Amar Food Products vs Union of India (UOI) and Others

Harsha Devani, J.—This petition has been filed with the following substantive prayers:

In view of the facts and circumstances abovementioned, it is respectfully prayed that this Hon''ble Court may be pleased:

to issue a writ of certiorari, or order other writ, order or directions in the nature of certiorari, quashing and setting aside the impugned Stay Order No. Order No. S/61/WZB/Ahmedabad/06 Dated 12th October, 2006.

to issue a writ of certiorari, or order other writ, order or directions in the nature of certiorari, quashing and setting aside the impugned order No. A/162/WZB/ Ahmedabad/2207 and Order No. M/118/WZB/ Ahmedabad both Dated 11TH January, 2007.

to issue a writ of certiorari, or order other writ, order or directions in the nature of certiorari, quashing and setting aside the Order-in-Appeal No. Commr(A)/49/ VDR-II/2006 Dated 11.5.2006 passed by the Commissioner (Appeals) Central Excise and Customs, Vadodra.

consequently, to issue a writ of mandamus, or other writ, order or direction in the nature of mandamus, directing the CESTAT to restore the appeal to its original number and to hear and decide the petitioner''s appeal without requiring any pre-deposit to be made by it and tag it with Appeal No. E/3156-59/2001 pending before Larger Bench of CESTAT.

The petitioner, a firm, is engaged in the manufacturing of Prepared maize flakes commonly known as "Makai Poha". Show cause notice dated 13.1.2000 came to be issued to the petitioner for the period 1994-95 to 1998-99 as to why "Makai Poha" should not be classified under Chapter 19 Heading 19.04 of the Central Excise Tariff Act, 1985 ("the Tariff Act") and as to why duty along with penalty and interest should not be recovered accordingly. Subsequently, Show cause notices dated 25.1.2000 and 22.0.2000 for the periods April 1999 to December 1999 and January 2000 to March 2000, respectively, came to be issued to the petitioner as to why Makai Poha should not be classified under Chapter 19 Heading 19.04 of the Tariff Act, and as to why duty along with penalty and interest should not be recovered, accordingly. After several rounds of litigation, the Tribunal vide order dated 9.1.2004 allowed two appeals preferred by the petitioner and remanded the matter to the adjudicating authority to re-decide the matter. In remand proceedings, the adjudicating authority vide order dated 24.01.2005, held that Makai Poha was classifiable under Heading 11.01 of the Tariff Act and not under Heading 19.04 and dropped the related demands pertaining to the period 1994-95 to 1998-99 and 1999-2000. The aforesaid order dated 24.01.2005 came to be challenged by the revenue by way of appeal before the Commissioner (Appeals). The Commissioner (Appeals) vide order dated 25.04.2006 allowed the appeal holding that Makai Poha would fall under Heading 19.04 of the Tariff Act. For the purpose of holding that Makai Poha would fall under Heading 19.04, the Commissioner (Appeals) placed reliance upon the decision of the Tribunal in the case of 2001 (127) ELT 131 Being aggrieved, the petitioner preferred appeal being Central Excise Appeal No. 2468 of 2006 before the Tribunal along with stay application being Central Excise Stay Application No. 2418 of 2006. Vide the impugned order dated 12.10.2006 made on the Stay Application, the Tribunal observed that the Tribunal in Favourite Food Products v. Commissioner of Central Excise, Rajkot (supra) has categorically held, in respect of the said item "Makai Poha" that it was classifiable under heading 19.04 of the Tariff. That in respect of the contention relating to classification, prima facie, the petitioner had not made out any case at that stage in view of the decision of the Tribunal in Favourite Food Products (supra) and directed that there shall be interim stay of the order impugned before it by depositing 50% of the amount payable thereunder within eight weeks from the date of the order, failing which the appeal would stand dismissed. Subsequently, on 23.11.2006, in the case of Mahavir Food Products v. Commissioner of Central Excise, Vadodara the aforesaid decision of the Tribunal in the case of Favourite Food Products (supra) came to be referred by the Tribunal to the Larger Bench. The petitioner, therefore, on 15.12.2006 filed an application for modification of the stay order dated 12.10.2006 on the ground that there was a change in circumstances inasmuch on the very same issue of classification of "Makai Poha" the Tribunal had referred the matter on 23.11.2006 to the Larger Bench of the Tribunal by not agreeing with the decision of the Tribunal in the case of Favourite Food Products v. CCE (supra) and requested that the stay order dated 12.10.2006 be modified and complete waiver of pre-deposit and penalty be granted. Vide the impugned order dated 11.01.2007 the application for modification of stay order came to be dismissed by the Tribunal. The Tribunal also observed that since the pre-deposit had not been made in terms of the order dated 12.10.2006, the appeal stood dismissed on 12.12.2006. Being aggrieved, the petitioner has moved the present petition challenging the order dated 12.10.2006 as well as order dated 11.01.2007 made by the Tribunal.

