Dismissed

Commissioner of Customs Ludhiana v. Royal Industries Ltd.

Punjab & Haryana HC20 Sept 2024CUSAP/12/2022

Case brief

AI extract

What is this about?

On appeal against a CESTAT order restoring an appeal after pre-deposit, the High Court held that the Tribunal was not functus officio as the original appeals were dismissed due to non-entertainment rather than merits. Considering the company's initial sick status, the delay was condonable. The Court allowed the appeal and directed the appellate authority to decide on merits.

What did the court decide?

Appeal dismissed; directions given to appellate authority to decide the underlying appeal on merits.

Commissioner of Customs Ludhiana Vs Royal… — Customs and Excise | Punjab & Haryana HC (2024)

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CUSAP-12-2022 (O&M)

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Page 1 of 6

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223

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

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CUSAP-12-2022 (O&M) Reserved on: 17.09.2024 Date of Pronouncement: 20.09.2024

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COMMISSI O NER OF CUSTOMS LUDHIA N A

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. . . . Appellan t Vs.

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ROYAL INDUSTRIES LTD.

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. . . . Responden t

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CORAM: HON’BLE MR. JUSTICE SANJEEV PRAKASH SHARMA HON’BLE MR. JUSTICE SANJAY VASHISTH

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Present: M r. Sourabh Goel, Sr. Standing C ounsel, Advocate f or the appellant/Revenue.

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M r. Anil Mehta, Advocate f or the respondent/assessee.

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SANJEEV PRAKASH SHARMA, J.

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Presen t appeal has been preferred un d er section 130 of the Custom s Act, 1962 against the order passe d dated 03.01.2022 passed b y Custo m s, Excise and Service Tax A ppellate Tribunal (CESTAT) , where b y it has allowed the restoratio n of appeal after the responden t (appell a nt therein) has complied with t h e condition of pre-deposit.

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Learne d counsel, Mr. Sourabh Goel, submits that the Tribunal ha s erred i n restoring the appeal. He sub m its that vide stay order date d 04.06. 2 012, the respondent was asked b y the CESTAT, Principal Benc h , New D elhi to make a pre-deposit of R s.3.30 crores as a condition fo r

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MOHIT GOYAL 2024.09.20 16:31 I attest to the accuracy and integrity of this document

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CUSAP-12-2022 (O&M)

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Page 2 of 6

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hearin g of their appeal against the or d er passed by the Commissione r of Cus t oms and Excise whereby the Commissioner had confirmed th e deman d s of duties and imposed pena l ties as against the company a s well a s its directors. The CESTA T had, after considering th e submissions raised by both the pa r ties, directed the respondent - compa n y to deposit Rs.80 lakhs towa r ds demand within period of 0 8 weeks f rom that day. The penalty imposed upon the Managing Directo r Harbh a jan Singh Sandhu was dispense d with, and the other two partie s , namel y Harman Fashions Pvt. Ltd. a n d Vinod Garg were directed t o deposi t amount of Rs.1.25 lakhs an d Rs.2 lakhs respectively as a conditi o n of hearing their appeals.

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On 13.10.2014, the appeal was ag a in taken up for hearing. Th e Tribun a l noticed that the Royal In d ustries had not deposited th e amoun t as was directed vide order dated 04.06.2012. It was als o pointe d out that the company was decl a red sick and BIFR proceeding s had be e n initiated. It also noticed that one of the Director Vinod Gar g had de p osited the amount. At the sam e time, it was informed that th e interi m order dated 04.06.2012 was c h allenged before the High Court . Howe v er, all the appeals were dis m issed on 13.10.2014 for non - compli a nce of the provisions of sectio n 35F of the Central Excise Ac t and no n -compliance of the interim ord e r dated 04.06.2012.

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The c o mpany Royal Industries filed a Custom Appeal.10 of 201 6 before the High Court of Punjab and Haryana challenging the orde r

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MOHIT GOYAL 2024.09.20 16:31 I attest to the accuracy and integrity of this document

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CUSAP-12-2022 (O&M)

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Page 3 of 6

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dated 1 3.10.2014, which too was dis m issed on the ground of delay o f 450 da y s.

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On 20.08.2020, the respondent mad e a deposit of Rs.4 crores i n compli a nce of the interim order p assed by the Tribunal date d 04.06. 2 012, and filed an applicatio n for restoration of appeal o n 18.05. 2 021 and also filed application for condonation of delay. Th e CEST A T, after considering the case of K irtikumar Jawaharlal Shah vs. UOI- 2014 (304) ELT 641 (SC) and th e decision of the Tribunal in S.B. Packa g ing Ltd. vs. CCE 2019 (370) E LT 552 , condoned the delay i n filing a pplication for restoration of appeal as the amount of Rs.4 crore s was de p osited as a pre-deposit.

