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Published : April 16, 2010 | Author : anchit
Category : Tax Laws | Total Views : 17546 | Rating :

  
anchit
Author: Anchit Oswal 4th Year Law student at National Law Institute University, Bhopal
 

Court gives life to the statutes, which otherwise at time are hard to decipher. Interpretation of provision or any word within that provision has at times evolved a whole new jurisprudence. As there are various methods of interpretation, such as literal interpretation, which is done as long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible, liberal or constructive interpretation.

Paper focalizes on Section 35F of the Central Excise Act, 1942 and Section 129E of the Customs Act, 1962. An attempt is made to interpret the word “undue hardship” which appear in both the sections. Since both the section are verbatim the same and for this reason the author would be using them interchangeably, so that the nerve of the judiciary may be studied in most effective way.

Chapter VIA of the Central Excise Act deals with the provision of Appeals which provides that when any person aggrieved by any decision or order passed under this Act by a Central Excise Officer, lower in rank than a Commissioner of Central Excise , may appeal to the Commissioner of Central Excise (Appeals) hereafter in this Chapter referred to as the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order. There is further provision which lays down an appeal to the appellate tribunal from the decisions of Commissioner (Appeals) . Right to appeal is a statutory right and therefore it can be conditional, similarly under Section 35F the condition prescribed before filling appeal , which is followed by an proviso or an exception.

Section 35F- Deposit, Pending Appeal, of Duty Demanded or Penalty Levied
“Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied :

Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.”

Let us break down the Section.
· Section is applicable when there is an appeal against an order or decision.

· Such order or decision must relate to duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act. So if the goods are in control of Central Excise authorities then this section would not be applicable.

· The amount which is claimed by the order or decision must be deposited when the appeal is pending.

· Such deposit is required to be made at both the level, i.e. when there is an appeal to Commissioner (Appeals) or the Appellate Tribunal.

Section 35F of the Central Excise Act, 1942 (herein after referred as ‘act’) lays down that whenever there is a duty imposed under this chapter of the Act or there is any penalty levied under the Customs Act of 1944 and the person against whom such penalty is imposed, wants to file an appeal against such imposition of the penalty is first required to deposit the amount so demanded with the adjudicating authority. So the deposit of the penalty amount becomes the rule and since the language of the section is such that it covers any penalty under the whole act, it has a wide ambit. In this paper authors’ emphasis is on the proviso of the Section 35F, which is an exception to the main Section.

Proviso lays down that the pre deposit of the amount which is imposed as penalty under this Act is such that it would cause undue hardship to the parties, then such appellate authority can waive the requirement of pre deposit amount at its discretion. Although tail of the proviso is like a guideline to the appellate authority, that such waiver must not affect the revenue. So the authority is left with the task of balancing the interest of the person, against whom the penalty is imposed and the revenues of the state. So the proviso is an exception to the main rule which talks about the deposit of penalty as pre requisite for appealing against the orders of the lower authority. In the case of CIT v Indo Mercantile Bank[1] , the Supreme Court has explained, "the territory of a proviso, therefore, is to carve out an explanation to the main enactment and exclude something which otherwise would have been under the section."

Courts have interpreted the proviso quite liberally and has held that provision for exemption or relief should be construed liberally and in favour of the assessee even if it results in his obtaining “a double advantage”.[2]

When there is a provision that has two possible interpretations, the one which casts a lesser burden on the subject must be adopted. In the case of CIT v M K Vaidya , the Karnataka High Court held that "...if reasonably two meanings are attributable to a word used in the fiscal law, the meaning which is more beneficial to the tax payers will be applied, specially it is so, when the state itself at one point of time clearly acted as if the wider meaning was not attributable without adding further words"

The relation between the above mentioned rule and exception has been beautifully summed up by the Apex Court in the case of Central Excise v. Dunlop India Ltd.[3] Where in the court underscored the importance of respecting the legislative mandate of pre-deposit, of assessed, or penal amounts, wherever prescribed, as preconditions for appellate remedies. The structure of several statutes granting discretion to the tribunal or appellate bodies, in such instances appears to be driven by the logic of existence of "undue hardship". While to some extent, the merits of the case, ("prima facie" strength) may be scrutinized, the tribunal or appellate forum has to be alive to the situation that such scrutiny, to decide interim applications, suspending the statutory requirement, have to be careful, and in rare cases. Sans the element of "hardship" which is necessarily subjective to each case, prima facie determinations should not become the normative rule, to grant exemptions.

