Krishna Murari, J.
1. This appeal under Section 35G of the Central Excise Act, 1944 (hereinafter referred to as 'the Act') is directed against the order dated 1-5-2009 passed by Customs, Excise and Service Tax Appellate Tribunal Principal Bench, New Delhi, disposing of the appellant's application for stay/waiver of pre-deposit of the service tax demand and penalty with a direction to deposit a sum of Rs. 1 crore within 8 weeks and report compliance on 25-6-2009.
2. Facts giving rise to the dispute are as under.
3. Appellant was issued a notice dated 10-10-2007 to show cause as to why,
(i) Education Cess amounting to Rs. 3,58,717 short/not paid by them and interest accrued thereon, should not be demanded and recovered from them respectively under Sections 11A & 11AB of the Central Excise Act, 1944 and the amount of Rs. 2,54,805 already paid should not be appropriated and adjusted against the total amount so payable;
(ii) Penalty under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 should not be imposed upon them;
(iii) CENVAT Credit amounting to Rs. 6,21,39,585 wrongly availed and utilised should not be demanded and recovered from them under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944;
(iv) Interest should not be recovered from them under Rule 14 of CENVAT Credit Rules, 2004 on the amount of credit wrongly availed and utilised read with Section 11AC of the Central Excise Act, 1944; and
(v) Penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 should not be imposed on them for the amount of credit wrongly availed and utilized by them.
4. The appellant filed a detailed reply to the show-cause notice vide letter dated 10-3-2008 and 20-8-2008 contesting the allegations made in the show-cause notice on diverse grounds including that the demand was barred by time and the question of eligibility of a manufacturer to avail CENVAT Credit against outward transportation of goods having been referred to a Larger Bench, the proceedings be kept in abeyance, till adjudication. Commissioner of Central Excise passed the order dated 23-9-2008 confirming the proposal contained in the show-cause notice and, accordingly, levied a sum of Rs. 3,58, 717 towards Education Cess under Section 11A of the Act along with interest under Section 11B of the Act accrued thereon and an equal amount was levied as penalty under Section 11C of the Act. The demand towards CENVAT Credit amounting to Rs. 6,21,39,585 under Section 14 of the CENVAT Credit Rules, 2004 read with Section 11A of the Act along with the interest due on it under Section 14 of the 2004 Rules read with Section 11AB was also confirmed and an equal amount was imposed as penalty.
5. Being aggrieved and dissatisfied, the appellant preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as 'the Tribunal') along with the stay application.
6. A prayer for waiver of the pre-deposit condition was also made on the ground that having a prima facie case insistence of pre-deposit of any part of duty and penalty imposed would cause undue hardship and irreparable loss.
7. Allegation with regard to the financial position being bleak was also made. The Tribunal vide impugned order dated 1-5-2009 directed the applicant to deposit a sum of Rs. 1 crore within 8 weeks and subject to said deposit being made the balance amount of duty and penalty was waived and recovery thereof was stayed till the disposal of the appeal.
8. It has been urged by Shri M.P. Devnath appearing for the appellant that if it is established before the Tribunal that the appellant has a strong case on merit, the appellate authority is bound to examine the issue and if prima facie, a strong case on merit is established, the condition of pre-deposit ought to be waived. It has further been submitted that financial hardship does not mean as to whether the appellant is in a position to make the payment or not, but the Tribunal is under an obligation to examine prima facie case whether the appellant is liable to make any payment at all and if the case on merit is prima facie found to be established, waiver should be permitted. It has further been pointed out that in view of the judgment of the Punjab & Haryana High Court in the case of Ambuja Cements Ltd. v. Union of India : [2009] 20 STT 182 as well as Board Circular No. 97/8/2007-ST, dated 23-8-2007 and the decision dated 18-5-2009 of the Larger Bench of the Tribunal at Bangalore, which still holds the field the appellant was entitled to avail the CENVAT Credit against onward transportation of goods and, thus, had a very strong prima facie case and order of the Tribunal directing to make a deposit of Rs. 1 crore, in the circumstances, is totally illegal and unjustified. It has next been submitted that various Benches of Tribunal throughout the country in identical facts and circumstances have waived the condition of pre-deposit, hence, the appellant was also entitled for a full waiver. In support thereof, various orders passed by different Benches of the Tribunal has been produced before me.
In reply, it has been submitted by Shri Shambhu Chopra appearing for the respondent that the appellant company being a profit making company has means to deposit a sum of Rs. 1 crore as directed by the Tribunal as pre-deposit and there is no reason to interfere with the impugned order. It has further been submitted that in case the appellant succeeds before the Tribunal, the amount of pre-deposit is liable to be refunded with interest, as such also the order does not requires any interference. It has also been submitted that in the absence of any pleading with respect to undue hardship by the appellant in making the pre-deposit, the order directing stay of the duty and penalty on payment of Rs. 1 crore is fully justified in the facts and circumstances of the case. It is also submitted that since the Statute has imposed a condition of pre-deposit for filing an appeal, the Courts ought not to interfere with the same.
