DBCEA NO.10/10. 1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. O R D E R D.B. CENTRAL EXCISE APPEAL NO.10/2010. M/s.Rajasthan Explosive & Chemicals Ltd., Muchkund, Dholpur, Rajasthan Vs. The Commissioner of Central Excise, Jaipur-I, Jaipur Date of order : 21/10/2010. HON'BLE Mr.JUSTICE ARUN MISHRA HON'BLE Mr.JUSTICE MOHAMMAD RAFIQ Shri Manoj Kumar Sharma for the appellant. Shri Anil Mehta for the respondent. ****** BY THE COURT:- Heard. This appeal has been preferred under Section 35G of the Central Excise Act, 1944 (shall hereinafter be referred as the "Act of 1944") assailing the legality of the order dated 19/4/2010 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (hereinafter referred as the "Tribunal") thereby, rejecting stay application filed by the appellant for waiver from the requirement of compliance with the provisions of Section 35F of the Act of 1944 DBCEA NO.10/10. 2 and appellant was directed to pay the entire duty demand, interest and penalty within a period of eight weeks from the date of the order. The facts in short indicates that appellant is a Joint Sector Company started as Joint Venture between RIICO and M/s.IDL Chemicals Ltd. in the year 1979. Appellant-company is engaged in manufacture of Electric Detonators (EDN) and R-Cords/Detonation fuse, both chargeable to Central Excise Duty under sub- heading 3603.00 of the Central Excise Tariff. On 8/11/1997, the factory premises of the appellant- company were visited by the jurisdictional Central Excise Officers and seized certain documents. Subsequently, the residential premises of Shri M.L. Agarwal, Dy.General Manager of the appellant-company was searched on 5/3/1998 and from the residential premises, several documents including the documents called the "incentive sheets" were recovered. Scrutiny of the documents revealed that during 1995-96, 1996-97 and 1997- 98, appellant-company maintained records of "incentive sheets" in respect of the quantity of production of EDNs and R-Cords/Detonator fuses and the entries in the incentive sheets in respect of EDNs were made on the basis of daily production by each regular worker and entries in DBCEA NO.10/10. 3 respect of R-Cords were made on the basis of actual consolidated monthly production. On the basis of figures of production in the incentive sheets, payments were being made to the workers. It was found that the production of 34,89,450 no. of EDN and 16,15,060 meters of R-Cord were not accounted for in the RG.I Register. Scrutiny of the seized documents also indicated that the huge quantity of inputs like ordinary/special ordinary/super plain detonators (OD/SOD/SPD) for manufacture of various types of EDNs had been received from various suppliers, one of the main supplier being M/s.H.N. Explosives (P)Ltd., Sohna (HNEPL) with Shri Ganesh Mathur as its Managing Director and without accounting for the same in the statutory records, these purchases had been made in cash. On enquiry, certain other facts were also found. On the basis thereof, show cause notice dated 9/7/1998 was issued to the appellant-company as well as Shri Rajesh Jain, Managing Director, Shri B.D. Agarwal, Vice President, Shri A.K. Jain, Vice President and Shri Ganesh Mathur Managing Director of M/s.HNEPL, Sohna, the supplier of unaccounted raw-material and one of the buyers of unaccounted EDNs/R-Cords with respect to recovery of Central Excise Duty amounting to Rs.51,51,960/- from the DBCEA NO.10/10. 4 appellant-company, imposition of penalty on the appellant-company under Section 11AC of the Act of 1944. Show cause notice was adjudicated upon by the Commissioner of Central Excise, Jaipur, duty demand along with interest was confirmed against the appellant-company and besides this, penalty of equal amount was imposed on it u/S.11AC, penalty of Rs.25 lacs was imposed on Shri Rajesh Jain, Managing Director of the appellant-company and penalty of Rs.5 lacs was imposed on Shri Ganesh Mathur, Managing Director, HNEPL under Rule 209A of the Act of 1944. Similarly, penalty of Rs.10 lacs each was imposed on Shri B.D. Agarwal and Shri A.K. Jain, Vice Presidents of the appellant-company under Rule 209A of the Act of 1944. The matter was initially remanded to the Commissioner for de-novo adjudication pursuant to the order of the Tribunal. Pursuant to the order of the Tribunal, de-novo adjudication was done by the Commissioner vide order dated 3/11/2000 whereby, Commissioner again confirmed the entire duty demand alongwith interest, imposed penalty of equal amount on the appellant-company under Section 11AC and imposed penalties of Rs.25 lacs on Shri Rajesh Jain and Rs.10 lacs each on Shri B.D. Agarwal and Shri A.K. Jain, respectively and penalty of Rs.5 lacs DBCEA NO.10/10. 