Meaning
In a recent case of Usha Udyog v. Customs, Excise & Gold (Control) Appellate Tribunal [4]
It was observed that "Hardship", within the meaning of the said Section, connotes something harsher and more severe than trifling inconvenience, and negligible loss of profit or temporary loss of a commercial opportunity. Section 129-E does not merely use the term "hardship". It is "undue hardship". For a hardship to become "undue" it must be shown that the particular burden which is required to be observed or performed is out of proportion to the nature of the requirement itself and the benefit which the applicant would derive from compliance with it.”

It was noted by Court in S. Vasudeva v. State of Karnataka and Ors.[5]That under Indian conditions expression "Undue hardship" is normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

.In a recent case of Indu Nissan Oxo Chemicals Ind. Ltd.Vs. Union of India (UOI) and Ors.[6] has held that Mere assertion about undue hardship would not be sufficient, Appellant has to establish it. So it can be inferred that the burden lies on the Appellant to adduce evidence to convince court that pre deposit would cause undue hardship on them.

While deciding a case under section 35F or 129E, there are certain yardsticks which majority of the court adheres to.

Prime Facie Case
The first and foremost requirement for the purposes of Section 35F and Section 129 E in a number of judgments, various court has held that from doing away with the requirement of pre deposit, the appellant must have a prima facie case in his favour

Now the question arises as to that would amount to prima facie case, although it would vary from case to case and would depend on the facts and circumstances of each case, but going by the definitions and view of courts, an attempt is made to figure the broad essential .

Blacks Law Dictionary defines Prima Facie as – At the first sight; On the first appearance; on the face of it ; so far as can be judged from first disclosure; presumably; a fact presumed to be trune unless disproved by some evidence to the contrary.[7]
Prima Facie Evidence has been defined as – Evidence good and sufficient on its face; such evidence as in judgment of law, is sufficient to establish a given fact, or the griop or chain of facts constituting party claim or defense, and which if not rebutted or contradicted will remain sufficient.[8]
In Orissa State Commercial Transport Corporation Ltd. v. Sri Satyanarayan Singh[9] it was held :

In establishing a prima facie case, plaintiff need not establish his title. It would be sufficient for him to show that he has a fair question to raise as to the existence of this right and that till the question is ripe for trial a case is made out for preservation of the property in status quo

"Irreparable injury" means such injury which cannot be adequately remedied by damages. The remedy by damages would be inadequate if the compensation ultimately payable to the plaintiff in case of success in the suit would not place him in the position in which he was before injunction was refused.

Court has considered the expression "prima facie case" in the case of A.P. Nagaraj v V.RKrishna[10] it has been observed,

"Prima facie case has always got to be distinguished from prima facie title. Prima facie case really means that there is a case which requires trial and the case is not the one based on erroneous or vexatious grounds.

In an earlier decision in the case of, Court has observed, "The traditional theory underlying the grant or refusal of interlocutory injunction has always been that the Court abstains from expressing any opinion upon the merits of the case until the hearing, but acts merely to minimise the sum total of irreparable damage to the litigants".

The meaning of 'prima facie case' should not be too much stretched to land in the loss of real purpose, The very expression 'prima facie case' is to look into the matter on the face of it not to do well into it.

In the matter of grant of temporary injunction, as a thumb rule, it is stated that the plaintiff, in order to succeed in obtaining the temporary injunction, must show that he has a prima facie case and that the balance of convenience is in his favour for such a grant. The expression "prima facie case" has been explained by the House of Lords in an unanimous opinion through Lord Diplock in American Cyanamid v. Ethicon,[11] thus :

"The use of such expression as a 'probability', 'a prima facie case', or 'a strong prima facie case' in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The Court no doubt must be satisfied that the claim is not frivolous or vexations; in other words, that there is a serious question to be tried."