9. I have considered the submission made by the learned Counsel for the parties and perused the record.
10. With the consent of the learned Counsel for the parties, the appeal is disposed of finally at this stage.
11. In the case of Ambuja Cements Ltd. (supra), the following two questions came up for consideration before the Punjab & Haryana Court:
(1) Whether the service of transportation up to the customer's doorstep, in the case of 'FOR destination' sales where the entire cost of freight is paid and borne by the manufacturer, would be 'input service' within the meaning of Rule 2(0 of the CC Rules ?
(2) Whether interest ought to have been demanded in the present case? (p. 184)
12. The Division Bench of the Punjab & Haryana High Court after considering the relevant provisions of the Act and Rules and also Board Circular No. 97/6/2007-ST, dated 23-8-2007 answered both the questions in favour of the assessee and against the revenue.
13. The question referred to for consideration by Larger Bench of the Tribunal was 'Whether the services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as a 'input service' in terms of Rule 2(1)(ii) of CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax paid on the value of such service or whether 'input service' should be limited only to outward transportation up to the place of removal in terms of inclusive definition as held in Gujarat Ambuja Cement Ltd. v. CCE : [2007] 8 STT 122 (New Delhi - CESTAT). By means of a well considered and detail judgment, the Larger Bench of the Tribunal ABB Ltd. v. CCE & ST [2009] 21 STT 77 (Bang. - CESTAT) answered the reference by holding that the services availed by manufacturer for outward transportation of final products from the place of removal should be treated as an 'input service' in terms of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax on the value of such service. Section 35B of the Act provides for an appeal against the order passed by Commissioner of Central Excise exercising power as adjudicating authority before the Appellate Tribunal. Section 35F of the Act prescribes condition of pre-deposit of duty demanded and the penalty levied for maintaining the appeal by the assessee. However under proviso, the Tribunal has been vested with the powers to dispense with such deposit, on forming an opinion that such deposit may cause undue hardship, subject to such conditions as it may deem fit in order to safeguard the revenue. Section 35F reads as under:
35F. Deposit, pending appeal of duty demanded or penalty levied.-Wherein any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise Authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied:
Provided that where in any particular case, the Commissioner (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 Commissioner (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 interests of revenue:
Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.
14. It is well-settled that right of appeal is a creature of Statute and if the legislation in its wisdom has imposed certain condition such as pre-deposit for the purpose of maintaining the appeal, normally the Court cannot interfere unless the condition imposed for the exercise of such right are so onerous so as to amount to unreasonable restrictions rendering the said right almost illusory as observed by the Hon'ble Supreme Court in the case of Nand Lal v. State of Haryana : AIR 1980 SC 2097. However, in cases where the Legislature has conferred the power upon the appellate authority to waive the condition for maintaining the appeal in a particular situation, the question which arises for consideration is whether the appellate authority is bound to examine as to whether the case of waiver has been made out after examining the issues and condition/situation.
15. This question is no longer res integra and has been examined and is being examined by the Courts everyday.
16. Delhi High Court in the case of Sri Krishna v. Union of India : 1998(104)ELT 325, has observed as under:
8. Mr. ML Bhargava, the learned Counsel for the respondent submitted that the impugned order being a discretionary order is not liable to be interfered with in exercise of writ jurisdiction of this Court. He relied on the decision of the Supreme Court in S.I. Coir Mills v. Addl. Collector, Customs : AIR 1976 SC 1527 and Oswal Weaving Factory v. State of Punjab : AIR 1966 Punjab 532. Suffice it to observe that while disposing of an application under Section 129 of the Customs Act, 1962 the Tribunal is obliged to adhere to the question of undue hardship. The order of the Tribunal should show if the pleas raised before it, have any merit prima facie or not. If the appellant has such a prima facie strong case as is most likely to exonerate him from payment and still the Tribunal insists on the deposit of the amount it would amount to undue hardship.
17. A Division Bench of this Court in the case of I.T.C. Ltd. v. Commissioner (Appeals), Customs & Central Excise : 2005 (184) ELT 347 held as follows:.While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition. The arguments that appellant is in a position to deposit or if he succeeds in appeal, he will be entitled to get the refund, are not the considerations for deciding the application. The order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with the law. The expression 'undue hardship' has a wider connotation as it takes within its ambit the case where the assessee is asked to deposit the amount even if he is likely to exonerate from the total liability on disposal of his appeal. Dispensation of deposit should also be allowed where two views are possible.... Undoubtedly, the interest of the revenue cannot be jeopardized but that does not mean that in order to protect the interest of the revenue, the Court or authority should not exercise its duty under the law to take into consideration the rights and interest of an individual....
18. Uniform view of the various High Courts of the country on the question has been that while considering provisions of pre-deposit of duty and penalty, the authority concerned has to examine the question whether the appellant has a good prima facie case so as to justify the dispensation of requirement of pre-deposit of the disputed amount of duty and penalty and the authority must exercise its discretion to dispense with such requirement particularly in a case where appellant satisfies the appellate authority that his case is squarely covered by the decision of a competent court binding on it and in such cases, asking the appellant to deposit the duty demanded and the penalty levied would cause undue hardship to the appellant. Reference may be made to the decision of Karnataka High Court in the case of BPL Sanyo Utilities & Appliances Ltd. v. Union of India : 1999 (108) ELT 621, Calcutta High Court in the case of J.N. Chemical (P.) Ltd. v. CEGAT : 1991 (53) ELT 543, Madras High Court in the case of Andhra Civil Construction Co. v. CEGAT : 1992 (58) ELT 184, Allahabad High Court in the case of Hindustan Ferro & Industries Ltd. v. CESTAT 2006 (205) ELT 153.