5 was imposed on Shri Ganesh Mathur of H.N. Explosives (P) Ltd., Sohna. The matter was again remanded by the Tribunal on appeals being preferred. Third adjudication was done by the Commissioner vide order dated 8/9/2006. Again the matter was remanded thereafter. Fresh adjudication took place and the Commissioner finally passed order on 6/5/2009 and confirmed the duty demand of Rs.51,51,960/-, imposed penalty of equal amount on the appellant-company u/S.11AC, imposed penalty of Rs.25 lacs on Shri Rajesh Jain, Managing Director of appellant- company and penalty of Rs.5 lacs on Shri G.M. Mathur and dropped the penal proceedings against Shri B.D. Agarwal and Shri A.K. Jain. Against the order dated 6/5/2009 passed by the Commissioner, two appeals have been filed before Tribunal, one by the appellant-company and another by Shri Rajesh Jain along with application for waiver of requirement of pre- deposit of duty demand with penalty and interest. In the year 1992, the appellant-company approached to the Board for Industrial & Financial Reconstruction (hereinafter referred as the, "BIFR") for declaring it a 'sick unit' and for finalizing a rehabilitation package. BIFR second time vide order dated 22/11/2000 finalized DBCEA NO.10/10. 6 the rehabilitation scheme. Stay Applications for waiver from the requirement of compliance with the provisions of Section 35F of the Act of 1944 have been rejected by the Tribunal by a detailed order discussing facts elaborately. It has been found that appellant-company was found indulging in huge duty evasion by unaccounted production of huge quantity of EDNs/R-Cords/Detonator Fuses etc. and removal in clandestine manner without resorting to the invoice. Looking to the various decisions of the Apex Court and also considering the conduct of the appellant, the Tribunal has observed that duty evasion by unaccounted production of huge quantity of EDNs/R-Cords/Detonator Fuses etc. and removal in clandestine manner without resorting to the invoice and unaccounted clandestine sales of items like detonators, detonator fuses, explosive slurry etc., is a serious matter and relaxation has not been granted under the provisions of Section 35F of the Act of 1944. Hence, instant appeal has been preferred. Shri Manoj Kumar Sharma, learned counsel appearing on behalf of the appellant has submitted that the Tribunal has failed to take into consideration the Scheme of B.I.F.R. of E (xv) & E (xviii) of GOI Clause. Learned counsel DBCEA NO.10/10. 7 has submitted that once the Scheme has been framed, no payment should have been asked for from the appellant-Company. It is submitted that no claim or any liability which was not taken/disclosed in the books by the old management or not provided in the Package approved by the B.I.F.R. from new management, should be ordered to be deposited. Counsel has also submitted that earlier, waiver was granted by the Tribunal. As such, same treatment ought to have been meted out by the Tribunal. Learned counsel has also submitted that at present, the Directors of the Company and several other persons of the appellant-Company are suffering incarceration due to violation of certain conditions of the license. He has also alternatively prayed that relaxation should be granted by waiving certain amount. As the appellant-Company is under the process of rehabilitation, it may not be in a position to comply with the onerous condition of depositing excise duty put in the show cause notice. Shri Anil Mehta, learned counsel appearing on behalf of the respondent has supported the order which was passed by the Tribunal considering the conduct of the appellant in the facts found as there was duty evasion by DBCEA NO.10/10. 8 unaccounted production of huge quantity of EDNs/R-Cords/Detonator Fuses etc. and removal in clandestine manner without resorting to the invoice and unaccounted clandestine sales of items like detonators, detonator fuses, explosive slurry etc. which took place in the connivance of Managing Director of the appellant-company and at present also, officials of the appellant-company are under incarceration for violating similar conditions of the license. Thus, they have not come before this Court with clean hands and hence they are not entitled for any relief. They cannot derive any benefit out of the previous orders which were passed by the Tribunal. Order of the Tribunal cannot be said to be binding on this Court. Learned counsel contended that Section 22 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred as the, "Act of 1985"), cannot be applied to deposit u/S.35F. He has placed reliance on the judgment of Apex Court in Indu Nissan Oxo Chemicals Industries Ltd. Vs. Union of India : 2008(221) E.L.T. 7 (S.C.) and also another decision of Apex Court in Metal Box India Ltd. Vs. Commissioner of Central Excise, Mumbai : 2003 (155) E.L.T. 13 (S.C.). Coming to the submission raised by Shri DBCEA NO.10/10. 9 Manoj Kumar Sharma, learned counsel appearing on behalf of the appellant that in view of the order passed by the BIFR, GOI Clause (xv), the amount cannot be recovered by way of directing the deposit and amount ought to have been waived. Condition of GOI Clause (xv) is quoted below:- "Central Excise & Customs should not to ask for any payment from the company & individuals against order no.v(36.02) 15/off/38/98/2/1999 dated March 5, 1999 show cause notice issued against the company or its employees and any other such, till the disposal of the cases by the appropriate court. Any interest, penalty, other charges etc. levied on these dues to be waived." It is apparent that the said GOI Clause (xv) is related to recovery pursuant to order no.v(36.02)15/off/38/98/2/1999 dated March 5, 1999 show cause notice issued against the company, till the disposal of the cases by the appropriate court. Any interest, penalty, other charges etc. levied on these dues to be waived. While we consider the order dated 6/5/2009 A/2 passed in the instant case by the Commissioner, Central Excise, Jaipur-I, it reveals that Show Cause bears the number as C.No.