Lord Diplock then went on to explain the criterion of "balance of convenience" at page 511:
"Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark on a course of action which he has not previously found it necessary to undertake, whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial."

Once a prima facie case is made out then the Appellate Authority should addressee its mind to the prima facie merits of the appellants' case and upon being satisfied of the same determined the quantum of deposit taking into consideration the financial hardship and other such relevant factors. Authority has to give cogent reasons for non waiver once a prima facie case is made out.[12]

In the case of Hoogly Mills Co. Vs. UOI [13] where petitioners challenged an order dated 22nd April, 1998 passed by the Commissioner of Central Excise (Appeals) disposing of the stay application directing the petitioners to deposit a sum of Rs. 10 lakhs for both the cases within 10 days from the date of receipt of the order as also the order dated 8th May, 1997 rejecting the application of the petitioner to modify the demand order passed by the Superintendent, Central Excise, the petitioners prayed for exemption of such pre-deposit, inter alia, on the ground that the company's financial position is not sound and also on the ground that he has a strong prima facie case. The issue which came before court was Interpretation of the word “undue hardship” under section 35F of the Central Excise Act was into question and also what would be a prima facie case under the above section.

Court held that, it is not necessary for the appellant to show, in addition to, that the appellant has suffered financial hardship as wrongly interpreted by the Commissioner of Appeals. For the purpose of deciding whether an appellant has got a good prima facie case, it is not really necessary for the appellant to satisfy the Court or the Tribunal or the appropriate authority, as the case may be, that his case is a guilt-aged one and is bound to succeed. It has been held time and again by the Courts that a strong prima facie case would mean that the case is an arguable one and fit for trial.

Balance of convince
Second factor which court takes into consideration while doing away with the pre deposit under section 35 F of the Central Excise Act or under Section 129 E of the customs act, as both are replica of each other, court has to see as to in whose favour balance of convince lies, balance of convince is in a way related to the concept of prima facie, in whose favour the case prima facie case is, or in other words if the duty or penalty is levied it will put that party in greater disadvantage .

Balance of convenience means comparative mischief or inconvenience that may be caused to the either party in the event of refusal or grant of injunction.[14] In applying this principle, the Court has to weigh the amount of substantial mischief that is likely to be done to the applicant if the injunction is refused and compare it with that which is likely to be caused to the other side if the injunction is granted.

Shri B.L. Dhaluka, Shri O.P. Aggarwal, Shri B.K. Karnawat and Shri Dinesh Thakur Vs. Union of India (UOI) and Ors.[15]
In this case where huge amount of government revenue has been defrauded by the group of companies in question on whose behalf, the petitioners have acted. They cannot disclaim their role in such alleged duty evasion which has taken place by illegal imports and exports as has been brought out in the adjudication orders. It was therefore, conclude that prima facie the culpability of the appellants is apparent and this would make pre-deposit of penalty a necessity before their case is taken up for final hearing.

In the same case court that that while exercising the discretion under Section 129E, appellate authority must bear in mind three things
v Firstly, that the discretion must be exercised on relevant materials, honestly, bona fide and objectively.

v Secondly, the Authority is also required to keep in mind the interest of the Revenue while making such an order.

v Thirdly, to form an opinion whether the requirement to deposit would cause "undue hardship" to the applicant; and (ii) what condition, if any, is to be imposed in the order to safeguard the interest of the Revenue, in case he considers the case fit for dispensing with the deposit.

In the case Benara Valves Ltd. and Ors. Vs. Commissioner of Central Excise and Anr.[16] where the appellant challenged order passed by the Allahabad High Court dismissing the writ petitions filed by the appellants who had filed the writ petitions questioning correctness of the order passed by the Customs Excise and Service Tax Appellate Tribunal, New dealing with the applications filed for staying recovery of duty and penalty imposed pending disposal of the appeals before the Tribunal. Commissioner had imposed certain penalty for default of plaintiff. Plaintiff in the instant appeal seeked waiver of deposit of such amount and a stay against the order of the Tribunal, which was rejected by the Allahbad High Court.

Court Observed “it is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens' faith in the impartiality of public administration, interim relief can be given.”

To the second contention of the appellant regarding undue hardship under Section 35 F court further observed “Two significant expressions used in the provisions are "undue hardship to such person" and "safeguard the interests of revenue". Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view.

