2005 (98) ECC 151 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J)

Vairava Textiles Ltd.

Versus

Commissioner of Central Excise, Coimbatore

E/PD/514/2003 and E/1067/2003

[Arising out of Order-in-Appeal No. 282/2003-CE dated 25.9.2003 passed by Commissioner of Central Excise & Customs (Appeals), Coimbatore]

Stay Order No. 345/2004
Final Order No. 545/2004, dt. 6.7.2004, Certified on 15.7.2004

Appeal

Waiver of Pre-deposit -- Where duty had been paid before issue of show-cause notice, no penalty could be imposed under Section 11AC of the Act. In view of the Larger Bench decision reported in 2004 (96) ECC 180 (LB). Hence, there shall be no requirement of any pre-deposit under Section 35F of CEA.

PRESENT :

Shri Subash Chandiran, Adv. for the appellant.

Shri C. Mani, JDR for the respondent.

Case Cited :

CCE, Delhi-III, Gurgaon v. Machino Montell (I) Ltd. 2004 (96) ECC 180 (LB)............ [Para 3]

Per : P.G. Chacko (Oral)

Having examined the records and heard both sides, I am of the view that the appeal requires to be finally disposed of at this stage it self. Accordingly, after dispensing with predeposit, I take up the appeal.

2. The appeal is against an order passed by the Commissioner (Appeals) on 25.9.2003 dismissing the assessee's appeal on the sole ground of non-compliance with Section 35F of the Central Excise Act, 1944. It appears from the records and submissions that the issue involved in the case was admissibility of Modvat Credit to the extent of Rs. 11,762 to the assessee; that this issue was decided upon by the original authority against the assessee; that the assessee, aggrieved by the decision of the original authority, preferred an appeal to the Commissioner (Appeals); that, alongwith that appeal, they also filed an application under Section 35F of the Act praying for waiver of pre-deposit and stay of recovery in respect of the penalty amount of Rs. 11,762; that the appellants, in that application, categorically stated that the Modvat Credit of Rs. 11,762 had been reversed in the relevant account prior to the issuance of show-cause notice; that the Commissioner (Appeals) insisted that an application for waiver of pre-deposit and stay of recovery in respect of the amount of Modvat Credit also should have been filed by the assessee; and that the assessee's appeal was dismissed on the ground that there was no pre-deposit of the amount of Modvat Credit.

3. Ld. Counsel for the appellants has submitted that the lower appellate authority insisted on pre-deposit of the Modvat Credit amount despite having noted the fact that the appellants had debited the said amount as per Entry No. 10 dated 30.9.1998 in their Modvat account. I find that this submission of the Counsel is factually correct. In para 5.2 of the impugned order, it is stated as under:

--"On examining the original copy of RG23C Part II for the month of September 1998, it was found that the appellants had, vide debit Entry No. 10 dated 30.9.1998, debited a sum of Rs. 11,762."

--Nevertheless, Ld. Commissioner (Appeals), in para 5.3 of his order, notes as under:-

--"As such, it is apparent that the appellants have not reversed the amount of Rs. 11,762 disallowed and demanded in the impugned order".

--This observation of the lower appellate authority is apparently inconsistent with its earlier observation noted in para 5.2 of the impugned order. It appears from the records of the case that it is an admitted fact that the party had debited the Modvat Credit amount as early as on 30.9.1998, well before the relevant show-cause notice was issued. It was, therefore unnecessary for them to seek waiver of pre-deposit or stay of recovery in respect of the said amount. It was only the penalty amount that could have been the subject-matter of any application for waiver of pre-deposit and stay of recovery under Section 35F of the Act. The assessee applied for such waiver and stay but the same was rejected by the Commissioner (Appeals). In this context, as rightly pointed out by Ld. Counsel the decision of the Tribunal's Larger Bench in Commissioner of Central Excise, Delhi-III, Gurgaon v. Machino Montell (I) Ltd., 2004 (96) ECC 180 (LB) : 2004 (168) ELT 466 (Tri.-LB)] is relevant. The Larger Bench held that, where duty had been paid before issue of show-cause notice, no penalty could be imposed under Section 11AC of the Act. The penalty in the instant case is under Section 11AC of the Act. Apparently, it is unsustainable in view of the Larger Bench decision. Thus, the appellants have a strong prima facie case as regards the amount of penalty. The lower appellate authority should have waived pre-deposit of the penalty amount and proceeded to dispose of the appeal before it in accordance with law and the principles of natural justice.

4. I set aside the impugned order and direct the Commissioner (Appeals) to dispose of the appeal before him on its merits in accordance with law. There shall be no requirement of any pre-deposit under Section 35F of the Act. Needless to say, the appellants shall be given a reasonable opportunity of being heard. The present appeal stands allowed by way of remand.

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