19. It may also be relevant to quote the following observation of the Hon'ble Apex Court in the case of Indu Nissan Oxo Chemicals Industries Ltd. v. Union of India : 2008 (221) ELT 7:
It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But, if on a cursory glance it appears that the demand raised has no legs to stand on, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a licence to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, interim relief can be given.
20. The Hon'ble Supreme Court again in the case of Bhavya Apparels (P.) Ltd v. Union of India : 2007 (216) ELT 347 has observed as under:
The learned Additional Solicitor General very fairly submits that a part of the goods is in custody of the respondents. If that be so, in our opinion, it was obligatory on the part of the Tribunal to take that factor into consideration in making the order of pre-deposit. Furthermore, while exercising its jurisdiction the Tribunal was also required to apply its mind in regard to the question of undue hardship on the part of the appellants upon considering existence of a prima facie case. Merit of the case ordinarily should not otherwise be gone into unless the question on the face of it appears to be concluded.
21. Thus, phrase 'undue hardship' has been interpreted to be not only exclusively related to economic hardship but would also cover a case where appellant has a strong prima facie case. For a good or strong prima facie case, it is not necessary for the appellant to satisfy the Tribunal that his case is foolproof and is bound to succeed. Strong prima facie case would mean that the case is an arguable one and fit for trial, or prima facie covered by a binding precedent. In such a situation, the Tribunal is under a legal obligation to consider the application of waiver taking into account the undue hardship which would require examination of prima facie case, on merits. In the case of I.T.C. Ltd. v. CCE & C (Appeals) ILR 2000 Kar. 25, the Hon'ble Karnataka High Court while examining the issue of the pre-deposit under Section 35 of the Act, after considering various pronouncements of the Hon'ble Apex Court and High Courts has held as under:
While considering the case of 'undue hardship', the authority is required to examine the prima facie on merits of the dispute as well. Pleading of financial disability would not be the only consideration. Where the case is fully covered in favour of the assessee by a biding precedent like that of the judgment of the Supreme Court, jurisdictional High Court or a Special Bench of the Tribunal, then to still insist upon the deposit of duty and penalty levied would certainly cause undue hardship to the assessee. Absence of the financial hardship in such a case would be no ground to decline the dispensation of pre-deposit under the proviso to Section 35F. The power to dispense with such deposit is conferred under the authorities has to be exercised precisely in cases like this type and if it is not exercised under such circumstances then this Court will require it to be exercised. Such like cases where two views are not possible then the condition of pre-deposit before the appeal is heard on merits, can be dispensed with. In case two views are possible on interpretation, based on conflicting judgments of the Tribunal or different High Courts in the absence of the judgment of the jurisdictional High Court then the authorities may pass the order under proviso to Section 35F of the Act keeping in view the facts of the case in hand.
22. In view of above exposition of law, the arguments advanced on behalf of revenue have no force. The Tribunal has to maintain a balance between the interest of revenue and rights and interests of an individual and should not refrain itself from exercising the discretionary powers conferred by the Statute, if the facts and circumstances of the case so justify, merely on the pretext that interest of revenue cannot be jeopardized.
23. In the case in hand, a specific plea was set up by the appellant that matter is covered by decision of Punjab & Haryana High Court in the case of Ambuja Cements Ltd. (supra) and the judgment dated 18-5-2009 by the Larger Bench of the Tribunal, both having binding effect and, accordingly, he is entitled to avail CENVAT Credit against onward transportation of goods.
24. However, from a perusal of the impugned judgment passed by the Tribunal, it is clear that the appellate authority has failed to address itself to the applicability and binding effect of decisions of Punjab & Haryana High Court in the case of Ambuja Cements Ltd. (supra) and Larger Bench of the Tribunal dated 18-5-2009 in the facts of appellant's case.
25. The impugned judgment disposing the stay/waiver application requiring the appellant to deposit a sum of Rs. 1 crore in a mechanical manner, without considering the questions whether the case is covered by precedents holding the field and binding upon the Tribunal and whether the appellant has prima facie case and is likely to succeed on merit and direction to make any pre-deposit would cause undue hardship or not, and returning a finding on the issues accordingly, is not liable to be sustained.
26. The appeal stands allowed. Impugned order dated 1-5-2009 passed by the Appellate Tribunal is hereby set aside. The matter stands remitted back to the appellate Tribunal to decide the application for stay/waiver afresh in accordance with law and the observations made hereinabove, as expeditiously as possible, preferably within a period of three weeks from the date of production of a certified copy of this order before him. The appellant shall file a certified copy of this order before the Tribunal within a week from the date of receipt of the same.