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Judgment
Ruma Pal, J.—The petitioner manufactures Biscuits. The petitioner is claiming to be a registered Small Scale Industries Unit and a Small Scale Industry within the meaning of the provisions of the Industries (Development & Regulation) Act, 1951. According to the petitioner, its liability to pay Central Excise Duty in respect of the biscuits manufactured by it is at the concessional rate of 5% ad valorem.
On 30th January 1987 there was a search and seizure at the petitioner''s factory by the Central Excise Officer. Various documents and other materials were seized. Two statements were recorded u/s 14 of the Central Excises & Salt Act, 1944 (hereinafter referred to as the said Act). The first was a confessional statement by one Sunil Agarwalla, one of the directors of the petitioner to the effect that goods valued at Rs. 10 lakhs had been manufactured and cleared during the period August 1986 to 12th January 1987 without keeping any accounts in respect thereof. It was also stated that such clandestine clearance was made only on the basis of challans for delivery of the goods and that the said challans had been destroyed once accounts had been settled.
A statement was also recorded by the manager of the petitioner, to the effect that shortage of Biscuits in the stock found by the Central Excise Officers had in fact been cleared without payment of Central Excise duty and without observing any Central Excise formality.
On 1st July 1987 a notice was issued by the respondents to the petitioner to show cause why
"(1) (a) 248 kgs. of different varieties biscuits falling under sub-head No. 1905.11 of the Schedule to the Central Excise Tariff Act, 1985 seized on 13-1-1987, shall not be confiscated under Rules 9(2), 173-O and 226 of the Central Excise Rules, 1944. (b) duty of Rs. 6,829.55 on 6869.81 Kg. of biscuits, manufactured and removed in January 1987 without payment of duty should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944 read with the proviso to Section 11A(1) of the Central Excises & Salt Act, 1944. (c) Duty of Rs. 32,869.28 on 34,459.32 Kgs. of biscuits manufactured without disclosing the fact of such manufacture and removed during the period Nov. 1986 to 12-1-1987, should not be demanded from them u/s 11A(1) (Proviso) of the Central Excises & Salt Act, 1944. (d) duty of Rs. 26,464.03 on 20,600.88 Kgs. of biscuits, manufactured and removed during the period from October 1986 to 12-1-1987, as indicated in the annexures E to G, should not be demanded from them u/s 11A of the Central Excises & Salt Act, 1944. (e) duty of Rs. 33,738.16 on biscuits, manufactured and removed during the period August 1985 to January 1987, as indicated in annexure ''B'' should not be demanded from them u/s 11A of the Central Excises & Salt Act, 1944 and
(ii) A penalty should not be imposed on them for contravention of the provisions of Rule 9(1), 52A, 53, 173F, 173G(1), 173G(4) and 226 of the Central Excise Rules, 1944 under Rules 9(2), 52A, 173Q and 226 ibid."
On the basis of the documents recovered from the premises it was found that goods of the value of Rs. 6,62,618.38 for the period October 1986 to January 1987 had been removed without payment of excise duty. On the basis of the confessional statement of the director to the petitioner a differential value of suppressed clearance for the period August 1986 to September 1986 was worked out at Rs. 3,37,381.52. Upon a consideration of the evidence and submissions, the Additional Collector, Central Excise passed an order charging duty of Rs. 99,901.02 on account of excise duty, Rs. 2,000/- by way of redemption fine and imposing a penalty of Rs. 50,000/- under Rule 173Q of the Central Excise Rules, 1944 (hereinafter referred to as the said Rules).
It may be mentioned that on 13-1-1987 when the search and seizure was on, the petitioner through its said director paid a sum of Rs. 50,000/- by cheque. This sum of Rs. 50,000/- was ordered to be adjusted towards the final payment of duty.
On 9-1-1989 the petitioner preferred an appeal to the Appellate Tribunal against the order of adjudication. On 23-1-1989 the petitioner filed an application u/s 35F of the Central Excises & Salt Act, 1944 (hereinafter referred to as the said Act) praying for stay of pre-deposit of duty and penalty pending final disposal of the appeal. The grounds for stay may be summarised as follows:-
(i) The Director of the petitioner had been terrorised into confessing that there had been non-duty paid clearance to the tune of Rs. 10,00,000/-;
(ii) That the Additional Collector had wrongly computed the tariff rate of duty at 10% ad valorem whereas the petitioner as a Small Industrial Unit was entitled to payment of duty at 5% ad valorem;
(iii) Non-duty paid clearance act at the best was only to the extent of 75,000 Kgs. involving duty calculated at concessional rate of Rs. 3,750/-.
(iv) The petitioner was running at a loss and would face undue hardship if the payment of duty and penalty was not waived.
By an order dated 10th July, 1989 the Tribunal disposed of the application for stay by granting waiver of pre-deposit and realisation of the amount pending decision in the Appeal subject to the petitioner -
(i) Depositing Rs. 15,000/- in cash in addition to the amount already deposited towards the duty liability; and
(ii) Depositing Rs. 5,000/- in cash towards penalty liability within 8 weeks from the date of receipt of the order;
In the said order it was recorded as follows:-
"Both the sides submitted that since one of the points however, is regarding rate of duty applicable, the matter may be transferred to the Special Bench concerned at Delhi.
