5 S Limited Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. in obedience to tribunal's order dated 7-5-1987 the registry of the tribunal issued notice dated 26-5-1987 to the appellants calling upon them to show cause why for non-compliance with section 35f of central excises & salt act, 1944 'and stay order no. 224/85-c dated 20-12-1985 passed in the case of appeal filed by the appellants to the tribunal be not dismissed. in response to this notice the appellants through their counsel shri i.c. upadhyay have filed reply dated 27-7-1987. in this reply it is submitted that the entire period 4-4-1984 to 29-4-1984 relating to gate pass no. 19* dated 4-4-1984 to 301 dated 29-4-1984 amounting to rs. 1,82,204.55 is covered by notification no. 246/85-c.e.dated 6-1-1985. the reply further states that the respondent has no locus standi or jurisdiction to demand this differential duty in view of this notification issued under section 11c of the act. the reply further states "by virtue of above notification there is no liability cast on the appellants to deposit the amount demanded by the respondents. moreover, the respondents have no authority or jurisdiction to demand the amount of differential duty in the light of the above notification". the reply then prays that the appeal may kindly he ordered to be allowed with consequential relief.2. at the hearing on 28-7-1987 shri i.c. upadhyay reiterated the points made in the reply. he also stated that if the order of the tribunal is adverse to him, he would challenge the matter in the high court. shri shishir kumar, sdr submitted that as the appellants had neither complied with section 35f of the act nor with the stay order no.224/85-c dated 20-12-1985, the appeal deserves to be dismissed for non-compliance with section 35f of the act.3. some facts in brief relevant for the present order need to be referred to. stay order no. 224/85-c dated 20-12-1985 shows that the tribunal after taking note of the appellants having deposited rs. 60,000/-and notification no. 246/85-c.e. dated 6-12-1985 waived pre-deposit of balance of duty and stay realisation of the demand on condition that appellants furnished bank guarantee within a period of two months from the date of the order. the order further stated that failing compliance with the order it shall stand vacated and the appeal will be liable to be dismissed under section 35f of the act. the appellants filed another application dated 15-3-1986 through their counsel (misc. application no. 141/86-c) praying for modification of the stay order by waiving condition of bank guarantee. the main ground urged for modification was notification no. 246/85-c.e. dated 6-12-1985 (there was no request for extension of time to comply with the order).by order no. 49/87-c after hearing shri upadhyaya, advocate in support of the application and shri sundar rajan, jdr for the respondent, the tribunal rejected the prayer for modification of stay order no.224/85-c dated 20-12-1985 on the ground that stay order calling upon the appellants to furnish bank guarantee had been passed after taking into consideration the notification and there was no change in circumstances to justify modification of the stay order. the present notice was then ordered to issue to the appellants.4. section 35f of central excises & salt act, 1944 which is analogous to section 129e of the customs act, 1962 as at present and the earlier section i29 of the same before its amendment in 1980 is reproduced below : "section 35-f. deposit, pending appeal, of duty demanded or penalty levied - where in 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 collectors (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 revenue".notification no. 246/85-c.e. dated 6-12-1985 on which shri upadhyay relied for the argument that -duty cannot be demanded is also reproduced below : "whereas the central government is satisfied that according to a practice that was generally prevalent regarding levy of duty of excise (including non-levy thereof), under section 3 of the central excises and salt act, 1944 (1 of 1944), certain varieties of vegetable product, falling under item no. 13 of the first schedule to the said act, were liable to a higher amount of duty of excise in terms of the notification of the government of india in the ministry of finance (department of revenue) no. 259/83-central excises, dated the 15th october, 1983, than what was levied with reference to the rate specified in the said first schedule, read with any notification for the time being in force issued by the central government in relation to the duty of excise so chargeable, during the period commencing on the 15th october, 1983 and ending with the 29th april, 1984. now, therefore, in exercise of the powers conferred by section 11c of the said act, read with sub-section(4) of section 55 of the finance act, 1983 (11 of 1983) and sub-section(4) of section 52 of the finance. act, 1984 (21 of 1984), the central government hereby directs that so much of that portion of the duty of excise payable under the said central excises and salt act, 1944 and the special duties of excise payable under sub-section (1) of section 52 of the said finance act, 1984, on such varieties of vegetable product, but for the said practice, shall not be required to be paid in respect of such varieties of vegetable product on which that portion of the said duty of excise and the special duties of excise were short levied during the period aforesaid, in accordance with the said practice." 