if such preliminary enquiry is made by the Tribunal, we are sure in most of the cases application may not be required to be heard on merits. Had such enquiry been made by the CEGAT in this behalf in this case, we are sure, Tribunal would have saved its labour and time and would not have been required to devote nine pages for writing impugned order. We direct that henceforth the Tribunal shall first made prima facie; enquiry whether application needs consideration on merits as indicated by us hereinabove before considering any application for modification of its previous order on merits. If the Tribunal finds that prima facie case for modification is made out, then, only a Tribunal shall deal with such application on merits. The Tribunal shall be justified in rejecting frivolous applications at the threshold.
7. The above para makes it absolutely clear that the Tribunal can entertain a modification application only in the event of change in circumstances. However, the aspect of financial hardship can always be looked into as has been observed by the Apex Court in the case of M/s. Sagarika Acoustronics Pvt. Ltd. (cited supra), where in the Apex Court directed the Tribunal to take into account the financial condition of the applicants and the same was acted upon by the Tribunal and pre-deposit was waived. In the present case we find that in both the cases the applicants entire assets have not only been taken over but have even been sold by the financial institutions to realize their dues and no balance is lying with them to recover the departmental dues. Such undue hardship cannot be ignored when it is on record that the applicants have no means, whatsoever, to pay. Taking the same into account, we modify our earlier stay order and waive the pre-deposit of the entire duty from them.
8. It may be mentioned that there is a application of modification filed by the revenue also in which it has been urged that the amount of pre-deposit indicated in the stay application in respect of M/s. Podar Texchem Limited does not appear to be correct as the pre-deposit amount mentioned in the annexure in respect of other applicants is about 25% of the duty demanded, except in the case of M/s. Podar Texchem Limited, where the pre-deposit amount is only Rs. 29 lakhs against the duty demand of Rs. 11.74 crores which is approximately 2.5% of the duty demand. There appears to be typographical error as instead of 2.90 crores, the figure 29 lakhs has been mentioned and perhaps a zero was unintentionally omitted while typing the order. Ld. advocate for the respondents agrees that it appears to be a typographical error and accordingly we rectify our earlier order and hold that the amount of pre-deposit against M/s. Podar Texchem Limited should be read as Rs. 2.90 crores instead of Rs. 29 lakhs mentioned therein.
Sarala Polyesters Ltd.:
9. The applicant, vide our earlier order, was asked to deposit Rs. 12 lakhs. Ld. advocate for the applicant Shri Prakash Shah submitted that the Commissioner who has passed the impugned order has in identical circumstances in his earlier order-in-original 171/COMMR(AH)/05 dated 27-9-2005 held that the respondent EOU are liable to pay duty in the event of the diversion of the goods in the local market. A similar vie was taken in respect of his further order-in-original 15/COMMR(AH)/05 dated 31.5.2006 wherein the EOU was held liable to pay duty on the goods diverted in the local market. In view of this contradictory stand taken by the Commissioner in identical set of evidences in both the above appeals, the Tribunal has granted unconditional waiver of pre-deposit of duty and penalty imposed vide its order No. S/529 to 533/2007/C.I.(EB) dated 30.7.2007 and order reported in 2007 (211) ELT 33 (Tri.- Mumbai). It was submitted that in view of inconsistent, contradictory orders passed by the Commissioner, the applicants are entitled to unconditional waiver of pre-deposit of duty demanded and penalty imposed. It was submitted that the Tribunal has in the case of Jaded Siddappa and Co. v. Commissioner of Service Tax, Mangalore 2007 (5) STR 356 and Neeraj Pipes Pvt. Ltd. v. Commissioner of Central Excise, Hyderabad 2007 (213) ELT 511 held that where the adjudicating authority has taken inconsistent views, unconditional waiver should be granted. In view of this, it was submitted that the stay order should be modified and the pre-deposit should be completely waived.
10. Ld. Jt. CDR, however, submitted that the Tribunal has been taking consistent view that in all cases where the re-warehousing certificate is not produced or is forged, the duty liability primarily lies on the supplier and invited our attention to the decision in the case of Carrier Aircon Ltd. v. Commissioner of Central Excise, New Delhi-III and Y.K. Joshi v. Commissioner of Central Excise, Mumbai 2007 (211) ELT 33 (Tri – Mumbai) where this view was reiterated. In the case of Y.K. Joshi, the pre-deposit was waived because the duty was demanded from the consignee and not the supplier and therefore, pre-deposit from the consignee was waived. Therefore, once the Tribunal has taken a consistent stand that duty is to be demanded from the supplier it is immaterial if the Commissioner has taken inconsistent stand as long as the Tribunal decision is consistent.