(36.02) 15/off/38/98 dated 6/9.7.1998. Thus, in the order of the BIFR, The Central Excise and Customs has been asked not to make recovery pursuant to show cause notice dated March 5, 1999. Notice in DBCEA NO.10/10. 10 question is dated 6/9.7.1998. Thus, reliance placed by the appellant's counsel on the aforesaid GOI Clause (xv) is of no avail. Apart from that, even assuming that recovery is with respect to the same notice though it is not so, Apex Court in Indu Nissan Oxo Chemicals Industries Ltd. supra relying on decision in Metal Box India Ltd. supra has laid down that deposit u/S.35F is not covered u/S.22 of the Act of 1985. Relevant part of observation is reproduced hereinbelow:- "9. We shall deal with first the issue relating to the question of stay/dispensation of pre deposit in respect of sick industry. In Metal Box India Ltd. v. Commissioner of Central Excise, Mumbai – 2003 (155) E.L.T. 13 (S.C.), this Court had clearly observed as follows:- Mr.Rana Mukherjee, the learned counsel for the appellants submits that in view of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'the Sick Industries Act'), the appellant need not deposit the amount, as ordered by the Tribunal, as protection is available to the appellant under the said provision. We are afraid, we cannot accept the contention of the learned counsel for reasons more than one. First, this aspect was not the subject matter of the order under challenge and, secondly, Section 22 of the Sick Industries Act provides relief in regard to the proceedings which relate to (a) winding up of the industrial company; (b) execution distress or the like against any of the properties of the industrial company; (c) the appointment of a receiver in respect thereof, and (d) proceeding in regard to suit for recovery DBCEA NO.10/10. 11 of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company. Payment of pre- deposit covered under Section 35F of the Central Excise Tax Act, 1944 does not fall under any of the above-mentioned categories in Section 22 of the Sick Industries Act." Thus, it is apparent from the aforesaid dictum of the Apex Court that payment of pre- deosit covered under Section 35F of the Central Excise Tax Act, 1944 does not fall under Section 22 of the Sick Industries Act. In the instant case, appellant has filed appeal under Section 35G of the Act of 1944, the provision of Section 35F is a statutory provision which is required to be complied with by them. The department is not making recovery. The pre-condition of maintainability of appeal which has appellant chosen to file has to be complied with. Coming now to the submission of Shri Manoj Kumar Sharma, learned counsel appearing for the appellant based upon GOI clause (xviii) in the order of BIFR, which provides that GOI shall not claim any other liability which was not taken / disclosed in the books by the old management or not provided in the package approved by BIFR from new management. This question was not argued before the Tribunal. It pertains to the question DBCEA NO.10/10. 12 of facts and documentary evidence was necessary to be adduced in this regard by the appellant and this aspect has not been argued before the Tribunal as it is not mentioned in the order, hence we are not inclined to accept the aforesaid submission. Even otherwise, appellant has not placed material along with appeal so as to satisfy this Court that liability which was not taken nor it was disclosed in the books of accounts of the old management and it was not provided in the package provided by the BIFR from the new management. Counsel rather prayed for giving some time to collect the documents. We have declined as in the instant case, this question was required to be raised at first instance before the Tribunal which has not been done. Coming to the submission based on previous interim-orders of waiver, same have not been placed on record along with the appeal. Apart from that, orders passed by the Tribunal relating to waiver cannot be pressed into to be used in this case after final adjudication has been done and previously there was one or other procedural lapse due to which case was remanded. When there has been fresh adjudications and they have been given opportunities for defending the DBCEA NO.10/10. 