Mound Trading Company Pvt. Ltd. V. Union of India & Ors.

EXCIA/35/2012

AI Insights

Mound Trading Company Pvt. Ltd. appealed against the order of the Customs, Excise & Service Tax Appellate Tribunal which dismissed their earlier appeal for non-compliance with the pre-deposit requirement as mandated by Section 35F of the Central Excise Act, 1944. The original dispute involved the denial of Cenvat Credit on capital goods and the imposition of duty, interest, and penalty. The High Court of Rajasthan, after considering the circumstances and the payments made by the appellant, decided to restore the appeal for a merit-based hearing, setting aside the Tribunal's earlier order.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 820109 (HC-JAIPUR)
• Appeal Type: Others
• Pronouncement Date: 12-07-2013
• Assessment Year: misc
• Laws Referred To: Central Excise Act, 1944, Cenvat Credit Rules, 2004
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AJAY SHUKLA
• Assessee Lawyers: T CHANDRAN NAYAR
• Keywords: CENVAT credit; Excise Duty; Job worker; Pre-deposit; Principal manufacturer
• Section: 2(A); 4(2); 35F; 35G

Judgement Text

"D.B. Civil Central Excise Appeal No.35/2012 139 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR :JUDGMENT: Mound Trading Company Pvt. Ltd. Vs. Union of India & Ors. D.B.CENTRAL EXISE APPEAL NO.35/2012 Date of Judgment: 12th July 2013 HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN-II Mr. T. Chandran Nayar, for the appellant. Mr. Ajay Shukla, for the respondents. <><><> BY THE COURT: By way of this appeal under Section 35G of the Central Excise Act, 1944 (‘the Act’), the appellant-assessee has questioned the order dated 24.08.2012 passed by the Customs, Excise & Service Tax Appellate Tribunal (‘the Tribunal’) in Excise Appeal No.2499/2011 whereby the Tribunal has proceeded to dismiss the appeal preferred against the order dated 27.07.2011/01.08.2011 passed by the Commissioner (Appeals), Jaipur-I upholding the Order-in-Original passed by the Additional Commissioner, Jaipur-I on 30.09.2010 confirming the Cenvat Credit demand alongwith interest and penalty. By the order impugned, the Tribunal has dismissed the appeal only on the ground that the appellant failed to comply with the requirements of pre-deposit as per the order dated 14.06.2012. The impugned order dated 24.08.2012 in its entirety reads as under:- 1 D.B. Civil Central Excise Appeal No.35/2012 “Vide stay order No.960/2012-Ex(BR) dated 14.06.2012 the appellant was directed to deposit the duty demand alongwith interest and penalty in terms of the impugned order within six weeks. Order of pre-deposit has not been complied with. 2. Ld. Counsel for the appellant submits that the appellant is only a job worker and as per mutual understanding between the appellant and the principal manufacturer M/s Parle Biscuit Pvt. Ltd. the amount of duty is to be deposited by M/s Parle Biscuit Pvt. Limited, therefore, the appellant has not deposited the amount. Ld. Counsel for the appellant has not offered to deposit the amount of pre-deposit and he wants to shift the burden of payment of excise duty on M/s Parle Biscuit Pvt. Limited. From this, it is evident that the appellant has not complied with the order of pre-deposit nor he intends to comply with the same. Therefore, the appeal is rejected for non-compliance of the provisions of Section 35F of the Central Excise Act.” When this appeal was taken up for admission on 12.10.2012, it was submitted on behalf of the appellant that the requisite deposit of the excise duty had been made and, therefore, the appeal may be examined on merits. Notice for final disposal was ordered to be issued to the respondents. Thereafter, on 11.07.2013, it was given out that without prejudice to the submissions sought to be made, the appellant has prepared a demand draft in the sum of Rs.20,00,000/- (twenty lacs) payable to the Chief Accounts Officer, Central Excise, Jaipur to prima facie show its bona fide; and the submissions were made for merit consideration of the appeal by the Tribunal concerned. The demand draft so prepared was handed over to the Superintendent (Law), Central Excise, Jaipur-I present in the Court. This Court took note of the submissions made and admitted this appeal for final hearing while formulating a short question arising in the matter in the order dated 11.07.2013, which reads as under:- “The learned counsel for the appellant submits that without prejudice to the submissions sought to be made in this matter, the appellant has got prepared a demand draft in the sum of Rs. 20,00,000/- payable to the Chief Accounts Officer, Central Excise, Jaipur, to prima facie show its bona fides; and essentially the submissions of the appellant are for merit hearing of the matter by the Tribunal concerned. Learned counsel for the appellant has