SCA/2213/2001 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 2213 of 2001 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH AND HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= GOEL SCIENTIFIC WORKS LTD Versus UNION OF INDIA AND OTHERS ========================================= Appearance : MR JD SHAH for the Petitioner MR HARIN P RAVAL for the Respondents ========================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 11/03/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE M.S.SHAH) This is an unfortunate case where the Tribunal imposed a very harsh and onerous condition on the petitioner to pre-deposit a sum of Rs.1 crore for hearing the appeal filed before the Customs, SCA/2213/2001 2/8 JUDGMENT Excise and Gold (Control) Appellate Tribunal (the Tribunal). 2. At the relevant time, Appeal No.913 of 1997 was filed before the West Regional Bench of the Tribunal at Mumbai. The petitioner was challenging the order dated 14.02.1997 passed by the Commissioner of Central Excise, Baroda raising demand of duty of Rs.2,85,22,727/- for the period from 1991-92 to 1995-96 and also imposing penalty of Rs.10 lacs. When the petitioner's stay application came up for hearing before the Tribunal on 20.06.1997, the Tribunal observed that on merits, the classification of the product is arguable and having regard to the financial position of the petitioner company, as reflected in their provisional balance sheet as on 31.03.1997, indicating the sales revenue of over Rs.2 crores, the Tribunal directed that for the purpose of hearing the appeal on merits, the petitioner shall pre-deposit an amount of Rs.1 crore on or before 31.07.1997. The matter was ordered to be posted for reporting compliance on 08.08.1997. It is the petitioner's case that the petitioner was not in a position to comply with the said condition and that the petitioner had even gone to State Bank of India for borrowing a sum of Rs.1 crore. The Bank, however, rejected that application. The petitioner thereafter made another application before the Tribunal for recalling/modifying the order dated 20.06.1997 pointing out that the petitioner was unable to make the pre-deposit due to financial hardship. The Tribunal, however, rejected the said application on 06.11.1997. Ultimately, when the matter came up before the Tribunal on 18.11.1997, on the SCA/2213/2001 3/8 JUDGMENT ground that the petitioner appellant had failed to comply with the condition stipulated in the pre-deposit order dated 20.06.1997, dismissed the appeal only on the ground of non-compliance of the stay order. 3. The dispute between the petitioner and the Central Excise authorities was whether the products being manufactured by the petitioner fell under Heading 7012.10 of Central Excise Tariff as contended by the petitioner or under Residuary Heading 7015 as contended by the department. Similar orders were passed by the Commissioner of Central Excise against six other units including M/s.Pioneer Scientific Glass Works. In their case also, the Tribunal had passed stay orders, requiring those appellants to pre-deposit certain amounts. The amounts being smaller in their case, those parties could deposit the amounts in compliance with the condition stipulated in the stay orders passed by the Tribunal and those six appeals came to be allowed by the Tribunal as per its judgment dated 25.9.2000. The Tribunal held that the appellants therein were manufacturing laboratory glassware and that they were covered by Heading 7012.10 and not under Heading 7015. The department carried the matter before the Apex Court and those appeals have, by now, been decided by the judgment dated 19.04.2006 reported as Commissioner of C.Ex., Vadodara Vs. Pioneer Scientific Glass Works, 2006 (197) E.L.T. 308 (S.C.). The Apex Court dismissed the appeals filed by the department and confirmed the findings of the Tribunal that the products SCA/2213/2001 4/8 JUDGMENT manufactured by the respondents before the Apex Court were laboratory glassware falling under Heading 7012.10. 4. Mr.J.D.Shah, learned counsel appearing for the petitioner, submits that the petitioner company is manufacturing the same products which are also being manufactured by M/s.Pioneer Scientific Glass Works and five other appellants before the Tribunal. It is submitted that only because the petitioner could not make the pre-deposit of Rs.1 crore, the petitioner's appeal was dismissed by the Tribunal on the ground of non-compliance with the stay order. It is also submitted that the condition of pre-deposit of Rs.1 crore imposed by the Tribunal in the order dated 20.06.1997 was too harsh. It is submitted that the Tribunal had merely considered that the sales revenue of the petitioner company for the year ended 31.03.1997 was over Rs.2 crores and on that basis alone, the order was passed for pre-deposit of an amount of Rs.1 crore. Mr.Shah has vehemently submitted that when a company has turnover of Rs.2 crores, such a company would never be in a position to have cash surplus of Rs.1 crore. In fact, turnover of Rs.2 crores would mean that after paying for raw materials, fuel, electricity, labour charges