For a hardship to be 'undue' it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it .The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.”

From the above case it the meaning of undue and hardship become less clouded and court also talked about the balancing the interest of an Individual against the Revenue of State.

Section 35F and Section 129E Medicine for Sick ?
When a company is registered as a sick unit with the BIFR, if contend that in the circumstances, the entire pre-deposit ought to have been waived, would by virtue of being a sick unit the requirement of the pre deposit could be done away with? Court answered this in negative and held that Section 22 of the Sick Industries Act, provides relief in regard to the proceedings which relate to (a) winding up of the industrial company; (b) execution, distress or the like against any of the properties of the industrial company; (c.) the appointment of a receiver in respect thereof, and (d) proceeding in regard to suit for recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company. Payment of pre-deposit covered under Section 35F of the Central Excise Act, 1944 does not fall under any of the above-mentioned categories in Section 22 of the Sick Industries Act.

In the case of ITC Ltd. Vs. CCE [17]where Petitioner was served with a show cause notice dated 25.6.1998 issued by the Assistant Commissioner, Central Excise, Saharanpur to show cause why the profit margin percentage as detailed therein be not increased to arrive at the assessable value of "Slides and Inner Frames" used by the Petitioner Company during the course of packing of cigarette sticks, for the assessment years 1986-87 to 1996-97.

Petitioner filed the reply to the show cause notice on 22.7.1998 and 8.10.1998 submitting that the "Slides and Inner Frames" neither manufactured nor a marketable commodities and, thus, could not be subjected to levy of duty. More so, as the show cause notice was based on a notification dated 30.10.1996, it could not be given effect retrospectively.

The adjudicating Officer vide order dated 26.12.2000, held that the profit margin would have to be worked out on the basis of the said circular dated 30th October, 1996 in respect of the price list for the period from 1.7.1988 to 31.3.1998.

Being aggrieved and dissatisfied, petitioner preferred the appeal under Section 35 of the Central Excise Act, 1944, hereinafter called 'the Act'. Along with the appeal, an application for waiver of the pre-deposit condition was also filed on the ground that the petitioner was not liable to pay any duty at all as "Slides and Inner Frames" were neither manufactured nor marketable and the petitioner had a fool proof case and was bound to succeed in appeal.

The said application has been rejected vide impugned order dated 8.10.2003 holding that the petitioner-Company did not plead the issue of financial hardship nor it could plead so in view of the stature being an established company of India and there was no strong prima facie case could be made out for waiver.

Judgment & Reasoning
Court posited the point that it has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition. The order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with the law. The expression "undue hardship" has a wider connotation as it takes within its ambit the case where the assessee is asked to deposit the amount even if he is likely to exonerate from the total liability on disposal of his appeal. Dispensation of deposit should also be allowed where two view are possible. While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority to stay/waive the pre-deposit condition, would be reduced to nugatory/illusory. Undoubtedly, the interest of the Revenue cannot be jeopardized but that does not mean that in order to protect the interest of the Revenue, the Court or authority should exercise its duty under the law to take into consideration the rights and interest of an individual. It is also clear that before any goods could be subjected to duty, it has to be established that it has been manufactured and it is marketable and to prove that it is marketable, the burden is on the Revenue and not on the manufacturer.

Final Order
In view of the above, the court held that as the Appellate Authority has not addressed to itself any of the issues involved in the appeal rather has gone to the issue of financial hardship which was unwarranted and uncalled for in the fact situation of this case. The order impugned cannot be sustained in the eyes of law and thus they allowed the petition and set aside the impugned order. The case has been remanded to the Appellate Authority to decide the application for stay/waiver afresh in accordance with law, as explained above.

Court in the case of J.N. Chemicals Vs. CEGAT [18] reaffirmed the tribunal power to dispense with the requirement of pre-deposit. The power to dispense with such requirement is conferred on the Tribunal to be exercised precisely in cases like these and, if it is not exercised under such circumstances, this Court will require it to be so exercised. The Tribunal is directed to entertain and decide the appeal in accordance with law by dispensing with the requirement of pre-deposit of the amount of excise duty and penalty in dispute.

