Hon'ble Dr. Satish Chandra,J.
1.Heard Sri S.M.K. Chaudhary, learned Senior Counsel on behalf of the appellant, Sri Rajesh Singh Chauhan, learned counsel for the respondent and perused record.
2.Present appeal under Section 35-G of Central Excise Act, 1944 (in short the Act), has been preferred against the impugned order passed by the Customs, Excise & Service Tax Appellate Tribunal (in short the Tribunal) dated 15.3.2011.
3.The argument advanced by the learned counsel for the appellant relates to interpretation of Section 35F of the Act. The brief facts giving rise to the present appeal are discussed hereinafter.
4.The appellant is engaged in manufacture of goods classified under tariff heading 32.91 of the First Schedule to the Central Excise Tariff Act, 1985. The appellant having been found to have committed certain irregularities in relation to the excise law, hence a show notice dated 30.1.2009 was issued to the appellant which was contested by them by filing reply dated 1.5.2009. After receipt of reply, the Assistant Commissioner, Lucknow by the order dated 29.1.2010 confirmed the demand to the tune of Rs.486472/- while appropriating an amount of 486500/- already deposited by the appellant and also ordered payment of interest on the said amount of duty, besides imposing equal amount of penalty. Further, 27775.00 kgs., plastic granules valued at Rs.26,94,175/- were ordered to be confiscated while giving option to redeem the same on payment of redemption fine of Rs.675000/- and further, penalty of Rs.38850/- was also imposed under Rule 15 (1) of the Cenvat Credit Rules, 2004. Being aggrieved, the appellants filed an appeal before the Commissioner (Appeals) along with application for dispensing with the requirement of predeposit. The said application was disposed of by an order dated 1.6.2010 directing yjr deposit of 50% of the entire amount of penalty within two weeks from the receipt of the copy of the said order. However, the appellant did not deposit the amount but under its letter dated 14.6.2010 submitted that the financial condition was very poor and the appellant was facing acute financial hardship and, therefore, requested for modification of the said order. After hearing, the Commissioner (Appeals), by an order dated 17.8.2010 held that the appellant had failed to comply with the requirement of pre-deposit and in absence of any cause being shown, the appeal was liable to be dismissed and was accordingly dismissed. The appeal preferred against the impugned order dated 17.8.2010, has been dismissed by the Tribunal on the ground that deposit under Section 35F of Act is mandatory hence in absence of fault on the part of the appellant to make deposit, the appellate authority has rightly dismissed the appeal. The operative portion of the judgment dated 21.12.2010 passed by the Customs, Excise and Service Tax Appellate Tribunal, West New Delhi, is reproduced as under:-
"20. In the cases in hand, it is seen that though initially when the applications for dispensation were filed before the Commissioner (Appeals) along with the appeals by the appellants, the same were disposed of without personal hearing to the appellants. Nevertheless they were disposed of with speaking order communicated to the parties and dispensing with 80% and 50% of the amount demanded under the adjudicating order. By no stretch of imagination it can be held that those orders were passed mechanically or without application of mind. Besides before dismissal of the appeal for non-compliance of the said order and pursuant to the applications filed by the appellants for modification of those orders, personal hearing was granted to the appellants and after taking into consideration the case putforth by the appellants, they having failed to make out satisfactory case for modification of the said orders, the impugned orders came to be passed. In other words, it can not be said that absolutely no hearing was granted on the issue regarding the requirement of pre-deposit of the amount due and payable under the order passed by the adjudicating authorities. It is not the case that the Commissioner (Appeals) has directed the appellants to pay the entire amount payable under those order, except in one case, and that too for justifiable reason. Besides, the requests for modification of those orders were rejected after hearing the parties and thereafter the appeals were dismissed. In fact, dismissal of the appeal is a consequence of non-compliance of requirement under Section 35F. There is no option left in that regard to the appellate authority unless the appellants are able to make out a case to that effect and undisputedly opportunity to make out a case in that regard was granted to the appellant. Being so, we do not find any illegality in the impugned orders nor it can be said that the orders which were passed on the stay applications are vitiated I n any manner."
5.A plain reading of the aforesaid order reveals that decision of appellate authority was in pursuance of non-compliance of requirement under Section 35F.