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Learne d counsel appearing for the Rev e nue submits that once the Hig h Court i n writ petition had upheld the order of dismissal of appeals , there w as no reason to allow the rest o ration of the said appeal on th e basis o f interim order dated 04.06.201 2 .

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Learne d counsel has relied on judgme n ts in Commissioner of Custom s vs. Li n dt Exports, 2012(278)ELT 587 Del, Lindt Exports vs. Comm i ssioner, 2013(9) TMI 1102 S C, Picaso Overseas Mumbai vs. CESTAT, 2016(4) TMI 183 Madr a s, Jai Bharat Steel Co. vs. Comm i ssioner of Customs, 2013(10) TMI 124 Gujrat, and Kissa n Gramu d yog Sansthan vs. Commissio n er of Central Excise, 2014(11 ) TMI 5 3 8 Allahabad .

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We ha v e considered the submissions. I t is a case where the respondent - compa n y was admittedly declared as sick company under the Sic k

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MOHIT GOYAL 2024.09.20 16:31 I attest to the accuracy and integrity of this document

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CUSAP-12-2022 (O&M)

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Page 4 of 6

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Industrial Companies (Special Prov i sions) Act, 1985 (hereinafte r referre d as SICA) by the Board of Industrial and Financia l Recon s truction (BIFR) vide order date d 12.09.2005.

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Thus, w hen the interim order was pas s ed on 04.06.2012, the compan y was a sick company under BIFR. I t appears to have restored it s positio n and had become functional m uch later, and therefore it coul d not ha v e deposited the amount whil e under control of BIFR. Th e judgm e nts cited by the appellant will t herefore have no application t o the pre s ent case.

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This C ourt also notices that one of t h e Directors had been exempte d from p r e-deposit, and similarly anothe r Director Vinod Garg was foun d to hav e made the pre-deposit. Their a p peals therefore could not hav e been d i smissed on the ground of non-d e posit. This Court also finds tha t there i s no decision on merits by the a p pellate body i.e. CESTAT wit h regard to the demand raised by Co m missioner of Customs, nor th e same h a s been adjudicated at any level .

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The n e xt contention of learned cou n sel for the appellant that th e Tribun a l was functus officio after 2014, is noted to be rejected. Th e Tribun a l can be said to become functu s officio only after it decides an y appeal on merits. If the appeal has be e n only dismissed on account o f being d efective, i.e. due to lack of pre- d eposit, it means that the appea l has no t been entertained, and therefor e such an appeal would have t o be trea t ed as lying dormant. While th e factum of appeal having bee n filed w ould remain on record, since i t was not taken up to be hear d

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MOHIT GOYAL 2024.09.20 16:31 I attest to the accuracy and integrity of this document

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CUSAP-12-2022 (O&M)

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Page 5 of 6

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before the condition of pre-deposit be i ng fulfilled, we cannot say tha t the Tr i bunal has become functus o ff icio, and it would have th e jurisdi c tion to hear the appeal on merit s . In fact, the appeal filed by th e appell a nt would be treated to be a still b orn, and it would only becom e alive a f ter the pre-deposit is made.

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In this case, we are satisfied that the c ompany was declared as a sic k compa n y under the SICA, and there f ore its account could not hav e been o p erated upon. The earlier order p assed by this Court did not tak e into a c count the said aspects. We al s o find that the delay in filin g applic a tion for restoration of an appea l after 07 years by the compan y was m a intainable before the Tribunal a s the company was earlier sic k and restored only later.

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I t also did not take into account that the appeals of the Director s could n ot have been dismissed on th e ground of non-compliance o f section 35F of the Act as appeal of Har b hajan Singh was to be heard o n merits a s pre-deposit had been exempt e d, and the appeal of Vinod Gar g could n ot have been dismissed as the p re-deposit amount had alread y been d e posited. Be that as it may, eve n after the pre-deposit was made , the ap p eal of Vinod Garg was not take n up and would be treated to b e pendin g . Since the appeal of responde n t-Royal Industries Ltd. has bee n dismis s ed on the ground of non-payment which they have made no w and al s o the same as having been a ccepted by the appellant, th e Reven u e cannot be allowed to tu r n around and challenge th e restora t ion.

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MOHIT GOYAL 2024.09.20 16:31 I attest to the accuracy and integrity of this document

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CUSAP-12-2022 (O&M)

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Page 6 of 6

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Takin g into consideration all the aforesaid aspects and afte r consid e ring the judgments cited supra, we find that the order passed b y the C E STAT, Chandigarh dated 03.0 1 .2022, whereby it restored th e original appeal for hearing on merits a f ter condition under section 35 F of the A ct was complied with, does no t warrant any interference of thi s Court, a nd the same is upheld.

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The a ppeal No. CUSAP-12-2022 f iled by the Commissioner o f Custo m s, Ludhiana is accordingly d i smissed with direction to th e appell a te authority to decide the appeal on merits.

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