2002 (2) TMI 427 - AT - Central Excise

Summary

Issues:
Admissibility of Modvat credit on certain goods treated as capital goods under Rule 57Q of the Central Excise Rules, denial of Modvat credit, imposition of penalty under Rule 173Q, waiver of pre-deposit under Section 35F of the Central Excise Act, violation of principles of natural justice in rejecting appeal, consideration of plea regarding unit declared sick by BIFR in Interim Stay Order.

Admissibility of Modvat Credit and Penalty Imposition:
The jurisdictional Additional Commissioner of Central Excise adjudicated a dispute on the admissibility of Modvat credit on goods treated as capital goods under Rule 57Q, denying the credit and imposing a penalty. The appellants appealed to the Commissioner (Appeals) seeking waiver of pre-deposit under Section 35F. The Commissioner granted 60% waiver but directed the deposit of the remaining 40%. Failure to provide proof of pre-deposit led to the rejection of the appeal without considering the merits. The order was challenged on this ground.

Violation of Natural Justice:
The counsel for the appellants argued that the rejection of the appeal for non-compliance with Section 35F violated the principles of natural justice. It was contended that the lower appellate authority should have allowed the appellants to show cause before rejecting the appeal. The absence of a hearing notice before final disposal of the appeal was noted, supporting the claim of a violation of natural justice.

Consideration of Sick Unit Status in Stay Order:
The lower appellate authority did not consider the plea that the appellants' unit had been declared sick by the BIFR when issuing the Interim Stay Order. This failure to account for the unit's sick status indicated a lack of consideration by the authority. The appellant's plea regarding the sick unit status was not addressed in the order, highlighting a significant oversight.

Judgment and Remand:
The judge set aside the impugned order and allowed the appeal by remanding it to the Commissioner (Appeals) for a merit-based disposal in compliance with the law and principles of natural justice. The Interim Stay Order, which did not consider the unit's sick status, was also overturned. The Commissioner was directed to reconsider the stay application, ensuring a fair hearing for the party. The final disposal of the appeal was made subject to the outcome of the stay application, emphasizing the importance of a thorough and just consideration of all relevant factors.