Therefore, it certainly can be said that the petitioner has got a strong prima facie case.

In yet another case of Shri Krishna Vs. UOI [19] where, Consignment of 133 pieces of woollen woven carpets valued at Rs. 44,45,000/- was found at Tikonia Rly. Station, close to Indo-Nepal Border. The Adjudicating Authority formed an opinion that the goods seized at the railway station were in the process of being taken to Nepal by one Shiv Raj Tiwari.

As to Sri Krishna the Adjudicating Authority recorded a finding that 'he had made a false claim to smuggled goods at the railway station by producing a railway receipt.'

The CEGAT has by order dated 23-4-1998 directed Sri Krishna to deposit a sum of Rs. 2 lakhs and V.C. Rao and eight others to deposit a sum of Rs. 5,000/- each by way of pre-deposit as a condition precedent to the hearing of the appeal.

Court placed reliance on Oswal Weaving Factory v. State of Punjab, [20]and held that ,Suffice it to observe that while disposing of an application under Section 129 of the Customs Act, 1962 the Tribunal is obliged to adhere to the question of undue hardship. The order of the Tribunal should show if the pleas raised before it, have any merit prima facie or not. If the appellant has such a prima facie strong case as is most likely to exonerate him from payment and still the Tribunal insists on the deposit of the amount it would amount to undue hardship.

Court also ruled that, any expression of opinion in this order shall not prejudice the hearing of the appeals on merits before the Tribunal and none of the parties shall be entitled to rely or refer to this order at the time of hearing of the appeals by the Tribunal on merits. The Tribunal shall be at liberty to form its own opinion irrespective of any observation made in this order.

This case throw light on post hearing approach of the court which must not be affected by the order setting aside or granting the pre deposit waiver. This is in way also indicative that pre deposit proceedings are independent based in prima facie case and balance of convenience.

In the case Hindustan Laminators Vs. CCE [21] where in the facts in brief were regarding a Basic dispute between the petitioner-company and the Central Excise Authorities is whether duties were required to be paid on duty paid jute fabrics after lamination. According to the Central Excise authorities such duty was required to be paid after lamination. petitioner has challenged the orders passed by the Customs Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as CEGAT). The Tribunal on the application under Section 35F of the Central Excise Act, directed the petitioner company to make a pre-deposit of Rs. 10 lacs out of a demand for duty of Rs. 86,54,835.69 and penalty of Rs. 9 lacs.

Issue
Whether CEGAT has passed the said order dated August 30, 2000 after taking into account the financial hardship as stated by the company before the said Tribunal

Held: Documents placed by the company in the modification application to place the financial hardship to be caused to the petitioner has not been properly dealt with by the Tribunal at the time of passing of the said order. . If the petitioner does not get any chance to place their case before the said Tribunal and only on the ground of the pre-deposit, the appeal is dismissed in that case, in my opinion the petitioner will suffer irreparable loss and prejudice

Court relied on "J.N. Chemical (Pvt.) Limited v. CEGAT[22] reported in where the Court has come to the conclusion which may be reproduced hereunder :-

"These judicial pronouncements of high authority show that even where enabling or discretionary power is conferred on a public authority, the words which are permissive in character may be construed as involving , duty to exercise the power is essential. If there is failure on the part of the donee to exercise such power accordingly, the Court will require it to be exercised."

Court directed the Tribunal to entertain and decide the appeal in accordance with law by dispensing with the requirement of pre-deposit of the amount of excise duty and penalty in dispute.

Northern Doors Ltd. v. CCE [23]: The petitioner has challenged the Order dated 1-9-2004 passed by the Central Excise and Service Tax Appellate Tribunal, Delhi, by which the petitioner has been asked to deposit a sum of Rs. 2,00,000/- for entertaining the appeal.

Court heavily relied on I.T.C. Ltd. v. Commissioner (Appeals), Customs & Central Excise and Ors [24] where in it was held that the Court should not grant interim relief/stay of the recovery merely by asking of a party. It has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit.

The arguments that appellant is in a position to deposit or if he succeeds in appeal, he will be entitled to get the refund, are not the considerations for deciding the application. The Order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with the law.

