K.S. Venkataramani, Member (T) -
(1.) THESE are the applications for waiver of pre -deposit of duty of Rs. 48,04,619.00 demanded from applicants, M/s. Rotex Textile Mills (P) Ltd. and for waiver of pre -deposit of the penalty of Rs. 10 lakh imposed on them and also for the waiver of penalty of Rs. 1 lakh imposed on applicant, Sh. N.K. Chakraborty, Managing Director of M/s. Rotex Textile Mills and of Rs. 10,000/ - on applicant, Sh. Rajan Nair who is an employee of the above -said applicant firm by the Collector of Central Excise, Bombay -Ill in his order dated 29 -6 -1991. Sh. Hidayatulla, Sr. Counsel, appeared for M/s. Rotex Textile Mills and Sh. N.K. Chakraborty and Ms. Rangaswamy for the applicant, Sh. Rajan Nair. Shri Hidayatulla, Sr. Counsel, submitted that the applications are not being pressed on the aspect of prima facie case, but that they would plead undue financial hardship to the applicants in making the pre -deposit of the duty and penalty demanded. In this regard, the Sr. Counsel referred to the extension of validity period of the Industrial Sickness Certificate dated 9 -9 -1991 issued by the Directorate of Industries, Maharashtra with an endorsement that authorities are requested not to take any coercive action against the unit. This would show that the applicant is a sick unit. They have been sick since 1987. Further, the letter dated 18 -9 -1991 from the Bank of India addressed to the applicant was also referred to which indicated that the applicant had overdrawn on their facilities with the Bank. The Ld. Sr. Counsel submitted that the applicants have sufferred a loss of Rs. 33 lakh and pleaded that their balancesheet as on 31 -3 -1991 would show that they are having continued loss although they are making every effort to emerge from the red. The fact remains that presently they are a sick unit which is having also liquidity problem. The liquidity ratio, as calculated with reference to their current assets inventories and current liabilities as on 31 -3 -1991, is 0.69. It was pleaded that in the case of other applicant, Sh. Chakraborty, the penalty was harsh and disproportionate. Ms. Radha Rangaswamy, Ld. Counsel appearing for the applicant, Sh. Rajan Nair, submitted that Shri Nair was only an employee with a monthly income of Rs. 2,840/ - and has no other source of income and was not income -tax assessee. He is the only earning member in his family. Therefore, the pre -deposit of the penalty on him should be dispensed with.
(2.) SHRI Chakraborty, the Ld. S.D.R., contended that the applicants in this case are not seeking the waiver of pre -deposit on the grounds of prima facie case and in such a situation, the Tribunal will not be justified in granting the waiver purely based on the claim of undue financial hardship when no substantial claim on the basis of prima facie case is sought to be established. He relied upon the Delhi High Court decision in the case of Uptron Powertronics v. Collector of Central Excise reported in 1987 (28) E.L.T. 61 that for getting discretionary relief, the party has to show prima facie substance and then undue hardship and not the reverse. Regarding their financial situation, the Ld. S.D.R. pointed out that the balance -sheet shows that the current assets is around Rs. 64 lakh which is more than their current liability which would show a comfortable position. He also referred to the Director's report on the business operations of the company for the year ending 31 -3 -1990. It shows that thee has been an increasing income from processing charges. Hence, the company has been able to increase its earning capacity. The Ld. S.D.R. also submitted that the fact that they are over -drawn with their own bankers is nothing unusual in the mangement of a commercial enterprise and further urged that even in the case of sick unit, the liquidity aspect has to be looked into when considering the stay application. In reply, the Ld. Sr. Counsel, Sh. Hidayatulla relied upon the Kerala High Court decision in the case of M/s. Rubicon v. Collector of Central Excise reported in 1989 (44) E.L.T. 401. In this decision, the Kerala High Court had also considered the Uptron Powertronics decision of the Delhi High Court. The Kerala High Court had held that the appellants' finances were in the red or are not comfortable, any direction to the appellants to make payment of a substantial amount will necessarily cause undue hardship to them having regard to their available resources. A decision of the Tribunal in the case of Exquisite Impex Pvt. Ltd. v. Collector of Customs, Calcutta reported in 1987 (31) E.L.T. 270 was also relied upon.