Mr. Anand Nainavati, learned advocate for the petitioner, submitted that vide the impugned order dated 12.10.2006 the Tribunal placing reliance upon its earlier decision in the case of Favourite Food Products v. CCE (supra) had formed the prima facie view that the petitioner had not made out any case at that stage and had accordingly directed the petitioner to deposit 50% of the amount payable under the order which was impugned before the Tribunal. However, after the order dated 12.10.2006 came to be passed by the Tribunal, there was a change in circumstances, inasmuch as on 23.11.2006, the Tribunal in the case of Mahavir Food Products v. Commissioner of Central Excise, Vadodara did not accept the aforesaid decision of the Tribunal in the case of Favourite Food Products (supra) and referred the same to the Larger Bench of the Tribunal. It was submitted that it was a consistent practice of the Tribunal to grant complete waiver of pre-deposit in case where an issue was referred to the Larger Bench of the Tribunal. Hence, the petitioner had moved the application for complete waiver of pre-deposit in the changed circumstances. It was, accordingly, urged that in the circumstances, the Tribunal was not justified in dismissing the appeal on the ground of non-payment of amount of pre-deposit. It was further submitted that in the case of Mahavir Food Products v. Commissioner of C.Ex. Vadodara 2007 (211) ELT 29 (Tri.-LB) the said issue has ultimately been held in favour of the assessee and it has been held that "Makai Poha" is classifiable under Heading 11.01 of the Tariff Act.

On the other hand, Mr. R.J. Oza, learned Senior Standing Counsel for the respondents, has opposed the petition submitting that in the light of the fact that the petitioner had not complied with the order directing pre-deposit of 50% of the duty demand, the Tribunal was justified in dismissing the appeal.

The facts are not in dispute. Vide order dated 12.10.2006 the Tribunal, in the light of the decision of the Tribunal in the case of Favourite Food Products v. CCE (supra) had found that prima facie no case had been made out at that stage and accordingly, had directed the petitioner to deposit 50% of the amount payable under the order impugned before it within a period of eight weeks from the date of the order. Computing the period of eight weeks from the order, the petitioner was required to deposit the amount on or before 12.12.2006. The Tribunal had also directed that the matter be posted for compliance report on 20.12.2006. Prior to the last date for depositing the amount in terms of the order dated 12.10.2006 of the Tribunal, on 23.11.2006 the decision of the Tribunal in the case of Favourite Food Products came to be referred by the Tribunal to the Larger Bench. In the light of the fact that the decision, on which the Tribunal had placed reliance for not granting full waiver of pre-deposit to the petitioner, had been referred to the Larger Bench, on 15.12.2006 before the date for reporting compliance, the petitioner moved an application for modification of the earlier order dated 12.10.2006 seeking complete waiver of pre-deposit in the changed circumstances.