Dispensation of deposit should also be allowed where two views are possible

Final Order: We are of the considered opinion that as the Appellate Authority has not addressed to itself any of the issues involved in the appeal rather, has gone to the issue of financial hardship which was unwarranted and uncalled for in the fact situation of this case. The Order impugned cannot be sustained in the eyes of law and we have no option but to allow this petition and set aside the Order impugned.

Bhavya Apparels Vs. UOI [25] where the issue was Interpretation of the provisions of Section 129E of the Customs Act, 1962.

An adjudication proceeding was initiated against the appellant. Assessment of Custom Duty was made. An appeal was preferred there against. The said appeal was dismissed for failure to pre-deposit a sum of Rs. 3,30,00000/- as directed by the Court of Appeal.

Section 129 provides for the constitution of the appellate tribunal where for procedures have also been laid down. Proviso appended to Section 129A enumerates the cases in respect whereof jurisdiction of the appellate tribunal is barred. Sub-section (6) of Section 129A envisages payment of court fee. Sub-section (2A) of Section 129B specifies a period of three years during which the appeal may be disposed of. A Tribunal is also empowered to grant stay. Section 129E, however, mandates pre-deposit of any duty and interest in appeal which is preferred in respect of the goods which are not under the control of the custom authorities or any penalty levied under the Act. Proviso appended thereto, however, empowers the Commissioner of Appeal or the appellate tribunal to dispense with such deposit if it comes to the conclusion that the deposit of duty and interest would cause undue hardship to the appellant.

Section 129E of the Act would be attracted where the goods in question are not in the custody of the Revenue. The said provision, therefore, would be attracted only when the ingredients thereof exist. So court was of the view that no Interpretation is required

Court was of the opinion, that it was obligatory on the part of the Tribunal to take that factor into consideration in making the order of pre-deposit. Furthermore, while exercising its jurisdiction, the Tribunal was also required to apply its mind in regard to the question of undue hardship on the part of the appellants upon considering existence of a prima facie case. Merit of the case ordinarily should not otherwise be gone into unless the question on the face of it appears to be concluded.

The proviso to Section 129E of the Act gives discretion to the Tribunal in cases of undue hardships to condone the obligation to deposit or to reduce. It is a discretion vested in an obligation to act judicially and properly.

Final Order: Matter requires reconsideration at the hands of the Tribunal. The Tribunal failed to take into consideration the limitation of its jurisdiction under Section 129E which emanates from the custody of the goods and as a part of the goods is in the custody of the Revenue and furthermore in view of the fact that the High Court instead of considering the question as to whether direction to deposit the amount would cause undue hardship or not has gone into the merit of the matter, the interest of justice would be subserved if the impugned judgments are set aside and the matter is remitted to the Tribunal for consideration of the matter afresh. Court requested the Tribunal to consider the desirability of disposing of the matter as early as possible.

In the case of UOI Vs. Kamlakshi Finance [26] where respondent manufactures electrical insulation tapes. According to the respondent, the goods manufactured by it fall under tariff heading 85.47 of the schedule to the Central Excise Tariff Act, 1985. On the other hand, according to the petitioner, the goods fall under heading 39.19 of the same schedule. The Assistant Collector of Central Excise, therefore, gave notice to the respondent to show cause why the product should not be classified under heading 39.19.

The Assistant Collector, however, did not accept the assessee's contention and held that the products in question fell under heading 39.19. The assessee preferred an appeal to the Collector (Appeals), who set aside the order of the Assistant Collector. the matter thus went back to the Assistant Collector he passed an order on 12.5.89, reiterating the conclusion that had been reached by his predecessor. The assessee thereupon filed a Writ petition in the Bombay High Court.

The High Court quashed the order of the Assistant Collector and directed the department to allocate the matter to a competent officer to pass a proper order. The Union of India preferred this appeal.

The Supreme Court upheld the view of the High Court and held that conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. Section 35-E confers adequate powers on the department in this regard. Under Sub-section (1), where the Central Board of Direct Taxes come across any order passed by the Collector of Central Excise with the legality or propriety of which it is not satisfied, it can direct the Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order. Under Sub-section (2) the Collector of Central Excise, when he comes across any order passed by an authority subordinate to him, if not satisfied with this legality or propriety, may direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order and there is a further right of appeal to the department.