(3.) ON a careful consideration of the submissions made by the Ld. Counsels and the Ld. S.D.R., the applicants, herein, are not pleading for waiver on the basis of prima facie case. The question is only whether on the basis of the evidence they have produced regarding their financial situation whether it is a fit case for exercising the decision under the proviso to Section 35F of Central Excises and Salt Act, 1944 in waiving the pre -deposit of duty and penalty wholly or partially. In this context, the Tribunal in the case of Jaishree Insulators Ltd. v. Collector of Central Excise, Calcutta -II reported in 1987 (28) E.L.T. 279, on a difference of opinion, resolved by the President of the Tribunal, had held that undue hardship under Section 35F of Central Excises and Salt Act, is not confined to financial hardship but also extends to prima facie case together with the balance of convenience. The Tribunal in this decision, inter alia, had also considered earlier Cegat decisions in the case of Exquisite Impex Pvt. Ltd. and the Tribunal's decision was based on the analysis of the decisions of the Supreme Court and High Court in this aspect. The Kerala High Court decision, relied upon by the applicants has also laid down that the financial position of the applicants, in such matters, is a relevant factor in consideration of undue hardship and in arriving at this decision, the Kerala High Court had noted the Delhi High Court decision in the case of Uptron Powertronics. The Kerala High Court had observed that if the applicants' finances were in the red, any direction to the applicants to make substantial payment will necessarily cause undue hardship to them in the context of their available resources. Therefore, the question in the present case to be considered is whether the financial position of the applicants has been shown to be so bad as to call for a total waiver of the pre -deposit or not. The Tribunal had occasion to look into the aspect of liquidity in its decision in the case of Sonodyne Television Company v. Collector of Central Excise, Calcutta -1985 (22) E.L.T. 582 wherein the Tribunal observed that liquidity means the status or condition of a person or a business in terms of his or its ability to convert assets into cash, and.that liquid assets consist of cash and other assets continually undergoing conversion into cash, such as stock, sundry debtors, bills receivable. In this decision, the Tribunal had also noted the Supreme Court decision in Application No. 332/84 in Appeal No. 693/84 of M/s. Spencers and Co. Ltd., Madras v. Collector of Central Excise wherein the Supreme Court held that expression undue hardship occurring in Section 35F of Central Excises and Salt Act, 1944 would include consideration, inter alia, of the aspect of liquidity possessed by the assessee. In the present case, examining this aspect, it is found that the applicants M/s. Rotex Textile Mills have income totalling to Rs. 3.63 crores during the period ending 31 -3 -1991. An amount of Rs. 31.63 lakh is due to them from Sundry Debtors and the total Current Assets are more than their Current Liabilities as already pointed out by the Ld. S.D.R. The unit is also, admittedly, improving its performance and as a result of which they are in a position to cut down their losses. In such a context, it is reasonable to hold that the balance of convenience will be in favour of a partial pre -deposit of duty demanded in this case and, accordingly, it is ordered that the applicants, M/s. Rotex Textile Mills should deposit a sum of Rs. 12 lakh (Rs. Twelve lakhs only) on or before 31 -1 -1992 and report compliance and on such compliance, the pre -deposit of the balance of the duty amount and of the penalty is dispensed with. In the case of Applicants, S/Shri Nair and Chakraborty, in the facts of the present case, prima facie, the amount being in the nature of personal penalty we dispense with the pre -deposit of the same under Sec. 35F of Central Excises and Salt Act, 1944. The matter will come up for ascertaining compliance on 10th February 1992. The Stay Applications are disposed of in the above terms.;