5. from section 35f reproduced above it would be seen that the person desirous of appealing against decision or order is required, pending the appeal, to pre-deposit with the adjudicating authority the duty demanded or the penalty levied by the decision or order appealed against. now there can be no doubt that the order appealed against relates to duty demanded and in the present case the goods are not under the control of central excise authorities. notification no.246/85-ce dated 6.12.85 reproduced above would show that it refers to a practice as to levy of duty on certain varieties of vegetable product falling under item 13 of the first schedule to the said act before 15.10.83. therein directs that so much of that portion of duty of excise payable under the schedule shall not be required to be paid on such varieties of vegetable product but for the said practice on which that portion of the said duty of excise and the special duty of excise were short levied during the period aforesaid. now what is the precise effect of this notification on the demand of duty confirmed against the appellants can be judged or determined only when the demand and the antecedent facts leading to it are examined in juxtaposition to the notification. this can be done only when the appeal is examined on its merits and for doing so the hurdle placed at the threshold by section 35f of the act has to be crossed by the appellants. the appellants have admittedly not deposited the duty nor complied with the stay order 224/85-c dated 20.12.85. we have already said how the tribunal while granting stay (no. 224/85-c dated 20.12.85) had taken notice of notification no. 246/85-ce dated 6.12.85 issued by the central government in exercise of powers conferred on them under section 11-c of the act. the stay order itself stipulated a time limit of two months for its compliance and stated that failure to comply with the same shall automatically vacate it and the appeal would become liable to dismissal. there is no application by the appellants for extension of time stipulated in the stay order nor was any fresh application for stay made.navin chandra chhotelal v. central board of excise & customs and ors. ( air 1971 sc 2280) which was followed by the tribunal in 1987 (29) elt 332 (tribunal) [collector of central excise, nagpur v. vidharba pharmaceutical (p) ltd. with reference to section 129 of the customs act which was substituted by section 129e by finance (no. 2) act, 1980 - a provision similar to section 35f of the act had the following to say - "section 128 no doubt gives a right of appeal. but it is followed by section 129(1) regarding making of deposit pending the appeal. it must also be noted that so far as the deposit of duty is concerned, the requirement regarding the deposit will come into force only if the goods in respect of which duty is demanded are not under the control of customs authorities. though sub-section (1) of section 129 may appear to make it necessary that an appellant should deposit the duty or penalty before his appeal could be heard on merits, the proviso whittles down the rigour of sub-section (1). in this connection, it is to be noted that u/s 189 of the sea customs act, w78, it was obligatory on the part of an appellant to deposit the duty or penalty pending the appeal. there was no provision therein by which the appellate authority could waive the requirement regarding the deposit of the entire amount of duty or penalty. but in the act by the proviso to sub-section (1) of section 129, which has been quoted above, discretion has been given to the appellate authority to either waive the deposit of the entire amount of penalty or duty or reduce the quantum to be so deposited if the appellate authority is of the opinion that the requirement regarding the deposit of the full amount of penalty or duty will cause undue hardship to an appellant. no doubt section 129 does not expressly provide for the rejection of the appeal for non-compliance with the requirement regarding the deposit of penalty or duty but when sub-section (1) of section 129 makes it obligatory on an appellant to deposit the duty or penalty pending the appeal and if a party does not comply either with the main sub-section or with any order that may be passed under the proviso the appellate authority is fully competent to reject the appeal of non-compliance with the provision of section 129(1). that is exactly what the first respondent has done in this case. accepting the contention of mr. trivedi will mean that the appeal will have to be kept on file for ever even when the requirement of section 129(1) has not been complied with. retention of such an appeal on file will serve no purpose whatsoever because unless section 129(1) is complied with, the appellate authority cannot proceed to hear an appeal on merits. therefore, the logical consequence of failure to comply with section 129(1) is the rejection of appeal on that ground".7. in the instant case as already observed the appellants have not complied with the requirement of pre-deposit of duty under the main part of section 35f nor with the terms and conditions of stay order no.224/85-c dated 20.12.85. we have already said that the true effect of the notification with reference to the present demand can be judged only when the appeal is considered on merits and merits of the appeal cannot be considered until the appellants cross the hurdle of section 35f of the act. the appellants having not done that, following the supreme court decision (supra) we have no option but to reject the appeal for non-compliance of the provision. we reject the appeal for non-compliance with section 35f of the act.