13 case and facts obtaining in this case, those orders are of no utility. All the facts have been dealt with by the Tribunal that the appellant- company was indulged in evasion of huge excise duty by unaccounted production of huge quantity of EDNs/R-Cords/Detonator Fuses etc. and removal in clandestine manner without resorting to the invoice and unaccounted clandestine sales of items like detonators, detonator fuses, explosive slurry etc. which took place in the connivance of the Managing Director of the appellant-company. Merely by the pendency of some cases relating to removal in clandestine manner for different periods, no case is made out in favour of the appellant. Even at present, it is not disputed at the bar that several responsible officers of the appellant-company are suffering incarceration for violating such condition of the license. Their conduct is against the public interest and security and waiver has been rightly declined by the Tribunal. Tribunal has assigned following reasons in paras 7 and 7.1 of the order:- "7. Section 35F of the Central Excise Act provides that where any appeal, decision or order appealed against relates to any duty demanded in respect of goods, which are not under the control of Central Excise Authorities 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 DBCEA NO.10/10. 14 demanded or the penalty levied. The only provision for waiver from the requirement of pre-deposit of duty demand and penalty is the 1st proviso to this Section, which provides that where the appellate authority is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the appellate authority may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the interests of revenue. Now what is undue hardship, has been explained by the Hon'ble Supreme Court in its judgment in the case of Benara Valves Ltd. vs. CCE reported in 2006 (204) E.L.T. 513 (S.C.) and Indu Nissan Oxo Chemicals Industries Ltd. vs. Union of India (supra), wherein Hon'ble Supreme Court has held that the undue means something which is not warranted by the conduct of the appellant or is very much disproportionate to it and that undue hardship is caused when the hardship is not warranted by circumstances. Hon'ble Court in these cases has observed for the hardship to be undue it must be shown that the particular burden to have to observe or to perform the requirement is out of proportion to the nature of the requirement itself and the benefit which the applicant would derive from compliance with it. Hon'ble Supreme Court in these judgments has also observed that two significant expressions used in Section 35F of the Central Excise Act and Section 129E of Customs are – "Undue hardship to such person" and "safeguard to interest of revenue" and, therefore, while dealing with the stay application, the twin requirements of the considerations that is consideration of undue hardship aspect and impositions of conditions to safeguard the interests of revenue have to be kept in view. 7.1 Coming to the conduct of the Appellant, as discussed in para 3, 4 & 5 above, from the perusal of the impugned order and other records, we are, prima- facie of the view that the Appellants have been indulging in huge duty evasion by unaccounted production of huge quantity of EDNs/R-Cords/Detonator Fuses DBCEA NO.10/10. 15 etc. and clandestine clearances of the same and that for clandestine clearances, the modus-operandi like issue of parallel invoices had been adopted. The unaccounted clandestine sales of items like detonators, detonator fuses, explosive slurry etc. and that too, taking place with the connivance of the Managing Director of the company have to be viewed very seriously. Therefore, neither the Appellant company, nor its Managing Director Sh. Rajesh Jain deserves any relaxation from the provisions of Section 35F." Aforesaid facts speaks about the conduct of the appellant and it appears that it is indulged in such activities continously. Thus, in the facts and circumstances of the case, the impugned-order rejecting application appears to be proper. Counsel further submitted that as the responsible officers are suffering incarceration at this stage, bank accounts have been seized, they may not be in a position to make the payment of the amount. Incarceration has taken place now. Whatever that may be, considering however the aforesaid facts, we extend the period of ten weeks from today to deposit the amount. We are not inclined to reduce the amount which has been directed to be deposited by the Tribunal. We are not inclined to interfere in the inter-locutory order passed by Tribunal. The appeal being devoid of merit is DBCEA NO.10/10. 16 dismissed as no substantial question of law is involved therein. (MOHAMMAD RAFIQ), J. (ARUN MISHRA), J. anil/- DBCEA NO.10/10. 17 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. O R D E R D.B. CIVIL MISC.STAY APPLICATION NO.1321/2010. IN D.B. CENTRAL EXCISE APPEAL NO.10/2010. M/s.Rajasthan Explosive & Chemicals Ltd., Muchkund, Dholpur, Rajasthan Vs. The Commissioner of Central Excise, Jaipur-I, Jaipur Date of order : 21/10/2010. HON'BLE Mr.JUSTICE ARUN MISHRA HON'BLE Mr.JUSTICE MOHAMMAD RAFIQ Shri Manoj Kumar Sharma for applicant-appellant. Shri Anil Mehta for the respondent. ****** BY THE COURT:- Consequent upon dismissal of appeal, this stay appliation does not survive and the same is dismissed. (MOHAMMAD RAFIQ), J. (ARUN MISHRA), J. anil/-