As can be seen from the impugned order dated 12.10.2006 made by the Tribunal, the Tribunal had placed reliance upon its decision in the case of Favourite Food Products v. CCE (supra) for the purpose of holding that prima facie in respect of the contention relating to classification, the petitioner had not made out any case at that stage. The Tribunal had accordingly directed the petitioner to deposit 50% of the total amount within eight weeks from the date of the order, failing which the appeal would stand dismissed. However, the Tribunal had directed that the matter be posted for compliance report on 20.12.2006. Before the date of reporting compliance, the petitioner on 15.12.2006 moved the application for modification in the light of the fact that the decision on which the Tribunal had placed reliance for the purpose of denying full waiver to the petitioner had been referred to the Larger Bench. The Tribunal in the impugned order dated 11.01.2007 has observed that since the amount was not deposited the appeal stood dismissed on 12.12.2006 and that the modification application made thereafter on 15.12.2006 could not have been entertained since the appeal stood dismissed. The Tribunal, after accepting the oral request of learned advocate for the applicant to add prayer clause of restoration in the miscellaneous application, held that since the pre-deposit had not been made the appeal stood dismissed on 12.12.2006. The Tribunal also held that merely because a Division Bench had referred the other appeals which were listed for final hearing to a Larger Bench, it does not in any manner dilute the ratio of the decision in Favourite Food Products (supra) on the basis of which the interim order was made. According to the Tribunal, referring those appeals to a Larger Bench cannot by itself constitute a change in circumstances so as to warrant modification on that count. That the ratio of the decision of the Division Bench continued to operate, notwithstanding the reference and that there was no change in circumstances to justify any modification on that count. It was further observed that since the pre-deposit was not made, the appeal stood dismissed on 12.12.2006. The Tribunal, accordingly, did not find any valid reason to modify the order requiring the pre-deposit or to restore the appeal for that purpose and rejected the application.

On a bare perusal of the impugned order made by the Tribunal two things are apparent. Firstly, though the petitioner had been directed to deposit 50% of the amount payable within eight weeks from the date of the order, that is, on or before 12.12.2006, the Tribunal had directed that the matter be posted for reporting compliance on 20.12.2006. Secondly, prior to the last date of making the pre-deposit, on 23.11.2006, the Tribunal had itself referred the decision in the case of Favourite Food Products v. CCE (supra) to the Larger Bench. When, the Tribunal had itself directed the matter to be posted for reporting compliance on 20.12.2006, if as observed in the impugned order dated 11.1.2007, the appeal stood dismissed on 12.12.2006 for non-compliance of the directions issued vide order dated 12.10.2006, it is difficult to comprehend as to which matter was to be posted for reporting compliance on 20.12.2006. Thus, both things, viz. dismissal of the appeal ipso facto on 12.12.2006 for non-compliance of the order dated 12.10.2006 and posting of the matter for reporting compliance on 20.12.2006 cannot co-exist together. Besides, the petitioner herein, in the light of the fact that the decision on which the Tribunal had placed reliance for the purpose of denying full waiver of the pre-deposit had been referred to the Larger Bench had moved the application much before the date of reporting compliance of the earlier order. This was certainly a change in circumstances which at least would require the Tribunal to re-consider its earlier decision one way or the other, considering the fact that the Tribunal itself had not accepted the decision rendered in the case of Favourite Food Products v. CCE (supra) and had referred the same to the Larger Bench. In the circumstances, the Tribunal could not have dismissed the plea of the petitioner as regards change of circumstances on the ground that merely because a Division Bench has referred the said decision to the Larger Bench, the same would not constitute a change in circumstances so as to warrant modifying the interim order. More so, when it was the case of the petitioner that it was the consistent practice of the Tribunal to grant full waiver in such circumstances. The Tribunal was, therefore, not justified in rejecting the application for modification of the stay order made by the petitioner on the ground that the appeal stood dismissed on 12.12.2006, as well as on the ground that there was no change in circumstances and as such the impugned orders made by the Tribunal cannot be sustained.

For the foregoing reasons the petition succeeds and is accordingly allowed. The impugned order dated 12.10.2006 made by the Tribunal in Central Excise Stay Application No. 2418 of 2006 as well as the impugned order dated 11.01.2007 made by the Tribunal in Excise Miscellaneous Application (Modf.) No. 255 of 2006, are hereby quashed and set aside. Central Excise Appeal No. 2468 of 2006 as well as Central Excise Stay Application No. 2418 of 2006 are hereby restored to the file of the Tribunal. The Tribunal shall decide the same afresh in accordance with law, after giving the petitioner reasonable opportunity of hearing. Rule is made absolute accordingly with no order as to costs.