Eco Valley Farms and Foods Ltd. vs Union of India

The question raised in this appeal is, whether the CESTAT by its order dated 6-12-2010 is justified in directing the appellant to make pre-deposit of Rs. 1.25 crores for entertaining its appeal filed against the order in original dated 27-2-2009 wherein demand was confirmed for Rs. 3.15 crores.

The appellant company was established in the year 1995 as an 100 per cent Export Oriented Unit (EOU). The appellant is engaged in the cultivation of fresh mushrooms which are exported out of India and also cleared in the domestic tariff area (''DTA'' for short). It is the case of the appellant that the raw materials required for cultivation and production of fresh mushrooms have always been procured indigenously on payment of appropriate duty.

Prior to 2005, mushrooms were classified under Heading 0701.00 of the Central Excise Tariff and were totally exempted from payment of duty. However, the appellant being an 100% EOU, the excise authorities were of the opinion that their clearances in the DTA were liable to duty under the proviso to Section 3 of the Central Excise Act. Accordingly, show cause notices were issued to the appellant in the year 1999. On being shown cause, the show cause notices were dropped by order-in-original dated 16-11-1999. Appeal filed by the revenue against the order dated 16-11-1999 was dismissed by the Commissioner (Appeals) on 27-5-2004. No further appeal has been filed by the revenue and thus the order dated 27-5-2004 has attained finality.

Even after the amendment of the Central Excise Tariff Act on 28-2-2005, mushrooms falling under Tariff Heading 0709 of the Central Excise Tariff are liable to ''Nil'' rate of duty.

By two show cause notices, the excise authorities once again called upon the appellant to show cause as to why excise duty should not be demanded on fresh mushrooms cleared in the DTA during the period December, 2006 to November, 2007 and December, 2007 to June, 2008 as per the proviso to Section 3 of the Central Excise Act, 1944.

By an order in original dated 27-2-2009 the Commissioner of Central Excise, Pune confirmed the demand for Rs. 3,15,06,757/- and also imposed penalty under Rule 25 of the Central Excise Rules, 2002. Challenging the aforesaid order, the appellants filed appeal before the CESTAT. By an order dated 7-8-2009 [2010 (250) E.L.T. 132 (Tri. -Mumb.) the Tribunal directed the appellant to pre-deposit the entire duty amounting to Rs. 3,15,06,727/-. That order was set aside by this Court on 14-10-2009 and remanded for fresh disposal. By the impugned order dated 6-12-2010, the Tribunal has directed the appellant to make pre-deposit of Rs. 1.25 crores for entertaining the appeal.

The short question to be considered is, whether the goods cleared by the appellant, a 100% EOU to DTA were excisable or not. Prior to 28-2-2005 as also subsequent to 28-2-2005 fresh mushrooms were excisable but were subjected to ''Nil'' rate of duty. The question as to whether the clearances to DTA by the appellant, a 100% EOU were dutiable in view of the proviso to Section 3 of the Central Excise Act, 1944 was the precise question raised in the earlier proceedings and it was held that no duty was payable. Unless the orders passed in the appellant''s own case are set aside by a higher authority, the question of demanding duty does not arise.

In the present case, by an order in original dated 27-2-2009 it is held that the clearances of fresh mushrooms by the appellant (100% EOU) to DTA are liable to duty under the proviso to Section 3 of the Central Excise Act. Validity of the said order is challenged before the Tribunal.

In this appeal, we are only concerned with the question as to whether the Tribunal was justified in directing the appellant to pre- deposit the amount of Rs. 1.25 crores. As noted earlier, the demands raised herein pertains to the period from December, 2006 to June, 2008 when the orders passed in the appellant''s own case were in operation. As per those orders, the appellant was not liable to duty on clearances to DTA. In these circumstances, in our opinion, this is a fit case for grant of full waiver of pre-deposit.

Accordingly, we quash and set aside the order of CESTAT dated 6-12-2010 and direct the Tribunal to dispose of the appeal filed by the appellants without insisting on pre-deposit. In the facts and circumstances of the present case, we direct the CESTAT to dispose of the appeal, as expeditiously as possible and preferably within a period of 6 months from today. We make it clear that the observations made herein are prima facie observations and the Tribunal shall dispose of the appeal on its own merits without being influenced by this order.

The appeal is disposed off accordingly with no order as to costs.