Delhi High Court
Shri B.L. Dhaluka, Shri O.P. Aggarwal, ... vs Union Of India (Uoi) And Ors. on 22 November, 2002
Equivalent citations: 2003(154)ELT59(DEL)
Author: D.K. Jain
Bench: D.K. Jain, Sharda Aggarwal
JUDGMENT D.K. Jain, J.
1. Rule D.B.
2. Since a short point of law is involved, with the consent of counsel for the parties, we proceed to dispose of all these matters finally at this stage itself.
3. The issue raised in these writ petitions being identical, for the sake of convenience, these are taken up together and this order shall govern all the cases.
4. Challenge in all these writ petitions is to a consolidated order, dated 7 August 2002, passed by the Customs, Excise and Gold (Control) Appellate Tribunal ('the Tribunal' for short), New Delhi, under Section 129E of the Customs Act, 1962 (for short the Act), on applications filed by the petitioners seeking waiver of pre-deposits as a condition precedent for entertaining their 24 appeals. By the impugned order, the Tribunal has directed the petitioners to make a pre-deposit of 50% of the penalties imposed in each of the orders impugned before it, within eight weeks of the date of receipt of the order.
5. Shorn of unnecessary details, the material facts giving rise to the present petitions are that on the basis of some information that three companies, namely, M/s. Ganpati Exports Limited, M/s. Ganpati Commerce Limited and M/s. Ganpati Combines Limited, all based at Calcutta, had made exports of plastic woven sacks to Russia towards fulfillment of their export obligations under the DEEC scheme, against advance licenses issued to them, by over-valuing these consignments by almost six times and further, instead of stipulated exports to GCA countries to earn free foreign exchange at the time of issue of advance licenses, exports were made to Russia for which payment is under RPA terms, involving export obligation of 100% CIF value of licenses, investigations were undertaken by the Directorate of Revenue Intelligence. Alleging that the four petitioners, in their capacities as the Chairman, Managing Director and General Managers respectively, were actively involved in the said nefarious transactions, after issuing six show cause notices to the said companies and the petitioners, the Commissioner of Customs, Kandla levied the following penalties on them under Section 114 of the Act for alleged improper exports:
S.No. SCN Dt.
Main Noticee Penalties Levied Main Noticee O.P. Aggarwal B.K. Karnawat B.L. Dhaluka Dinesh Thakur
1.
25-2.97 Ganpati Combines Nil 50lacs 25lacs 15 lacs 10 lacs
2. 29.3.00.
-do-
203708675 5 crores 2 crores 50lacs 50lacs
3. 25.2.97 Ganpati Commerce Nil 2 crores 50 lacs 10 lacs 10 lacs
4. 29.3.00
-do-
117421799 2.50 crores 1 crore 05 crore 0.5 crore
5. 25.2.97 Ganpati Exports Nil 2.50 crores 1 crore 1 crore 50 lacs
6. 29.3.00
-do 7359999 2crores 50 lacs 50lacs 50 lacs Total:
14.50 crores 5.25 crores.
2.75 crores 2.20 crores Thus, the total penalties levied on the petitioners ranged between 2.20 crores to 14.50 crores.
6. Aggrieved with the said orders, the four petitioners herein preferred 24 appeals to the Tribunal along with applications for waiver of pre-deposit and stay of demands. As noted above, vide the impugned order, the Tribunal has directed them to deposit 50% of the penalties imposed. To appreciate the rival contentions and for the sake of ready reference, the relevant portion of the order of the Tribunal is extracted hereunder:
"We have considered the arguments advanced by both the sides. The present case is different from the cases covered in the case laws cited by the learned counsel for the appellants. This is a 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. We, 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. However, considering the fact that the appellants are individuals, we direct that they make a pre-deposit of 50% of the penalties imposed in each of the impugned orders against each of them. The deposits may be made within a period of 8 weeks from the date of receipt of this order and compliance reported. Subject to pre-deposit of the said 50% of the penalty, waiver of the pre-deposit of the balance penalty is allowed."
Thus, the amounts directed to be deposited range between 1.1 crores and 6.25 crores.
7. We have heard Mr. C. Hari Shankar on behalf of the petitioners and Mr. Jayant Bhushan on behalf of the respondents.
8. It is strenuously urged by Mr. Hari Shankar, on behalf of the petitioners, that the direction by the Tribunal to the petitioners to deposit 50% of the penalties imposed is illegal inasmuch as the impugned order has been passed without any application of mind, and that the Tribunal has not only lost sight of actual factual position, it has also failed to apply the settled principles governing stay applications under the Act. Learned counsel would submit that despite the fact that it was brought to the notice of the Tribunal that B.L. Dhaluka and Dinesh Thakur, two of the petitioners herein, had nothing to do with M/s. Ganpati Commerce of M/s. Ganpati Combines, as they were not their employees, the Tribunal has, in an omni-bus manner, directed these two petitioners to deposit 50% of the amounts of penalties imposed on tem for alleged acts of misfeasance in respect of these two companies also. Learned counsel has also urged that had the Tribunal correctly analysed the relevant material on record, it would normally have come to the conclusion that no penalty under Section 114 of the Act for alleged violation of Section 112(b) of the Act was leviable on the petitioners, particularly when in the show cause notices issued to them, except for making references to statements of some employees, there was no specific allegation that the petitioners had dealt with the goods in question in any manner contemplated in the said section. It was contended that in contradistinction to Section 140 of the Act, making the functionaries of the company vicariously liable for the offences committed by the company, Section 112 does not provide for fixing vicarious liability on the directors/employees and, therefore, a mere presumption based on the statements of some persons, was not sufficient to attract Section 114 of the Act. It is maintained that penalty under the said Section can be imposed only on a person who in relation to any goods does or omits to do an act which would render the goods liable to confiscation under Section 113 of the Act but there is no such allegation against the petitioners either in the show cause notice or the final order. It is also submitted that although the plea of financial hardship was raised before the Tribunal, it has failed to take into consideration their financial status while directing them to make the aforenoted deposits. It is pleaded that in view of the precarious financial position of the petitioners, imposition of stringent condition of pre-deposit, which they are incapable of complying with, would render the right to appeal illusory. It is, thus, urged that no case for levy of penalties on the petitioners being made out, even prima facie, the Tribunal should have waived the entire penalty, failing which the petitioners would suffer undue hardship as they would not be in a position to deposit the amounts as directed by the Tribunal.