11. We have considered the submissions. We find that though it is correct to say that in case where the adjudicating authority has taken inconsistent stand in identical circumstances, the Tribunal has, by and large, taken a view that such cases warrant for unconditional stay of waiver of pre-deposit. This view of the Tribunal was known to the applicants even at the time of the hearing of the original stay application but this plea was never advanced and, therefore, as per the Bombay High Court decision in the Baron International Ltd., the modification can be sought only on grounds arising out of change in circumstances which is not so in the present case. Accordingly the modification application has no merits. Additionally, we find merits in the ld. CDR’s contention that the Tribunal has been taking consistent stand that in cases of re-warehousing certificate not received or certificate being forged, the duty liability lies with the consigner which is what the Commissioner has done in the present appeal. Therefore, the modification application has no merits and is accordingly rejected.
Yangir Synthetics:
12. In addition to the grounds submitted in the case of Sarala Polyesters Ltd., it was additionally submitted here that the applicants factory is closed since December, 2003 and they have incurred heavy losses and the carry forward losses for the year ending March, 2006 is Rs. 9.78 crores and as the balance sheet for the year 2006 shows earning per share as -0.06 and, therefore, in accordance with the Apex Court’s decision in the case of M/s. Sagarika Acoustronics Pvt. Ltd., pre-deposit should be waived.
13. We have considered the submissions. We find from the balance sheet for the year 2006 that the net-worth of the company is negative and therefore, following the ratio of the Apex Court decision in the case of M/s. Sagarika Acoustronics Pvt. Ltd. we modify our earlier stay order and waive the pre-deposit of the entire duty.
Indian polyfins Ltd.;
14. The applicants were required to pay an amount of Rs. 4.5 lakhs by our earlier stay order. They have submitted that out of the same 2.70 lakhs has already been deposited and Rs. 1.80 lakhs remains to be deposited. Some points have been urged by them regarding merits of the Commissioner’s order which were already considered by us at the time of our earlier stay order and, therefore, are not being considered. The applicants seek further eight weeks time to deposit remaining amount of Rs. 1.80 lakhs which we grant and direct them to report compliance by 30.1.2008. Failure to do shall result in dismissal of the appeal without further notice.
Karan fibers & Fabrics Ltd. and Shree Sanand Textile Industries Ltd.
15. Ld. advocate for the applicants submitted that they were never a party to the fraud committed by the EOU and others and, therefore, they should not have been asked to pay the duty and though they made the submissions in this regard to the Tribunal they were not allowed to present their all submissions and, therefore, the order needs to be modified as the CT3 copies in their case were not bogus, fake and forged and was duly authenticated and attested by the Central Excise authorities. Besides they pleaded financial hardship on the ground that the unit is closed from 1997-98 and all its assets, as per the order of Debt Recovery Tribunal, were under custody of Bank of Rajasthan, Ahmedabad. The land and building have already been sold / auctioned and proceeds were recovered by the said bank. The residential premises of shri Ashok K. Chechani being the guarantor, mortgaged to the said bank were also auctioned and the proceeds were recovered by the said bank and therefore, they do not have any fund, by which they can arrange any payment. The balance sheet for the year 1996-97 was annexed which shows accumulated losses of over Rs. 6 crores after which the factory is lying closed.
16. We have considered the submissions. Looking into the fact of financial hardship, in as much as their entire land and building including the residential premises has been sold by the Bank and other assets are under the custody of the Debt Recovery Tribunal, we modify our earlier order and waive the pre-deposit of entire duly of Rs. 8 lakhs in the case of Karan fibers & Fabrics Ltd. and Rs. 30 lakhs in the case of Shree Sanand Textile Industries Ltd.
Virlon Textiles Mills Ltd.
17. The applicants besides stating that they were not party to the fraud stated that they have acted upon a valid CT3 certificate and re-warehousing certificate and the re-warehousing in respect of their unit was not sent to the hand writing expert and accordingly cannot said to be forged. Financial hardship was also pleaded as their factory is closed and no manufacturing activity is taking place and no income is being generated.
18. We have considered the submissions. As regards merits it has already been taken into consideration in our earlier stay order and nothing new has come on account of change in circumstances. As regards financial hardship, the applicants have in general terms pleaded having financial hardship and stated to have submitted the balance sheet. However we do not find anything on record and therefore, we do not find any reason to modify our earlier stay order. The application is accordingly rejected. Time for compliance is extended to 30.1.2008
(Pronounced in the court on 11.12.07)