The court held that the Commissioner's order was arbitrary and did not rest on sound judicial principles.

A.R. Tiwari, J.

1. An erstwhile partnership firm M/s Rubber Products claims that it is now a proprietary concern owning a factory at village Sejvaya, District Dhar for manufacture of Rubber foam sheets and plywood. M/s. Dayal Laminates of Makai Nagia, manufacturer of paper surfaced Hard board and decorative laminate is said to be a private limited Company registered under the Companies Act. The department felt that M/s. Rubber Products an alleged proprietary concern owned by one R.N. Kapur is nothing but a front company i.e. M/s. Dayal Laminates (P) Ltd. owned by Sahebdass and Gurucharandas and that martrecious (sic) segregation has been designed in a ruse to earn eligibility of the exemption from payment of duty in terms of the Notification No. 175/86 dated 1-3-1986.

2. Pursuant to the report of the intelligence, the Central Excise Officers conducted simultaneous raid on 9th and 10th October, 1991 on the alleged two units and seized documents. After show clause notice and order of adjudication dated 16-7-1993 (Annexure P/14) is passed by respondent No. 3 imposing duty of Rs. 20,09487.1 and Rs. 73,631.65 under Section 9(2) of Central Excise Rules, 1944 read with Section 11A of Central Excises and Salt Act, 1944 besides penalty of Rs. 3,00,000/-.

3. Both the concerns preferred appeals registered as No. 2824/1993-D and 2825/1993-D against the Order No. 14/Collector/CE/93-l adj., dated 16-7-1993 Annexure P/14 passed by the Respondent No. 3 before Respondent No. 2. They filed therein application for waiver of predeposit of total duty-demand of Rs. 20,16,850/- besides penalty of Rs. 2 Lakh each on these concerns.

4. The respondent No. 2 by order dated 16-2-1994 (Annexure P/21) allowed the prayer in part and softened the rigour by directing these concerns to deposit in cash Rs. 8 Lakhs on or before 31-5-1994 for purpose of hearing appeals and for staying recovery of the amount as adjudicated and foisted.

5. Petition No. 852/94 (M/s Rubber Products, Indore) and Petition No. 853/94 (M/s Dayal Laminates Pvt. Ltd. Indore) have been filed impugning the order of assessment (Annex. P14) and order on application (Annexure P/21).

6. As the point is short. I heard the petitions finally at this stage.

7. The counsel for the petitioners in both these petitions contended that existence of prima facie case in favour of the assessee is the dominant consideration in matter of grant of stay and waiver of pre-deposit and the respondent No. 2 has erred in holding that no prima facie case on merits has been made out for waiver of pre-deposit. It is urged that undernoted facts and features, relevant and vital, have not been adverted to and considered properly.

(1) The demand in 92 in respect of alleged evasion of 1986 to 1991 is ex facie barred by limitation being not within 6 months.

(2) Products of two concerns are not liable to be clubbed. And if these concerns are treated to be one, then how is that penalty was imposed separately ?

(3) Benefit of Notification 175/86 dated 1-3-1986 was available and undeniable and as such no duty was payable.

(4) The concerns are incurring losses and order causes 'undue hardship'.

(5) Closure of concern since 1993 is in force on the strength of the orders of respondent No. 3.

(6) Valuable right of appeal should not be seen to be frustrated by inability to deposit the amount.

(7) Views expressed by Apex Court and various High Courts in this country sufficiently indicated that there existed a prima facie case.

8. The counsel has placed reliance on 1992 (61) E.L.T. 52 (M.P.) Kinetic Honda Motor Ltd. v. Union of India - 1993 (67) E.L.T. 216 (M.P.), Partap Steel Rolling Mills Ltd. v. CEGAT - 1993 (65) E.L.T. 161 (Del.), Eicher Motors Ltd. v. Union of India -1989 (44) E.L.T. 629 (Ker.), Excel Rubber Products v. Addl. Collector of C. Ex. & Customs - 1993 (48) ECR 272 (Tribunal), Kothari Products Ltd. v. Collector of Central Excise, Kanpur; to urge that order of pre-deposit is arbitrary and is not based on sound principles.

9. The coun