APPEAL FILED ON MERITS CANNOT BE DECIDED ON EXTRANEOUS GROUNDS

[Mr. M. GOVINDARAJAN]

              In 'Annapoorna Re-rolling (P) Limited V. CESTAT, Chennai' - (2010 - TMI - 79016 - MADRAS HIGH COURT) the appellant has been engaged in the manufacture of MS rounds/CTD bars, MS flats and MS angles.   During the years 2004-2005 and 2005-2006, the assessee availed exemption under Notification No. 8/2003, dated 01.03.2003.  After crossing the exemption limit as per the Notification, the assessee paid the duty after availing CENVAT credit on the goods.   The Department issued show cause notices for the above said two years proposing to demand duty with interest towards CENVAT credit, which is liable to be reversed.   The Additional Commissioner of Central Excise confirmed the demand in the proposal.Before the Commissioner of Central Excise (Appeals) the appellant filed an application seeking waiver of pre deposit. The appeal was allowed by Commissioner (Appeals).

             Aggrieved against the order of Commissioner of Central Excise (Appeals) the Department filed an appeal before CESTAT.   The Tribunal has set aside the order of the Commissioner of Central Excise (Appeals) and remitted the matter back for  re-consideration on the ground that the appeal made before the Commissioner of Central Excise is not maintainable being in violation of Sec. 35F of the Central Excise Act, 1944, as there was no pre deposit made by the assessee.

             The appellant challenged order of the CESTAT before the High Court.  The High Court observed the following:

·  It is not in dispute that the assessee filed an application seeking to waive the pre deposits;

·  It is not also in dispute that the department, in spite of service of notice and sufficient time given, had not chosen either to contest the application seeking to waive pre deposit or the appeals;

·  Insofar as the order passed for the year 2004-05, the Department has not chosen to file an appeal, but however has filed an appeal for the year 2005-06;

·  Even in the grounds of appeal filed before the Tribunal, no plea has been taken on the ground that no proper notice  has been served on the department and the appeal is not maintainable before the Commissioner of Central Excise (Appeals) while deciding the same on merit without complying with the condition of pre deposit;

·  Only during the course of arguments, those points were may by the Department stating that inasmuch as the Commissioner of Central Excise (Appeals) has not decided the issue on pre deposit, he ought not to  have passed the order on merits;

            The High Court held that Section 35F of the Act mandates that for adjudication the appeal on merits, there has to be pre deposit by the assessee concerned.   However the proviso to Sec. 35F clearly states that in a given case, the Commissioner of Appeals or the Appellate Tribunal as the case may be, may dispense with such deposit.   In view of the fact that the Department has not chosen to contest the application filed for pre deposit the Commissioner of Central Excise has proceeded to decide the matter on merits.  Even while deciding the appeal on merits, the department has not chosen to contest the same.   Thereafter the appeal was filed before the Tribunal.   Therefore the above said facts would indicate that it is not open to the department to contend before the Tribunal for the first time during the arguments that inasmuch as the question of pre deposit having not been considered by the Commissioner of Central Excise (Appeals), the appeal before the said authority was not maintainable on merits.

              The High Court further held that the appellant could not be faulted for not deciding the application filed for waiver of pre deposit since he duly filed the application setting out the reasons for waiver of pre-deposit.  The Department did not contest the same.   Therefore the Commissioner of Central Excise (Appeals) decided the matter on merits.   In appeal also no objections has been raised.  Sec. 35F gives authority to waive the condition of pre deposit at their discretion. 

               In the present case the facts would clearly indicate that final order on merits has been passed against which an appeal was preferred by the department to the Tribunal.  The Court is of the opinion that the Tribunal has committed an error in remanding the matter to the Commissioner of Central Excise (Appeals) to decide the matter afresh.   When an appeal has been filed on merits, the same has to be decided on merits.   The appeal has been preferred by the Department against the order which ends in favour of the assessee.   Such an order cannot be set aside on extraneous grounds than on merits, especially when no plea has been take on the ground of maintainability.  The Commissioner of Central Excise has been under the proviso to Sec. 35-F ample power to waive pre deposit.  The Court held that the order passed by the Tribunal cannot be sustained and set aside the same and directed the Tribunal to decide the case on merits.