Thursday, December 8, 2011



The indirect tax laws provide adjudication process and appeal process. The lowest authority is the Adjudication Authority and appeals lies with the order against to that of Adjudication Authority is Commissioner (Appeals). The next appellate authority is CESTAT. The next appeal lies with High Court. In some cases the assesses directly filed writ petition before the High Court. The Supreme Court as well as High Courts dismissed such writ petitions on the ground that once there is an alternative remedy of appeal the writ petition will not be entertained. In such cases the writ petitions will be dismissed with directions to avail alternate remedy of appeal. In some cases the writ petitions are admitted if there is an action against the law. In `Vijay Plas Fabs (P) Limited V. CESTAT, Chennai' -2011 (24) STR 279 (Mad) the High Court returned the writ petition for being converted into appeal.

In this case the petitioner is engaged in the manufacture of HDPE/PP circular woven socks and articles of plastics falling under Chapter 39 of the Central Excise Tariff Act and is eligible to avail CENVAT credit of duty paid on inputs and capital goods for the period 2000-2001. The petitioner was allowed to pay the duty fortnightly. On default of payment of duty for one time the petitioner was barred from paying the duty fortnightly and asked to pay the duty in account current. He is also allowed to utilize the CENVAT credit for the payment of duty on clearance of the final product. During the relevant period of time the petitioner, in acute financial problem the demand was complied with from and out of CENVAT credit account and not through personal ledger account.

The petitioner was issued with a show cause notice under Rule 8 of Central Excise Rules treating the payment of duty out of CENVAT credit account as in contravention of Central Excise Rules and treating the petitioner as defaulter in payment of duty and the petitioner was demanded to pay duty. A reply was filed to the show cause notice. The Adjudicating authority did not accept the reply passed the confirming the duty liability and penalty.

The petitioner filed appeal before the first appellate authority. He also filed a petition along with the appeal to dispense with the pre deposit of duty and penalty. Without giving notice to the petitioner the appellate authority passed order to pre deposit 50% of the duty confirmed by the adjudicating authority within four weeks as precondition to waive pre deposit and to stay recovery of penalty. The appeal was also dismissed for non compliance of pre deposit order.

The final order of CESTAT, the first appellate authority is challenged before High Court by way of writ petition.The petitioner put forward the following arguments:

The orders dismissing his appeals for failure to make pre-deposit of 50% of the duty amount which is passed ex-parte without giving notice to the petitioner company and without considering the prima facie case and balance of convenience in favor of the petitioner company amounts to failure to properly exercise the discretion vested in the first appellate authority;
When the original order of assessment itself is under serious challenge before the first appellate authority on the ground that the duty amount is already paid through CENVAT credit account, the condition imposed to pay 50% of the duty amount is onerous and is amounting to double payment;
When there are conflicting decisions on the same issue the claim made by the petitioner requires thorough examination and any condition to pay 50% of the amount to entertain the appeal filed against the same will render the petitioner's right to avail the statutory remedy is not meaningful and ineffective;
The conditional order in the absence of strong prima facie case in favor of the Revenue and in spite of the payment of duty by the petitioner through CENVAT account cannot be allowed to stand;
The petitioner relied on various judgments that the writ jurisdiction can be invoked notwithstanding the availability of alternative remedy.

The Revenue put forth the following arguments:

The writ petitions are not maintainable without exhausting the statutory remedy provided under Section 35G of the Central Excise Act, to High Court;
The department filed a detailed counted indicating the order passed by the lower authority is correct;
The notice to the petitioner was properly sent which was returned undelivered as the addressee is not available;
The lower authority has observed that it is for the petitioner to intimate the change of address proceeded to pass the order in the absence of the petitioner;
It is submitted by the petitioner that as the Appellate Tribunal to which further remedy lies itself is High Court the petition need not be dismissed in toto and in order to enable the petitioner to file fresh appeal along with application to condone delay etc., the present writ petition can be returned for being converted into CMA and the same may be after suitably converted so posted before the appropriate bench constituted for disposal of tax matters and if such course is adopted no serious prejudice is likely to be caused to the department/revenue. The High Court considered the same. The writ petition is filed within the period of limitation i.e., 180 days as specified under Sec. 35G of the Act to prefer further appeal. In order to safeguard the interest of both parties and to give a quietus to the litigation the writ petition is ordered by the High Court to be returned for being converted as CMA for disposal as per law.

Dated: - December 6, 2011

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