handed over the 2 D.B. Civil Central Excise Appeal No.35/2012 demand draft to the learned counsel for the respondents. Learned counsel for the respondents submits that Superintendent(Law), Central Excise, Jaipur-I is present in the Court, who has instructions to accept this demand draft, of course, without prejudice to the submissions sought to be made in this appeal. The demand draft has been handed over to the learned counsel for the respondents, who has placed receipt thereof on record. As regards present appeal, in our view, following substantial question of law does arise for consideration: (1) Whether on the facts and in the circumstances of the case, in the first place, the CESTAT was justified in directing the appellant to make deposit of the duty, interest and penalty in question and then, in dismissing the appeal for want of compliance of the provisions of Section 35F of the Central Excise Act, 1944? Admit. Mr. Ajay Shukla, learned counsel having appeared for the respondents, fresh notice need not be issued. In view of the short point involved, it appears to be appropriate to take us this appeal for hearing out of turn. List this matter for hearing tomorrow, i.e. 12.07.2013, as prayed for and agreed to by the learned counsel for the parties.” Thus, the only short point involved is as to whether the Tribunal was justified in passing the order for making of deposit and then, dismissing the appeal for want of compliance of the provisions of Section 35F of the Act. On the short point involved, after having heard the learned counsel for the parties and having perused the record, we have formed the opinion that while setting aside the order impugned and taking note of the payment already made, the appeal filed by the present appellant before the Tribunal (Appeal No.2499/2011) deserves to be restored for consideration on merits. In this view of the matter, dilatation on all the factual aspects does not appear necessary. Only a brief reference to the background aspects would suffice. The appellant-assessee is said to be engaged in the manufacture of confectionary and plastic jars as a Contract Manufacturing Unit on job work basis for its alleged principal manufacturer Parle Products Pvt. Ltd. The appellant had allegedly procured from the principal manufacturer the capital goods 3 D.B. Civil Central Excise Appeal No.35/2012 namely ‘Candy Depositing Line’ and ‘Chilling Plant’ with components and accessories under agreements dated 18.04.2002 and 01.09.2006 on payment of monthly rent. The case of the appellant is that the said capital goods were received in its factory on payment of excise duty; and as permissible under Rule 2(a) read with Rule 4(2) of the Cenvat Credit Rules, 2004, Cenvat Credit of 50% of duty paid, amounting to Rs.33,44,067/-, was claimed on capital goods during May 2008 to August 2008. A show cause notice dated 30.04.2009 was, however, issued by the Additional Commissioner, Jaipur-I proposing to deny the credit so claimed and to recover, alongwith interest and penalty, the said amount of Cenvat Credit to the tune of Rs.33,44,067/-. The appellant resisted the show cause notice but the Additional Commissioner by his Order-in-Original dated 30.09.2010 denied the credit and confirmed the demand of Rs.33,44,067/- alongwith interest and imposed an equal amount of penalty. The appellant unsuccessfully challenged the order before the Commissioner (Appeals), Customs & Central Excise, Jaipur-I who proceeded to dismiss the appeal by the order dated 27.07.2011/01.08.2011. Aggrieved by the aforesaid order dated 27.07.2011/01.08.2011, the appellant filed an appeal alongwith stay application before the Tribunal (Appeal No.2499/2011). By the order dated 14.06.2012 (Annex.10), the Tribunal considered the prayer made on behalf of the appellant for waiver of the condition of pre-deposit. The Tribunal, however, was not prima facie satisfied with the submissions made on behalf of the appellant and, accordingly, declined the prayer for waiver and, while dismissing the stay application, directed the appellant to deposit the duty alongwith interest and penalty within six weeks. 