Judgment:
1. In obedience to Tribunal's order dated 7-5-1987 the Registry of the Tribunal issued notice dated 26-5-1987 to the appellants calling upon them to show cause why for non-compliance with Section 35F of Central Excises & Salt Act, 1944 'and Stay Order No. 224/85-C dated 20-12-1985 passed in the case of appeal filed by the appellants to the Tribunal be not dismissed. In response to this notice the appellants through their Counsel Shri I.C. Upadhyay have filed reply dated 27-7-1987. In this reply it is submitted that the entire period 4-4-1984 to 29-4-1984 relating to gate pass No. 19* dated 4-4-1984 to 301 dated 29-4-1984 amounting to Rs. 1,82,204.55 is covered by Notification No. 246/85-C.E.dated 6-1-1985. The reply further states that the respondent has no locus standi or jurisdiction to demand this differential duty in view of this notification issued under Section 11C of the Act. The reply further states "by virtue of above notification there is no liability cast on the appellants to deposit the amount demanded by the respondents. Moreover, the respondents have no authority or jurisdiction to demand the amount of differential duty in the light of the above notification". The reply then prays that the appeal may kindly he ordered to be allowed with consequential relief.

2. At the hearing on 28-7-1987 Shri I.C. Upadhyay reiterated the points made in the reply. He also stated that if the order of the Tribunal is adverse to him, he would challenge the matter in the High Court. Shri Shishir Kumar, SDR submitted that as the appellants had neither complied with Section 35F of the Act nor with the Stay Order No.224/85-C dated 20-12-1985, the appeal deserves to be dismissed for non-compliance with Section 35F of the Act.

3. Some facts in brief relevant for the present order need to be referred to. Stay Order No. 224/85-C dated 20-12-1985 shows that the Tribunal after taking note of the appellants having deposited Rs. 60,000/-and Notification No. 246/85-C.E. dated 6-12-1985 waived pre-deposit of balance of duty and stay realisation of the demand on condition that appellants furnished bank guarantee within a period of two months from the date of the order. The order further stated that failing compliance with the order it shall stand vacated and the appeal will be liable to be dismissed under Section 35F of the Act. The appellants filed another application dated 15-3-1986 through their Counsel (Misc. Application No. 141/86-C) praying for modification of the stay order by waiving condition of bank guarantee. The main ground urged for modification was Notification No. 246/85-C.E. dated 6-12-1985 (there was no request for extension of time to comply with the order).

By Order No. 49/87-C after hearing Shri Upadhyaya, Advocate in support of the application and Shri Sundar Rajan, JDR for the respondent, the Tribunal rejected the prayer for modification of Stay Order No.224/85-C dated 20-12-1985 on the ground that stay order calling upon the appellants to furnish bank guarantee had been passed after taking into consideration the notification and there was no change in circumstances to justify modification of the stay order. The present notice was then ordered to issue to the appellants.

4. Section 35F of Central Excises & Salt Act, 1944 which is analogous to Section 129E of the Customs Act, 1962 as at present and the earlier Section i29 of the same before its amendment in 1980 is reproduced below : "Section 35-F. Deposit, pending appeal, of duty demanded or penalty levied - Where in 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 Collectors (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 revenue".

Notification No. 246/85-C.E. dated 6-12-1985 on which Shri Upadhyay relied for the argument that -duty cannot be demanded is also reproduced below : "Whereas the Central Government is satisfied that according to a practice that was generally prevalent regarding levy of duty of excise (including non-levy thereof), under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944), certain varieties of vegetable product, falling under Item No. 13 of the First Schedule to the said Act, were liable to a higher amount of duty of excise in terms of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 259/83-Central Excises, dated the 15th October, 1983, than what was levied with reference to the rate specified in the said First Schedule, read with any notification for the time being in force issued by the Central Government in relation to the duty of excise so chargeable, during the period commencing on the 15th October, 1983 and ending with the 29th April, 1984.