9. Mr. Jayant Bhushan, learned central government standing counsel, on the other hand, while terming the impugned order as very reasonable, submits that when read in totality the adjudication orders clearly bring out the roles played by each of the petitioners in the exports. It is asserted that this being a case of large scale fraud, in which the petitioners were actively involved, this Court should not interfere in exercise of writ jurisdiction with the discretionary order of the Tribunal.
10. At this juncture we are not concerned with the question whether penalty under Section 114 of the Act could be levied on the petitioners or not because that would be a matter to be gone into by the Tribunal at the time of final hearing of the appeals. It would neither be proper nor desirable for us to embark upon a detailed inquiry at this stage itself to find out whether the stand of the petitioners is correct or not. The only question for consideration is as to whether the Tribunal has exercised the discretion vested in it under Section 129E of the Act, in directing the petitioners to deposit 50% of the impugned penalties levied on them, as a condition precedent for entertainment of their appeals, on sound legal principles by taking into consideration all the relevant facts.
11. The right to appeal is a statutory right and while granting such a right, the Legislature is competent to circumscribe it by imposing conditions. Section 129E of the Act provides that no appeal against the duty demanded or penalty levied can be entertained unless the person desirous of appealing against such decision or order, pending the appeal, deposits with the Adjudication Authority the duty demanded or the penalty levied. However, under proviso to the Section a discretion has been conferred on the appellate authority to dispense with such deposit if in the opinion of the Authority deposit of duty or penalty would cause "undue hardship" to the person concerned. There is no gain saying that the discretion must be exercised on relevant materials, honestly, bona fide and objectively. The Authority is also required to keep in mind the interest of the Revenue while making such an order. Therefore, what the proviso to the section postulates is that while dealing with an application seeking waiver of pre-deposit, the Authority concerned must bear in mind two aspects, namely, (i) 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.
12. While dealing with a similar provision contained in Section 35-F of the Central Excise Act, 1944, in Usha Udyog v. Customs, Excise & Gold (Control) Appellate Tribunal , to which one of us (D.K. Jain, J.) was a party, it was said that the term "opinion" means "judgment of belief, that is a belief or a conviction resulting from what one thinks on a particular question. It a man is to form an opinion, and his opinion is to govern, he must form it himself on such reasons and grounds as seem good to him". It was further 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.
13. Needless to say that in addition to what is provided in the provision in express terms, the two other well established principles namely: (i) whether the assessed has made out a prima facie case in his favor; and (ii) the balance of convenience qua deposit or otherwise have also to be borne in mind while dealing with a stay application. It is trite that while dealing with an application under Section 129-E of the Act it would neither be desirable nor the Authority is required to embark upon a detailed inquiry to find out whether the stand of the petitioner is correct or not. But, at the same time, the order must reflect the awareness of the Authority to the dispute before him and its application of mind to the factors involved, for, in exercising power under Section 129E of the Act, it acts as a quasi judicial authority. This being an important statutory function, is coupled with a duty and therefore, cannot be performed mechanically.
14. Having carefully perused the impugned order, particularly the afore-extracted penultimate paragraph, in the light of the aforenoted settled principles governing a stay application, we are constrained to observe that the order suffers from the vice of non-application of mind. From the order it appears that the Tribunal got swayed by the quantum of the amount, allegedly defrauded by the group companies, on whose behalf, it is stated, the petitioners have acted. Though the Tribunal noticed the contention on behalf of B.L. Dhaluka and Dinesh Thakur that they had nothing to do with Ganpati Commerce or Ganpati Combines as they were the employees only of M/s. Ganpati Exports yet the Tribunal directed them to deposit 50% of the penalties imposed on them for the alleged acts of omission and commission by the said two companies. We have no hesitation in observing that the Tribunal has failed to address itself on the vital factual aspects with regard to the applicability of Section 114 in the cases of the petitioner and their financial status, to form the opinion whether they have prima facie cases in their favor and further whether the requirement of pre-deposit would cause undue hardship to them. We say no more because expression of any opinion on merits of the case of the petitioners at this juncture is likely to influence the appellate authority while hearing their appeals. Neverthless, Since the petitioners had pleaded financial hardship before the Tribunal, before hearing them on this aspect, we had directed them to file affidavits stating their financial status. The affidavits filed in response thereto lend support to our view that all the four matters require re-consideration by the Tribunal. We may, however, note that although while fixing the amount of deposit the Tribunal has shown its awareness that the petitioners are individuals but we feel that their financial status has not been taken into consideration by it.
15. For the foregoing reasons, we are of the opinion that the matter of stay in all the four cases deserves to be re-considered by the Tribunal. We, accordingly, set aside the impugned orders and remand all the cases to the Tribunal for re-consideration of the stay applications filed by the petitioners, keeping in view of settled principles governing the stay applications.
16. In the result, all the writ petitions are allowed and the rule is made absolute. There will, however, be no order as to costs.