and after discharging the interest liability and tax liability, the company would be left with cash surplus of only a few lacs of rupees. The Tribunal, therefore, grossly erred in passing the order for pre-deposit of huge amount of Rs.1 crore. It is submitted that after dismissal of the petitioner's appeal by the Tribunal on the ground of non-compliance with the SCA/2213/2001 5/8 JUDGMENT stay order, the department attached the petitioner's properties and the properties were at that time valued at Rs.21,57,200/- and this fact also supports the petitioner's case that the condition imposed by the Tribunal in the pre-deposit order dated 20.06.1997 was too harsh. It is submitted by the learned counsel for the petitioner that the petitioner also deserves a chance to get his appeal heard on merits, more particularly when the appeals of other similarly situated manufacturers were not only allowed by the Tribunal but the said order is also confirmed by the Hon'ble Supreme Court in April 2006. 5. On the other hand, Mr.Harin Raval, learned Assistant Solicitor General of India, for the respondents has submitted that when the petitioner's appeal was dismissed in November 1997 on the ground of non-compliance with the condition stipulated in the stay order, it is too late in the day for the petitioner to make any grievance about dismissal of the appeal. It is also submitted that the decision of the Tribunal and of the Hon'ble Supreme Court were only for the benefit of the six individual units who were appellants before the Tribunal, in whose favour the Tribunal decided the matter on merits. 6. Having heard the learned counsel for the parties, we would like to note that this petition is not filed recently. The petition was filed as far back as in March 2001. In the first place, the condition imposed by the appellate Tribunal in the stay order dated SCA/2213/2001 6/8 JUDGMENT 20.06.1997 was certainly unduly harsh. When the petitioner's balance sheet showed turnover of over Rs.2 crores, obviously, the net surplus remaining with the petitioner after paying for raw materials, fuel, electricity, labour charges, etc. and after paying interest and taxes would be comparatively much less. Hence, the order for pre-deposit of a huge sum of Rs.1 crore was certainly unduly harsh and completely crippled the petitioner. The petitioner did not get any reasonable opportunity to get its grievance redressed on merits. The very fact that six other units, against whom the Commissioner of Central Excise had passed similar orders, ultimately succeeded before the Tribunal indicates that the petitioner's appeal also deserved to be heard on merits. Moreover, after dismissal of the petitioner's appeal on the ground of non- compliance with the stay order and after the appeals of six other parties were allowed by the Tribunal, the petitioner made one more attempt by going back to the Tribunal with a request to restore its appeal. However, the Tribunal dismissed that application on 23.01.2001 and therefore, the petitioner moved this Court in March 2001. It cannot, therefore, be said that this petition suffers from delay, laches and acquisance. Even otherwise, looking to the injustice done to the petitioner company, this is a fit case where this Court would entertain this petition. 7. The next question is what reliefs may be granted to the petitioner. The petitioner has been contending that its case is similar to case of M/s.Pioneer Scientific Glass Works and five SCA/2213/2001 7/8 JUDGMENT others, who succeeded before the Tribunal and before the Hon'ble Supreme Court. However, since the petitioner's appeal was dismissed only on the ground of non-compliance with the condition stipulated in the stay order, in the facts and circumstances of the case, we are inclined to set aside the order dismissing the petitioner's appeal and also the stay order dated 20.06.1997 and we are inclined to direct the Tribunal to hear the petitioner's appeal on merits and consider the petitioner's submission whether the petitioner is entitled to the benefit of judgment of the Tribunal rendered on 25.09.2000 as confirmed by the Hon'ble Supreme Court on 19.04.2006. 8. Accordingly, the petition is allowed. The impugned orders dated 20.06.1997 on the stay application and the order dated 18.11.1997 dismissing the petitioner's appeal are hereby set aside. The petitioner's appeal (Appeal No.913 of 1997 on the Register of the Tribunal at Mumbai) shall stand restored to the file of the Appellate Tribunal and shall be heard by the Appellate Tribunal at Ahmedabad on merits without any condition about pre-deposit of the amount of duty or penalty demanded by the Order in Original. The Tribunal shall hear and decide the matter as expeditiously as possible and preferably within three months from the date of receipt of writ of this Court. 9. It is clarified that we have not gone into the merits of the controversy between the parties and the Tribunal shall hear the SCA/2213/2001 8/8 JUDGMENT parties on merits and decide the matter in accordance with law. 10. Rule is made absolute accordingly with no order as to costs. (M.S.SHAH, J.) (RAVI R.TRIPATHI, J.) *Shitole