6.While assailing the impugned order, Sri S.M.K. Chaudhary learned Senior counsel would submit that a decision dated 23.5.2011, rendered by the Division Bench of this Court of which one of us (Hon'ble Mr. Justice Devi Prasad Singh) was a member, is based on different facts and hence is not applicable. Further submission is that the provisions of Section 35F is not mandatory. Only, the application moved by the appellant was rejected by the appellate authority hence, it was not incumbent on the appellate authority to dismiss the appeal on the ground that pre-deposit was not made in pursuance of the order dated 1.6.2010. Further submission is that the excise duty was already deposited hence also, it was not incumbent on the appellate authority to dismiss the appeal only because of lack of pre-deposit of amount on the part of the appellant in pursuance of the order dated 1.6.2010.
7.On the other hand, Sri Rajesh Singh Chauhan, learned counsel for the respondents would submit that the provisions of Section 35F is mandatory more so, when the appellate authority had exercised powers on the application moved by the appellate himself partly dispensing the deposits by the order dated 1.6.2010. Submission is that pre-deposit of the excise has direct nexus with the statutory adjudication of dispute in question.
8.Much emphasis has been given by the appellant's counsel on the Apex Court judgment reported in (1993) 1 SCC 22: Shyam Kishore and others. Vs. Municipal Corporation of Delhi and another. In the case of Municipal Corporation (supra), the Hon'ble Supreme Court has held that provision of Section 35F is mandatory. However in para 46, their lordships has made following observations:-
"46. We only wish that the statute itself is soon amended to make this position clear. After all, under the D.M.C. Act, the appellate authority is a high judicial officer, being the District Judge, and there is no reason why the Legislature should not trust such a high judicial officer to exercise his discretion in such a way as to safeguard the interests of both the Revenue and the assessees. We think that, until this is done, the provision requires a liberal interpretation so as to preserve such interests and should not be so rigidly construed as to warrant the throwing out of an appeal in limine merely because the tax is not paid before the appeal is filed."
9.A plain reading of the observations made I n para 46 (supra), reveals that their lordship of Hon'ble Supreme Court opined that since the appellate authority is high authority not less than District Judge, (as then was) there is no reason why the Legislature should not trust such a high officer to exercise his discretion in such a way to safeguard the interests of both the Revenue and the assessees.
10.The observations made by Hon'ble Supreme Court does not seem to extend any help. Even if the observations of the Hon'ble Supreme Court is taken into account, there is no reason to record a contrary finding than what has been recorded by the Tribunal for the reason that the appellate authority has exercised discretion to balance the right of parties while passing the order dated 1.6.2010 in pursuance of the proviso to Section 35F of the Act. The provisions of Section 35F is reproduced as under:-
"35-F. Deposit, pending appeal, of duty demanded or penalty levied.--When 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 authority 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 Commissioner (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 Commissioner (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:
Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing."
11.A plain reading of proviso to Section 35-F shows that ample power has been given to the appellate authority by the Legislature to dispense with the deposit of duty demanded or penalty levied under the first proviso subject to such conditions as it may deem fit to impose so as to safeguard the interest of revenue. Once the appellate authority has exercised the discretion and directed the appellant to make deposit of duty demanded or penalty levied , then the discretion of the appellate authority ordinarily may not be disturbed by the Tribunal while deciding the appeal unless order of the appellate authority suffers from perversity, absurdity or not application of mind.
12.While deciding the F.A.F.O. No.504/2011, the Division Bench of this Court had proceeded to observed as under:-
"Learned counsel for the appellant has further relied upon the case reported in (2006) 13 SCC 347, Benara Valves Ltd. and others Versus Commissioner of Central Excise and another. In case of Benara, their Lordship of Supreme Court has held that while deciding the issue with regard to undue hardship appellate authority has to apply its mind and pass reasoned order, there should not be a mechanical application of mind. The provision contained in case of Benara Valves (supra) does not seem to be applicable under the facts and circumstances of the present case. That too when the petitioner has not raised grievance against the original order passed under Section 35G of the Act at initial stage. Only at later stage, he moved an application for waiving of 20% with regard to pre-deposit of amount. At the face of record, it reflects that he was having no grievance against the original order passed by the appellate authority. In case, he had any grievance, he could have approached the higher forum against the original order passed under Section 35F of the Act. He represented with regard to subsequent order for waiving of 20% deposit. The appellate authority has rightly rejected the application for waiving of 20% deposit without providing opportunity of hearing. There is no other aspect of the matter. It is not a case, where the appellate authority had not applied its mind with regard to appellant's undue hardship. In the present case, the appellate authority himself had directed the appellant to deposit 20% of the duty as well as penalty. It means the appellate authority himself has considered the appellant's undue hardship on the basis of material on record. Accordingly, the ratio of the judgment of Hon'ble Supreme Court in the case of Benara Valves (supra) is not applicable.
