Judgment:
1. The applicants were granted Industrial Licence by the Ministry of Industries, Government of India on 11.6.1986 for setting up a 100% Export-Oriented undertaking (EOU) for manufacture and export of stainless steel cutlery. As per the conditions of the licence, the EOU had to export the entire production excluding rejects not exceeding 5% for a period of ten years. For the purpose of setting up 100% EOU, the applicants imported capital goods without payment of Customs duty by availing the exemption under Notification No. 13/81-Cus dated 9.2.1981 during the period 1986 to 1988 and also procured indigenous capital goods and raw materials without payment of Central Excise duty in terms of Notification No. 123/81-CE dated 6.6.1981 during 1988 to 1992.
Before expiry of the above period of ten years, the Department issued a show-cause notice to the applicants. Two corrigenda were issued later.
As per these proceedings, the Department proposed to recover customs duty on the imported capital goods and Central Excise duty on the indigenous capital goods and raw materials and also to impose penalties on them under both the Customs Act and the Central Excise Act. The Department also proposed to confiscate the goods procured without payment of duty. For these purposes, it was alleged that the applicants had failed to discharge their export obligation under the licence and to fulfil the conditions under the Notifications. The applicants denied the allegations and resisted the proposed action of the Department. The Commissioner of Central Excise, Jaipur, who adjudicated the dispute, found that the party had not discharged their export obligation in full and had violated the conditions of the above Notifications and, therefore, Customs duty and Central Excise duty were leviable on the imported capital goods and the indigenously procured goods respectively under Section 28 of the Customs Act and Section 11A of the Central Excise Act respectively. He also found that the two categories of goods were liable to confiscation under Section 111(o) of the Customs Act and Rule 173Q of the Central Excise Rules respectively. It was further found that the applicants were liable to penal action under both the Customs and Central Excise provisions. Accordingly, Ld. Commissioner passed order dated 14.3.2000 confirming the demand of customs duty to the extent of Rs. 2,11,08,034.00 under Section 28 of the Customs Act and also the demand of Central Excise duty amounting to Rs. 18,71,053.40 under Section 11A of the Central Excise Act. The adjudicating authority, apart from confiscating the goods, imposed penalties of Rs. 25 lakhs and Rs. 30 lakhs on the applicants under Rule 173Q of the Central Excise Rules and Section 112 of the Customs Act respectively. Aggrieved by this order of the Commissioner, the applicants have preferred appeal to this Tribunal and have also filed the present application seeking waiver of pre-deposit of the aforesaid duty and penalty-amounts and stay of recovery thereof, pending the appeal.
2. We have carefully examined the grounds of the stay application and have heard Ld. Consultant Shri J.M. Sharma for the applicants and Ld.
JDR Shri M.R Singh for the respondents.
3. Ld. Consultant submitted that the Commissioner of Central Excise, Jaipur had no jurisdiction to pass the impugned order; that the goods in respect of which demand was confirmed were also confiscated, that, no such confiscation, the property vested in the government and therefore the applicants had no liability to pay duty on such goods except at the stage of redemption of the goods; that any pre-deposit of duty was not warranted in respect of goods which were under the control of the Customs/Central Excise authorities; that the demand of Customs duty was time-barred inasmuch as it was raised beyond the period of five years after the period of importation of the goods; that the applicant-company was a sick unit declared as such by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985; that their unit suffered accumulated loss to the tune of Rs. 7.06 crores as on 31.3.2000 and, therefore, the company was not in a position to make any pre-deposit of duty or penalty. Ld. Consultant prayed for allowing the present application on the grounds of prima facie case, time-bar and financial hardships.
4. Ld. JDR opposed the above pleas and submitted that the Commissioner had jurisdiction to adjudicate the dispute as per circulars issued by the Ministry; that, when the period of ten years was over, it was obligatory for the authorities to finalise the assessments and, for this purpose, the show cause notice was issued; that the earlier assessments were provisional and therefore the plea of limitation would not be tenable; and that the original show-cause notice was issued within the period of ten years prescribed for fulfilment of export obligation by the EOU. He further contended that, when the said period elapsed, the exemption Notifications became inoperative and, consequently, Customs duty and Central Excise duty became leviable on the imported capital goods and indigenously procured goods respectively on expiration of the aforesaid period of ten years. The applicants were therefore bound to pay the duty as demanded and confirmed. Ld. JDR further argued that, even if the goods were still in bonded premises of the Customs, duty was leviable on the same once it was found that exemption under the Notifications was not available to such goods. He also opposed the plea of financial hardships and submitted that the EOU had not acted upon the package for reviving the unit as ordered by the BIFR on the basis of consent of parties. He, therefore, urged that the applicants should be directed to deposit the entire amounts of duty and penalty.
5. We have carefully examined the rival submissions. We note that a major part of the total duty amount was demanded and confirmed under the Customs Act. It is not in dispute that the goods are under the control of the Customs/Central Excise authorities. In such a situation, for purposes of the present application, we are inclined to follow the view taken by the Tribunal in the case (cited by Ld. Consultant) of Yuil Measures (I) Ltd. v. CC, New Delhi 1998 (29) RLT 396 (CEGAT), wherein the contention of the assessees that no pre-deposit of Customs duty could be insisted on in respect of goods which on confiscation vested in the Government was accepted by the Bench and waiver of pre-deposit of duty was granted. Following this view, we waive pre-deposit of the entire amount of Customs duty confirmed by the adjudicating authority. As regards the Central Excise duty, we accept Ld. Consultant's contention that the principle laid down by the Tribunal while considering Section 129-E of the Customs Act in Yuil Measures (I) Ltd. (supra) is equally applicable to the requirement of pre-deposit of Central Excise duty under Section 35-F of the Central Excise Act in respect of goods which are confiscated under Central Excise provisions and thereby vest in the Government. We, therefore, waive pre-deposit of the Central Excise duty as well. The rival submissions on merits and limitation may require detailed consideration at hearing stage of the appeal.
6. It is not disputed that the company was declared as sick unit by the BIFR. It is also seen from records that sanction was granted by the BIFR to revive the unit. But there is no evidence to show whether the unit was actually revived. Ld. JDR argued that the company ceased to be a sick unit upon sanction by the BIFR for its revival. This argument was, however, not substantiated before us. Therefore, we cannot but treat the company as a sick unit. It is also not in dispute that the unit has suffered accumulated loss to the tune of over Rs. 7 crores as on 31.3.2000 as evidenced by the Balance Sheet produced by the applicants. Having regard to this precarious financial position of the applicants coupled with the fact that they are a sick unit as declared by the BIFR, we are of the view that the amounts of penalties imposed by the adjudicating authority should also not be required to be pre-deposited at this stage. The interests of the Revenue, however, would call for an early disposal of the appeal.
7. The application stands allowed unconditionally and the appeal is directed to be posted for regular hearing to 14.12.2000.