On 3rd October, 1989 an application was made by the petitioner for extension of time to make payment of the amount as directed by the Tribunal by a period of 3 months on the grounds stated therein.
This writ application was moved in April 1990. An interim order was passed directing the status quo as on that date to continue.
The order dated 10th July, 1989 has been challenged in this writ petition. The grounds of challenge are :-
(i) that in the facts of the case, the Tribunal should have waived the pre-deposit unconditionally;
(ii) that the Tribunal erred in directing transfer of the case to the Special Bench at Delhi;
In support of the first contention the petitioner has relied upon the decisions of Radiant Engineering Industries Pvt. Ltd. Vs. Collector of C. Ex., . In that case a learned Single Judge of this Court granted relief in respect of pre-deposit by directing the petitioner instead of depositing a sum of Rs. 50,000/- towards penalty to furnish a personal bond for the entire penalty amount of Rs. 2,00,000/-. The Learned Judge, however did not grant any relief in respect of the requirement for deposit of Rs. 3,98,280.35 on account of duty.
The next case relied upon is an unreported decision of a Division Bench of this Court viz. M/s. J.N. Chemicals Pvt. Ltd. v. Customs Excise & Gold (Control) Appellate Tribunal. In an application challenging the requirement for pre-deposit the Division Bench found that on the admitted facts of the case -
"There was full justification for the exercise of the power vested in the Tribunal to dispense with the requirement of pre-deposit inasmuch as the case of the appellant was fully covered by the decision of a Special Bench of the Tribunal and still to insist upon the deposit of duty demanded and penalty levied would indubitably cause undue hardship to the appellant".
The third case relied upon by the petitioner is a decision of the Government of India on a Revisional Application in the case of In re : Dhampur Sugar Mills Ltd. reported in 1990 (46) E.L.T. 400. In that case the petitioner had cleared the goods without determining the amount of basic excise duty, without approval of the classification list and without following the prescribed procedure under the Rules. The amount of duty involved was Rs. 3,264/-. On 15-5-1987 the petitioner had intimated the Department that it wished to clear the goods in terms of the fresh classification list submitted by them and that they were facing storage problems. The goods were cleared on 18-5-1987 and duty was paid on 20-5-1987 by making a debit entry in the Personal Ledger Account. The show cause notice was issued on 29-7-1987. In the circumstances of the case the Government held that there was no indication of any mala fide intention on the part of the petitioner to evade Central Excise duty and therefore set aside the personal penalty imposed.
As far as the second contention is concerned, the petitioner has stated that in accordance with para 2 of the CEGAT Order No. 137 of 1983 relating to Appellate Tribunal - Jurisdiction of Regional Benches, the Special Bench at Delhi only had jurisdiction to hear matters relating to classification or valuation. In this case, it is contended that there was no dispute regarding classification or valuation, and that therefore the Tribunal could not transfer the case to the Special Bench at New Delhi.
On behalf of the respondents it is contended -
(i) that the petitioner had accepted the order of the Tribunal by making a prayer for extension of time to comply with the same and therefore could not challenge the order;
(ii) the Tribunal had gone into all the questions raised including the question of undue hardship. Reliance has been placed on the decision of the Supreme Court in State of Uttar Pradesh and Others Vs. Maharaja Dharmander Prasad Singh and Others, and also the decision of the CEGAT in the case of 1987 (28) ELT 279
(iii) that there was admittedly a dispute regarding the rate of duty applicable as recorded in the order of the Tribunal.
I am of the view that the last contention of the respondents must be accepted. The petitioner had itself submitted to the transfer of the case to the Special Bench at New Delhi.
However, I am also of the prima facie view that the rate of duty charged should be 5% ad valorem. This also appears from the documents disclosed by the Petitioner in these proceedings. The Tribunal having recorded the submissions of the parties did not consider the same. Assuming that the duty was to be calculated on the value of the goods declared, on the basis of the confessional statement, the duty would (at the rate of 5% ad valorem) have been less than Rs. 50,000/-. The petitioner has paid Rs. 50,000/- which has been directed to be adjusted. The Tribunal has, it appears, only drawn a mean line between the case of the department and the case of the petitioner without coming to any finding as to which of the two cases has to be accepted at least prima facie. However having regard to the fact that the petitioner itself instead of challenging the order asked for and was granted an extension of time to comply with the order of the Tribunal, I direct that the petitioner will be at liberty to furnish a bond for the amount of Rs. 15,000/- instead of depositing the said amount. The bond will be executed in the form which was made over by the petitioner to the respondents a copy of which is kept on record. The respondents not having objected to the form as indicated in my order dated 14-2-1991 it is presumed that the same is accepted by them. The encashment of the bond will remain subject to the final decision of the matter by the Special Bench at New Delhi.
As far as the deposit on account of penalty is concerned, I am not inclined to interfere with the same considering the gravity of the offence alleged. At this stage it cannot be said that the mere payment of Rs. 50,000/- during the search and seizure establish the bona fides of the petitioner warranting a waiver of the penalty.
I therefore reject the case of the petitioner in so far as it challenges the order of the Tribunal directing transfer of the case to the Special Bench at New Delhi.
The petitioner will furnish the bond and deposit the amount of Rs. 5,000/-within 2 weeks from date. In default writ application will stand dismissed.
The writ application is, therefore, partially allowed on the terms set out. There will be no order as to costs.