1998 JTR(SC) 969
1999 AIR(SC) 3468 ; 1999 AIR(SCW) 3455 ; 1998 103 ELT 5 ; 1999 103 ELT 5 ; 1999 1 SCC 259 ; 1999 KHC 1713
SUPREME COURT OF INDIA
A.P.Misra : K.Venkataswami
Sangfroid Remedies Limited
Versus
Union Of India
Case No. : 4744 of 1998
Date of Decision : 9/11/98
Pre-deposit for hearing an excise appeal is unsustainable if the original assessment order was passed without notice or opportunity to be heard, particularly when the appellant is a declared sick industry.
Act
Referred
:CENTRAL EXCISE ACT
: S.35(f)
SICK INDUSTRIAL COMPANIES SPECIAL PROVISIONS ACT: S.20
(A) Central Excise Act - Section 35-F - Assessment order passed without notice - Pre-deposit for hearing appeal - Violation of natural justice - Appellant declared as sick industry - Insisting upon payment of determined duty as a condition for hearing the appeal cannot be upheld. (Paras 6 and 7)
Facts of the case:
A dispute arose regarding the classification of a product for the purpose of levying excise duty. An assessment order was passed rejecting the claimant's classification and levying a significant duty amount. The claimant alleged that the order was passed ex parte without any notice or opportunity to substantiate the claim. Upon filing an appeal, the appellate authority directed the payment of the full duty amount as a pre-deposit. The High Court subsequently reduced this amount and required a bank guarantee.
Findings of Court:
The court noted that the fact that no notice was served and no opportunity was given before passing the assessment order was not disputed. Additionally, the appellant had been declared a sick industry by the relevant authority.
Issues: Whether the requirement to pay the determined excise duty as a pre-condition for hearing an appeal is sustainable when the original order was passed without notice and the appellant is a sick industry.
Ratio Decidendi: Where an assessment order is passed in violation of the principles of natural justice, specifically the lack of notice and opportunity to be heard, and the party involved is a sick industry, the condition of pre-deposit for entertaining an appeal is not sustainable.
Result: Appeal allowed.
Facts of the case:
A dispute arose regarding the classification of a product for the purpose of levying excise duty. An assessment order was passed rejecting the claimant's classification and levying a significant duty amount. The claimant alleged that the order was passed ex parte without any notice or opportunity to substantiate the claim. Upon filing an appeal, the appellate authority directed the payment of the full duty amount as a pre-deposit. The High Court subsequently reduced this amount and required a bank guarantee.
Findings of Court:
The court noted that the fact that no notice was served and no opportunity was given before passing the assessment order was not disputed. Additionally, the appellant had been declared a sick industry by the relevant authority.
Issues: Whether the requirement to pay the determined excise duty as a pre-condition for hearing an appeal is sustainable when the original order was passed without notice and the appellant is a sick industry.
Ratio Decidendi: Where an assessment order is passed in violation of the principles of natural justice, specifically the lack of notice and opportunity to be heard, and the party involved is a sick industry, the condition of pre-deposit for entertaining an appeal is not sustainable.
Result: Appeal allowed.
(1) LEAVE granted.
(2) THIS appeal is preferred against the order dated 24/11/1997 of the A. P. High court in Writ Petition No. 31031 of 1997. Having regard to the nature of the controversy, it is not advisable to go into the merits of the case at this stage. The grievance of the appellant is that the 3rd respondent before passing the impugned order rejecting the claim of the appellant that the product "Shower to Shower" prickly heat powder falls under Ch. Heading 33.03 and holding that the same falls under Chapter Heading 33.04 and levying excise duty of Rs 5.18 crores, has not given any opportunity to substantiate its claim and no notice was served on them by the third respondent before passing the impugned ordeR.Therefore, according to the appellant, the order passed was an ex parte one. When an appeal was preferred before the 2nd respondent with a prayer to dispense with the pre- deposit as laid down under Section 35-F of the central Excise Act, the appellant was directed by order dated 7/11/1997 to pay the full excise duty amount of Rs 5,17,76,163.00 for entertaining and hearing the appeal.
(3) AGGRIEVED by the order of the 2nd respondent, the appellant moved the High court under Article 226 of the Constitution and the High court, while reducing the amount to be paid for hearing the appeal, directed the appellant by the order under appeal to pay Rs 1.25 crores and give bank guarantee for another sum of Rs 2 crores.
(4) IN these circumstances, the appellant has filed this appeal by way of special leave petition.
(5) WE have heard learned Senior Counsel, Mr H.N. Salve, for the appellant and also the learned Senior Counsel for the respondents.
(6) IN view of the objection/contention raised throughout by the appellant that no notice was served on them and opportunity given before passing the impugned assessment order by the 3rd respondent, which fact has not been disputed before us, we consider that insisting upon the payment of the duty determined, cannot be upheld. Further, there is one other factor in this case and that is that the appellant has since been declared as a sick industry by an order dated 23/4/1998 by the Board for Industrial and Financial Reconstruction.
(7) IN these circumstances, we are of the view that directing the appellant to pay the excise duty as determined as a condition for hearing the appeal, is not sustainable. Accordingly, on the facts of the case, the orders of the High Court and that of the appellate authority and the 3rd respondent are set aside.
(8) BOTH the learned counsel are agreed that the matter can go back to the Assistant Commissioner of central Excise, Hyderabad II Division for hearing the case on merits. Accordingly, we remit the matter to the Assistant Commissioner of central Excise, Hyderabad II Division for hearing the matter on merits. The appeal is allowed. No costs.