Civil Appeal No. 5152 OF 2007 (Arising out of S.L.P. (C) No.21705
Dr. Arijit Pasayat, J.- Leave granted
1.Challenge in this appeal is to the
order passed by a learned Single Judge of the Gujarat High Court,
setting aside the order passed by the Appellate Tribunal for Foreign
Exchange (for short 'Tribunal') dated 4th January, 2006 in Appeal nos.
199, 500 and 501 of 2006 whereby the application for dispensation of
pre-deposit was rejected.
Background facts in a nutshell
are as follows:-
On the basis of the alleged violation of certain provisions of the
Customs Act 1962 (in short the 'Act') notices were issued to certain
noticees including the present respondents primarily on the ground of
mis-declaration as to the description and narration of the goods
imported and on the ground of over-invoicing so far as valuation is
concerned and consequentially misusing foreign exchange. Show-cause
notices were issued by the adjudicating authority and on consideration
of the submissions and replies filed, the orders in original were passed
by the Commissioner of Customs (hereinafter referred to as the
'Commissioner'). The orders passed by the original authority were
challenged by the respondents before the Customs, Excise and Service Tax
Appellate Tribunal, Bangalore (in short 'CESTAT'). Notices were also
issued under Foreign Exchange Management Act, 1999 (in short 'Management
Act'). The Additional Director General passed orders in terms of the
Foreign Exchange Regulation Act, 1973 (in short 'the Regulation Act')
which has been repealed along with the provisions of the Foreign
Exchange Management Act 1999 (in short the 'Management Act'). The order
was passed after considering the replies and submissions in response to
the show-cause notices. The adjudicating authority found the noticees
guilty of the charges and in terms of the powers conferred under Section
50 of the Regulation Act read with Section 49(3) and 49(4) of the
Management Act imposed the following penalties:
A) A penalty of Rs.7,50,00,000/-
(Rupees Seven Crores fifty lakhs only) on Shri Dharmesh P. Shah,
Proprietor of M/s. Vaishal Impex, (noticee No.1).
B) A penalty of Rs.4,00,000/- (Rupees Four Crores only) on M/s. Adani
Exports Limited, (noticee No.2).
C) A penalty of Rs.2,00,00,000/- (Rupees Two Crores only) on Shri Rajesh
Adani, Director of M/s. Adani Exports Limited. (noticee No.3).
4. Questioning correctness of the
adjudication order, appeals were preferred before the Tribunal. Along
with the appeals, application for dispensation of deposit of penalty
amount was filed. The same was rejected as noted above by order dated
5. The Tribunal was of the view that
neither any prima facie case was made out nor the financial stringency
established to warrant dispensation of pre-deposit. A writ petition was
filed before the Gujarat High Court primarily questioning the said order
and also incidentally questioning legality of the proceedings.The High
Court not only dealt with the impugned order before it relating
pre-deposit aspect but also the merits of adjudication. It elaborately
discussed the merits of the adjudication proceedings, though it itself
noted that the Special Civil Applications were filed questioning
correctness of the order relating to pre-deposit. Not only the High
Court held that the order directing deposit was unsustainable but also
held that the order of adjudication was unsustainable, overlooking the
fact that the appeals were pending before the Tribunal. The High Court
set aside the order passed by the adjudicating authority and remitted
the matter to the adjudicating authority i.e. the Additional Director
6. In support of the appeal learned
counsel for the appellant submitted that the approach of the High Court
is clearly unsustainable. High Court itself noticed that the primary
challenge was to the order passed by the Tribunal relating to
pre-deposit. Though some grounds were taken relating to the merits of
the adjudication, the High Court should not have dealt with them and
should have left those matters to be adjudicated by the Tribunal.
Instead of doing that, the High Court set aside the order referring to
certain observations made by CESTAT in other cases. It is further
submitted that the view taken by CESTAT in those cases has been
questioned before this Court and the appeal has been admitted. In that
view of the matter the order passed by the High Court is clearly
7. Learned counsel for the
respondent on the other hand submitted that there was an earlier order
passed by CESTAT which was in favour of the respondents-noticees.
Therefore, the High Court was justified in remitting the matter to the
8. It is not in dispute that the
respondents have filed appeals before the Tribunal. As noted by the High
Court, primary challenge in the writ petitions was to the order relating
to pre-deposit. While dealing with that the High Court was not justified
in going into the merits and expressing its views and thereafter
remitting the matter to the Tribunal. Such a course was not available to
9. The Tribunal has highlighted the
relevant aspects while rejecting the prayer for dispensation of
pre-deposit. The three aspects to be focused while dealing with such
(a) prima facie case
(b) balance of convenience and
(c) irreparable loss.
The Tribunal categorically found that these factors were established by
the respondents. Even when Tribunal decides to grant full or partial
stay it has to impose such conditions as may be necessary to safeguard
the interest of revenue. This is an imperative requirement under Section
129E of the Act. Normally, therefore, we would have asked the respondent
assessee to comply with the orders of Tribunal, by setting aside the
impugned order. But considering the fact that the Tribunal already
passed consequential order on the basis of the High Court's order on
18.8.2006, we dispose of the appeal with following directions:
(a) Impugned order passed by the
High Court and the consequential order passed by the Tribunal on
18.8.2006 are set aside.
(b) The parties are directed to appear before the Tribunal without any
further notice on 3.12.2007.
(c) The Tribunal shall take up the appeal by hearing them without
insistence on pre-deposit.
(e) The appeals shall be heard on day to day basis.
(f) The respondent shall file an undertaking before the adjudicating
authority to liquidate the demands, if any, sustained by the Tribunal
subject of course, to the right of appeal if any, within eight weeks
from the date of receipt of Tribunal's order. This of course would be
subject to any order of interim protection, passed in the appeal.
12. The appeal is accordingly
disposed of without any order as to costs.
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