It was observed that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them.

In the case of LG Balakrishnan Vs. CCE [27] where an application regarding for waiver of pre-deposit and stay of recovery. The Commissioner has demanded Rs. 1,13,562/- along with Education Cess from the assessee for the period Aug'05 to March'06, under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act/Section 73 of Chapter V of the Finance Act, 1994. He has also raised a similar demand on the assessee for the period Jan'05 to July'05, amounting to Rs. 82,781/- Education Cess. Penalties equal to the above demands have also been imposed on the assesse.

Court relied on India Cements vide Stay Order No. 939/07 dated 17-9-07 and came to the conclusion for granting waiver of pre-deposit and stay of recovery in respect of the duty and penalty amounts, after taking note of the reference to Larger Bench.

The jurisdictional issue raised by Counsel in this case is of a substantial nature and the same, should be considered by the Division Bench. Accordingly, it is directed that the appeal be posted before the Division Bench as soon as its turn is reached before that Bench. This case can be an authority for the proposition that when the matter is referred to a larger bench for consideration then the requirement of the pre deposit can be done away with.

Conclusion
Courts have been liberal with the mandate of pre deposit before filling an appeal, because when the amount which is being asked as pre deposit might be at times so huge and deposit of same can cause undue hardship to the person. Courts have by and large done away with the deposit where the person has a strong prima facie case and the balance of convince is in his favour. Following are the grounds which can be taken help of , inorder to seek the waiver of the requirement of pre deposit under section 35E of the Central Excise Act and 129E of the Customs Act.

Ø Reasons given by the appellate authority must be satisfactory and the Appellate Authority should have addressed its mind to the prima facie merits of the appellants.

Ø Courts are to apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit

Ø When the matter is referred to a Larger Bench stay of recovery of the amount is granted.

Ø Dispensation of deposit should also be allowed where two view are possible.

Ø If there are divergent views of the tribunal which may be indicative of arbitrariness on the part of tribunal.

Ø Documents placed by the person seeking waiver of deposit must be duly considered by the tribunal because if same would not be the case then and the documents are rejected only on the ground of the pre-deposit, the appeal is dismissed in that case, it would cause irreparable loss to the party.

Ø Authority must first consider the case on prima facie basis without going into the merits of the case, otherwise it would subserve justice.

Charging sections to be strictly construed while benevolent and procedural sections should be liberally construed - This is a very important and practical rule of interpretation and generally resorted to while interpreting the sections pertaining to incentives, exemptions and deductions where the spirit is to promote exports, increase earnings in foreign convertible exchange, promote industrialization, infrastructure development etc. A provision for appeal should also be liberally construed.
--------------------------------------------------------------------------------
[1] AIR1959SC713
[2] 89 ITR 236, 240 (SC
[3] 1985ECR4(SC)
[4] 2003(156)ELT201(Del)
[5] [1993]2SCR715
[6] 2008(221)ELT7(SC)
[7] Black in Venkataramaiya's Law Lexicon Vol. 4 Second Edn
[8] State V. Haremza, 213 Kan. 201,515 P2d 1217 1222
[9] (1974) 40 Cut LT 336
[10] ILR1996KAR753
[11] (1975)1 All E.R. 504
[12] Mesana District Co-op Vs. UOI 2003 154 ELT 347 SC.
[13] 1999 108 ELT 637 Cal.
[14] Ram Narain Agarwal & Another Vs. D.D.A. & Others, AIR2000Delhi206
[15] 2003(154)ELT59(Del)
[16] 2006(113)ECC314
[17] 2005 184 ELT 347 Alld.
[18] 1991 53 ELT 543 Calcutta.
[19] 1998 104 ELT 325 Del.
[20] AIR1966P&H532
[21] 2002 141 ELT 614 Cal.
[22] 1991 (53) E.L.T. 543
[23] 2005 182 ELT 450 Alld.
[24] Civil Misc. Writ Petition No. 1219 of 2003
[25] 2007 216 ELT 347 SC
[26] 1991 55 ELT 433 SC
[27] 2008 229 ELT 302.




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