By TIOL News Service

KOLKATA, MAY 27, 2014: A demand of more than Rs.2.57 crores along with penalties was confirmed by the CCE, Kolkata. Personal penalties were also imposed.

The duty demand comprised of the following -

+ During the course of manufacture of wires and cables, the appellant had manufactured waste and scrap but failed to discharge the duty of Rs.2.23 crores on such waste and scrap.

+ The second component of the demand pertains to the CENVAT credit of Rs.34.14 lakhs contained in the 'waste and scrap' of wires and cables cleared as non-excisable goods.

While seeking a stay in the matter, the applicant informed the Bench that no duty could be levied on such ‘waste and scrap' as in their own case the Tribunal had earlier decided in their favour. The Revenue representative countered this submission by stating that the said decision may not be a good law after amendment made by the FA, 2008 to the meaning of "excisable goods" defined at section 2(d) Central Excise Act, 1944.

The Tribunal,   prima facie, considering the case on merit, as well as the financial hardship expressed by the Applicant, waived pre-deposit of the entire amount of duty and penalty aggregating Rs.4,47,26,182/- confirmed on this count.

In respect of the second component of the demand, the Bench had observed that the approach of the appellant is ambivalent inasmuch as whereas on the one hand they had claimed that the waste and scrap of wire & cable is non-excisable but availed credit on the inputs; secondly, they have not complied with the provisions of Rule 3(5) of the CCR, 2004, while clearing said 'waste and scrap' brought as input, from the factory, by debiting the credit/duty involved availed on such inputs. Noting that although the Applicant is required to reverse the entire amount of credit, taking into consideration all aspects, including financial hardship expressed by the applicant, the interest of revenue and the principle of law settled by the by the Supreme Court and High Courts in disposal of stay applications, the Tribunal, directed the Applicant to deposit 25% CENVAT Credit of Rs.34,14,010/- i.e. Rs.8,53,502/- and waived remaining dues of Rs.59,74,518/- confirmed on this count.

So, in a nutshell, against the total dues of Rs.5,90,54,202/- confirmed against the Applicants, the bench vide its order dated 29.04.2013 directed pre-deposit of Rs.8,53,502/-, which is around 1.44% of the total dues.

Later, the Appeals were dismissed by the CESTAT on 10.07.2013 for non-compliance with direction of pre-deposit.

Unhappy with this order, the applicant moved the High Court. The Calcutta High Court disposed of the Writ Petition, vide Order dated 08.08.2013, with a direction for re-consideration of the three Applications afresh, after restoration of the Appeals dismissed for non-compliance.

Thus, the matter was again taken up for consideration by the Tribunal.

At the outset, the Bench noticed -

"8. We find from the Order of the Hon'ble High Court that the High Court proceeded on the premise that the Applicants were asked to deposit 25% of the total dues and waiver has been allowed for remaining 75% of the dues. It seems that the facts were not properly placed before the Hon'ble High Court. As stated above, in fact, the Applicants have been allowed waiver of pre-deposit of around 98.56% of the total dues and directed to deposit only 1.44% of the confirmed dues."

The appellant submitted that as the net worth of the company is in the negative, they cannot be called upon to deposit any amount, irrespective of any circumstances, even if on merit, the case is against them, in view of the apex court judgment in Sagarika Acoustronics Pvt. Ltd. [refer 2007-TIOL-2271-CESTAT-MUM ].

The Revenue representative submitted that even if the Applicant is in BIFR and their net worth is negative that itself cannot be the basis for allowing complete waiver to the Applicants, without safeguarding the interest of the Revenue. It is also informed that the Balance Sheet for the year ending 31.03.2013 reveals that the total revenue earned by M/s applicant for the FY ending as on 31st of March 2013 is Rs.2175.10 Lakhs, total cash and equivalents is Rs.1340.52 lakhs and the investments are Rs.448.64 lakhs. Therefore, pre-deposit of Rs.8,53,202/-, as directed, would not cause any undue hardship to the Applicant. It is further submitted that the decision of the Supreme Court in Sagarika Acoustronics Pvt. Ltd.'s case is binding on the parties to the said case and cannot be considered as a binding precedent. Reliance is also placed on the decision in Metal Box India Ltd. - 2003-TIOL-66-SC-CX wherein after considering the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 the Supreme Court had observed that the same is not applicable to deposits under Section 35F of CEA, 1944.

The Bench extracted the order of the Supreme Court in Sagarika Acoustronics Pvt. Ltd. and on the submission made by the Revenue representative that the said decision cannot be considered as a binding precedent, the CESTAT examined the term ‘ ratio decidendi ' by culling its meaning given by the apex court in the case of Dalbir Singh Vs. State of Punjab AIR 1979 SC 1384, Krishna Kumar Vs. Union of India AIR 1990 SC 1782 and observed that no principle of law has been settled by the Apex Court in Sagarika Acoustronics Pvt. Ltd.'s case and that it was clear from a plain reading of the said judgment that it was delivered in the facts and circumstances in the said case and is binding on the parties to the case; the same cannot be made applicable to other cases as a binding precedent.

After taking note of the apex court decision in Metal Box India Ltd. - 2003-TIOL-66-SC-CX & Indu Nissan Oxo Chemical Ind. Ltd. - 2007-TIOL-225-SC-CX  the Bench concluded -

"17. Bearing in mind the principle of law on disposal of the waiver application, besides analyzing the merit of the case on a   prime facie basis, we have also now carefully considered the financial hardship expressed by the learned Advocate for the Applicant. Besides, we have taken note of interest of the revenue which also needs to be safeguarded. We find that against the total outstanding dues of 5.90 Crore confirmed against all the applicants, a pre-deposit of Rs.8,53,502/- would meet the ends of justice. As already mentioned above, the said amount of Rs.8,53,502/- is around 1.44% of the total dues and 3.32% of the total duty confirmed, which in our opinion, would not result in any undue hardship to the Applicant, in the circumstances, when the total Revenue of the Applicant is Rs.2175.10 Lakhs; Cash and Cash equivalents Rs.1340.52 lakhs; and investments are Rs. 448.64 lakhs for the financial year ending 31.03.2013…."

In fine, the applicant was directed to make a pre-deposit of Rs.8,53,502/- within a period of six weeks and report compliance.

(See 2014-TIOL-856-CESTAT-KOL)