Learned counsel for the appellant has relied upon another judgment of Hon'ble Supreme Court reported in (2009 17 SCC 626, Dinesh International Ltd. v. Union of India and another. In the case of Dinesh International Ltd. (supra), their Lordship of Hon'ble Supreme Court has held that dismissing the appeal on account of assessee's delay in making pre-deposit ordinarily be condoned and the appellant may be permitted to make deposit. The judgment of Dinesh International Ltd. (supra) seems at all not applicable under the facts and circumstances of the present case.
In view of above, no substantial question of law is involved in the present case, which may require for interference by this Court under Section 35G of the Act. The controversy is based on the finding of fact, hence there appears no good ground to interfere with the impugned order passed by the Tribunal, it is dismissed accordingly, However, it is provided, in case, the appellant deposits the pre-deposit amount within one month from today, in case already not deposited, then the appellate authority may hear the appeal on merits, expeditiously."
13.Submission of the appellant's counsel is that the case of Delhi Municipal Corporation (supra), decided by the Hon'ble Supreme Court, relates to a situation where the Delhi Municipal Corporation Act was considered and the significance of the words, "no appeal shall be heard or determined under Section 169 unless as contained in the opening part of Section 170. Even if it is so, it shall not make any difference for the reason that the consistent view of Hon'ble Supreme Court is that the provision of Section 35F is to be complied with subject to relaxation granted by the appellate authority under the proviso contained therein. A plain reading of Section 35F reveals that the Legislature to their wisdom provided that whenever any appeal under the Chapter is filed, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authority or any penalty levied under the 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. Meaning thereby, after filing the appeal, it shall be incumbent on the assessee to make deposit with the adjudicating authority the duty demanded or penalty levied. The inference is that in case duty demanded or penalty not levied, is not deposited, it shall not be open to the appellate authority to hear the appeal on merit.
14.However, the provision is that subject to rider contained in proviso to Section 35F which provides that whenever in any particular case, the Commissioner (Appeals) or appellate Tribunal is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals), as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the interest of revenue. The emphasis is to secure the interest of Revenue. The purpose of the provision is that while passing any order, it shall be incumbent on the appellate authority to ensure that tax imposed or penalty levied, in any case, be not frustrated and the assessee may not escape the liability with regard to the payment of duty for any reason whatsoever. The proviso further provides that whenever an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing. Thus, the provisions contained with regard to disposal of application also seems to be mandatory. Meaning thereby whenever an application is moved, it shall be decided within thirty days.
15.It is true that even if the Legislature has not provided the consequence on account of non-deposit of demand or penalty levied in Section 35F of the Act, the natural consequence will be the dismissal of appeal without entering into the merit of the controversy. Accordingly, we are of the view that in case the duty demanded or penalty levied is not deposited by the assessee in pursuance of the decision taken or application decided under Section 35F of the Act, the appeal shall be liable to be dismissed. But while dismissing the appeal it shall not be incumbent on the appellate authority to enter into merit of the controversy. The analogy may be drawn from provisions where the appeal is filed after delay without application under Section 5 of Limitation Act. In case the delay is not condoned, then the Court has to dismiss the appeal without entering into the merit of the controversy. In view of the above, though, Section 35F does not provide consequence with regard to non-payment of duty or penalty but the natural consequence will be the dismissal of the appeal without entering into the merit of the controversy.
16.From the aforesaid discussions, the observations made and the finding recorded by the Tribunal does not seem to suffer from any impropriety or illegality. In view of catena of judgment of Hon'ble Supreme Court and this Court, question of law involved is no more res integra.
17.In view of the above, the question raised by the appellant's counsel, does not seem to res integra which may require to frame a substantial question of law. However, we permit the appellant to deposit the dues in terms of the order dated 1.6.2010 passed by the appellate authority within six weeks from today. In case the appellant deposit the dues before the appellate authority, then the appeal shall be heard on merit in accordance with law. The amount deposited if any shall be adjusted in terms of the order dated 1.6.2010.
18.Subject to above, the appeal is finally disposed of.
[Justice Dr. Satish Chandra] [Justice Devi Prasad Singh] Order Date :- 1.9.2011 Rajneesh AR-PS)