Now, therefore, in exercise of the powers conferred by Section 11C of the said Act, read with Sub-section(4) of Section 55 of the Finance Act, 1983 (11 of 1983) and Sub-section(4) of Section 52 of the Finance. Act, 1984 (21 of 1984), the Central Government hereby directs that so much of that portion of the duty of excise payable under the said Central Excises and Salt Act, 1944 and the special duties of excise payable under Sub-section (1) of Section 52 of the said Finance Act, 1984, on such varieties of vegetable product, but for the said practice, shall not be required to be paid in respect of such varieties of vegetable product on which that portion of the said duty of excise and the special duties of excise were short levied during the period aforesaid, in accordance with the said practice." 5. From Section 35F reproduced above it would be seen that the person desirous of appealing against decision or order is required, pending the appeal, to pre-deposit with the adjudicating authority the duty demanded or the penalty levied by the decision or order appealed against. Now there can be no doubt that the order appealed against relates to duty demanded and in the present case the goods are not under the control of Central Excise authorities. Notification No.246/85-CE dated 6.12.85 reproduced above would show that it refers to a practice as to levy of duty on certain varieties of vegetable product falling under Item 13 of the First Schedule to the said Act before 15.10.83. Therein directs that so much of that portion of duty of excise payable under the Schedule shall not be required to be paid on such varieties of vegetable product but for the said practice on which that portion of the said duty of excise and the special duty of excise were short levied during the period aforesaid. Now what is the precise effect of this notification on the demand of duty confirmed against the appellants can be judged or determined only when the demand and the antecedent facts leading to it are examined in juxtaposition to the notification. This can be done only when the appeal is examined on its merits and for doing so the hurdle placed at the threshold by Section 35F of the Act has to be crossed by the appellants. The appellants have admittedly not deposited the duty nor complied with the Stay Order 224/85-C dated 20.12.85. We have already said how the Tribunal while granting stay (No. 224/85-C dated 20.12.85) had taken notice of Notification No. 246/85-CE dated 6.12.85 issued by the Central Government in exercise of powers conferred on them under Section 11-C of the Act. The stay order itself stipulated a time limit of two months for its compliance and stated that failure to comply with the same shall automatically vacate it and the appeal would become liable to dismissal. There is no application by the appellants for extension of time stipulated in the stay order nor was any fresh application for stay made.Navin Chandra Chhotelal v. Central Board of Excise & Customs and Ors. ( AIR 1971 SC 2280) which was followed by the Tribunal in 1987 (29) ELT 332 (Tribunal) [Collector of Central Excise, Nagpur v. Vidharba Pharmaceutical (P) Ltd. with reference to Section 129 of the Customs Act which was substituted by Section 129E by Finance (No. 2) Act, 1980 - a provision similar to Section 35F of the Act had the following to say - "Section 128 no doubt gives a right of appeal. But it is followed by Section 129(1) regarding making of deposit pending the appeal. It must also be noted that so far as the deposit of duty is concerned, the requirement regarding the deposit will come into force only if the goods in respect of which duty is demanded are not under the control of Customs authorities. Though Sub-section (1) of Section 129 may appear to make it necessary that an appellant should deposit the duty or penalty before his appeal could be heard on merits, the proviso whittles down the rigour of Sub-section (1). In this connection, it is to be noted that U/S 189 of the Sea Customs Act, W78, it was obligatory on the part of an appellant to deposit the duty or penalty pending the appeal. There was no provision therein by which the appellate authority could waive the requirement regarding the deposit of the entire amount of duty or penalty. But in the Act by the proviso to Sub-section (1) of Section 129, which has been quoted above, discretion has been given to the appellate authority to either waive the deposit of the entire amount of penalty or duty or reduce the quantum to be so deposited if the appellate authority is of the opinion that the requirement regarding the deposit of the full amount of penalty or duty will cause undue hardship to an appellant.

No doubt Section 129 does not expressly provide for the rejection of the appeal for non-compliance with the requirement regarding the deposit of penalty or duty but when Sub-section (1) of Section 129 makes it obligatory on an appellant to deposit the duty or penalty pending the appeal and if a party does not comply either with the main sub-section or with any order that may be passed under the proviso the appellate authority is fully competent to reject the appeal of non-compliance with the provision of Section 129(1). That is exactly what the first respondent has done in this case.

Accepting the contention of Mr. Trivedi will mean that the appeal will have to be kept on file for ever even when the requirement of Section 129(1) has not been complied with. Retention of such an appeal on file will serve no purpose whatsoever because unless Section 129(1) is complied with, the appellate authority cannot proceed to hear an appeal on merits. Therefore, the logical consequence of failure to comply with Section 129(1) is the rejection of appeal on that ground".

7. In the instant case as already observed the appellants have not complied with the requirement of pre-deposit of duty under the main part of Section 35F nor with the terms and conditions of Stay Order No.224/85-C dated 20.12.85. We have already said that the true effect of the notification with reference to the present demand can be judged only when the appeal is considered on merits and merits of the appeal cannot be considered until the appellants cross the hurdle of Section 35F of the Act. The appellants having not done that, following the Supreme Court decision (supra) we have no option but to reject the appeal for non-compliance of the provision. We reject the appeal for non-compliance with Section 35F of the Act.