4 D.B. Civil Central Excise Appeal No.35/2012 The appellant filed a modification application with the submissions that it had correctly availed the Cenvat Credit in respect of the capital goods loaned/leased to it by the principal manufacturer who had claimed depreciation in respect of the capital goods in question for the purpose of income tax only after excluding the excise duty. Thus, it was a case of the appellant that duty paid on capital goods was not considered for the purpose of depreciation claimed by its principal. In support of the contentions, a certificate of the Chartered Accountant was also produced. The Tribunal was, however, not impressed with the submissions so made and dismissed the application by its order dated 30.07.2012 (Annex.12). Thereafter, for want of compliance of the condition of pre-deposit, the appeal filed by the appellant was dismissed by the impugned order dated 24.08.2012. While submitting that the appellant has a strong prima facie case in its favour with reference to Rule 4(3) of the Cenvat Credit Rules, 2002/2004, it is sought to be contended that the fact of treatment of capital goods in the books of Parle Products Pvt. Ltd. has not been properly appreciated. It is also submitted that in the appellant’s own case for the period 2003-04 to 2007-08, the Tribunal in its order dated 03.01.2012 (Annex.15) has held that the Credit of Cenvat and the duty paid on capital goods belonging to their principal manufacturer Parle Products Pvt. Ltd. is admissible to them, for they being the job workers. It is submitted that on proper appreciation of the facts, strong case for consideration is made out in favour of the appellant. So far the aspects relating to the merits of the case are concerned, we have only taken a brief note of the same to indicate the nature of dispute but for the order proposed to be 5 D.B. Civil Central Excise Appeal No.35/2012 passed, neither any comment thereupon is being made nor any finding in that regard is necessary. For the present purpose, suffice it to observe that during the course of submissions, another fact has been brought to our notice that another concern Parle Biscuits Pvt. Ltd., Neemrana has reversed under protest an amount of Rs.33,44,067/- under debit entry No.938 dated 29.09.2012 against the demand of central excise duty confirmed in the case of the present appellant. This step was taken by Parle Biscuits Pvt. Ltd. in terms of their undertaking dated 30.07.2008 given at the time of applying for Central Excise Registration to the effect that they would honour all the demands against the present appellant, Mound Trading Company Pvt. Ltd., Neemrana, subject to appellate remedies available. The certificate in that regard issued by the Superintendent, Central Excise, Behror has been produced before us and the same is taken on record. As noticed, further to show its bona fide, the appellant has made payment of an amount of Rs.20 lacs by way of demand draft on 11.07.2013. The submissions sought to be made by the appellant in its appeal before the Tribunal cannot be said to be wholly baseless or moonshine. Although the ultimate decision thereupon would depend upon the analysis and adjudication of several relevant aspects but we are only indicating that the appeal filed by the appellant before the Tribunal could not have been considered as totally bereft of substance to the extent that the appellant was to be denied an opportunity of merit-hearing altogether. So far the condition of pre-deposit is concerned, with the aforesaid Parle Biscuits Pvt. Ltd. having honoured its undertaking by reversing an amount of Rs.33,44,067/- for the demand standing against the 6 D.B. Civil Central Excise Appeal No.35/2012 appellant and then, the appellant further having paid an amount of Rs.20 lacs, we are satisfied that, even if late, a substantial part of demand in the order in question has been fulfilled. Having regard to the circumstances, we find it in the interest of justice to observe that on the payments so made, substantial part of the condition of pre-deposit deserves to be considered as having been complied with and to waive the other part of the demand for the time being. As a corollary, the appeal filed by the appellant before the Tribunal deserves to be restored for consideration on merits. Accordingly and in view of the above, the answer to the formulated question is in favour of the appellant-assessee to the extent as indicated above. This appeal is allowed to the extent that while setting aside the impugned order dated 24.08.2012, the appeal (No.2499/2011) is restored for consideration by the Tribunal on merits. It is made clear that with reference to the payments taken note of hereinabove, the appellant shall be deemed to have complied with requirement of the part of condition of pre-deposit. The other part of condition of pre-deposit stands waived. However, it is also made clear that this shall remain an interim arrangement only and the rights of the parties shall ultimately be governed by the final order to be passed by the Tribunal in the appeal. The parties through their counsel shall stand at notice to appear before the Tribunal on 29.08.2013. Needless to reiterate that this Court has, otherwise, not pronounced on merits of the case either way. No costs. 7 D.B. Civil Central Excise Appeal No.35/2012 (NARENDRA KUMAR JAIN-II),J. (DINESH MAHESHWARI),J. cpgoyal/- CERTIFIED THAT ALL CORRECTIONS MADE IN THE JUDGMENT / ORDER HAVE BEEN INCORPORATED IN THE JUDGMENT / ORDER BEING EMAILED C.P.Goyal PA 8 "