Customs, Excise and Gold Tribunal - Calcutta
Siemens India Ltd. vs Collector Of Centaral Excise on 28 May, 1986
Equivalent citations: 1987(14)ECC456
ORDER
6-2-1986 M.G.S. Murthy, Member
1. This was originally an application praying, inter alia, that "the fine in lieu of confiscation amounting to Rs. 1,00,000 and penalty of Rs. 50,000 may be stayed till the disposal of the appeal by the Hon'ble Tribunal". Although, it was ostensibly made under Section 35F of the Centra] Excises and Salt Act, 1944, (hereinafter the Act) there was no prayer for dispensing with the deposit of the penalty in terms thereof.
2. When the application came up for hearing on 9-8-1985, it was observed during the course of our order that in terms of Section 35F of the Act, it is only when a deposit is made of the amount of duty or penalty, as the case may be, (that is required to be paid) or such deposit is dispensed with for undue hardship, that the appeal becomes maintainable and stay of recovery in exercise of inherent or ancillary powers of the Tribunal could be granted in further pursuance thereto.
On this, Shri Gurbaxani, representing the applicants, prayed leave to amend the application.
3. On 23-8-1985 leave was granted to amend the application as prayed for and respondent was directed to--
(a) furnish necessary evidence in support of the subsistence of the bank guarantee furnished for fine in lieu of confiscation, unenforced; and
(b) maintain status quo till the disposal of the stay application.
4. The amended application praying, inter alia, that the Tribunal may
(a) Dispense with precondition of deposit of the aforesaid fine of Rs. 1,00,000 and penalty of Rs. 50,000 for admission of appeal and; or
(b) Restrain the respondent from appropriating an amount of Rs. 1,00,000 towards the value of goods in terms of the adjudicating order against the bank guarantee furnished to the respondent by the applicants, and/or
(c) Stay the recovery of the aforesaid amount of Rs. 1,00,000 and Rs. 50,000 till the disposal of the appeal;
was heard on 4-9-1985. The next day, on 5-9-1985, Shri Gurbaxani mentioned the case and filed a certified copy of the Supreme Court's judgment in S.L.P. No. 7762 of 1984 (M/s. Spencer & Co. Ltd., Madras v. Collector of Central Excise, Madras) and contended on its basis that it was erroneously reproduced (in that the word "include" had been wrongly substituted in the place of "exclude") in our judgment in (1985) 20 ELT 384 (Brima Sugar Ltd. v. Collector of Central Excise, Pune) as well as in (1985) 21 ELT 704 (Parasmal Solanki v. Collector of Customs). He filed a certified copy of the order of the Supreme Court dated 25-10-1984 in the aforesaid case reading as under:--
We are in agreement with the contention of the counsel for the petitioner that the expression 'undue hardship' occurring in the proviso to Section 35F of the Central Excises and Salt Act, 1944 would exclude consideration, inter alia, of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that that aspect has been completely ignored as was contended by counsel. With these observations, the special leave petition is dismissed.
5. The undisputed facts that led to the appeal and the instant application, insofar as material are--
(a) A notice date 14-10-1980 was issued to the applicants, as a sequel to a search and seizure of 5 sets of switch boards valued at Rs. 2,89,760.81, alleging inter alia, the completion of their manufacture and readiness for removal duly packed and loaded into a lorry, without a classification list duly approved in terms of Rule 173-B of the Central Excise Rules, 1944 and without making the appropriate entries in the RG-1 Register and in contravention of Rules 53 and 223 of the Rules;
(b) The goods in question were, however, provisionally released in terms of Rule 206(3) on the execution of B-11 bonds by the applicants and a bank guarantee in a sum of Rs. 1,91,727 at the instance of the applicants herein;
(c) In adjudication, it was held by the learned Collector of Central Excise, by his order dated 5-2-1983/22-10-1984, that the aforesaid goods were liable to confiscation for contravention of Rule 173-Q and he, accordingly, directed that, since they were provisionally released, they were required to be produced in terms of the bonds on pain of enforcement and realisation of the bank guarantee and appropriation of an amount of Rs. 1,00,000 from the proceeds towards their value. Further, he imposed a penalty of Rs. 50,000 on the applicants.
(d) The instant appeal and application were the sequel.
6. In a brief compass, Shri Gurbaxani's submissions in support of the application were--
(a) Our reliance on the order of the Supreme Court in the Spencer case in both the aforesaid cases in (1985) 20 ELT 384 and (1985) 21 ELT 704 was misplaced and, doubtless, arrived at on a wrong reading of the former. Correctly read, the order would support his contention to the effect that the aspect of liquidity or immediate pecuniary hardship is to be excluded from consideration in construing the expression "undue hardship" occurring in Section 35F of the Act. The liquidity of the applicants or the immediate pecuniary hardship that may be caused to the applicants, in case a deposit were to be made is, really, of no relevance at all in the light of the Hon'ble Supreme Court's order in the Spencer case;
(b) While it may be that, financially speaking, the deposit of the aforesaid amounts would not cause any hardship whatsoever--much less undue hardship--to the applicants, that is not the criterion for adjudging "undue hardship" in Section 35F of the Act. The existence of a prima facie case for the applicants in the appeal and the balance of convenience have to be taken into account.
(i) "Undue" is what is more than proper, illegal. It denotes something wrong according to the standard of morals which the law enforces, and in fact, illegal and qualifies the purpose with which influence is exercised or result which it accomplishes (reliance on Black's Law Dictionary--p. 1370--5th Edition 1979--relying on Morris v. Morris--192 Miss, 518). "Hardship" is, in general, privation, suffering, adversity.
(ii) Prima facie, a levy of a penalty in excess of Rs. 2,000 was contrary to Rule 226 (of the Rules) which was alleged to have been contravened.
(iii) The balance of convenience was in favour of dispensing with the deposit seeing that the bank guarantee covered the amount of penalty as well and is stated to be still subsisting, more so in view of the long delay in the search and seizure and the communication of the order in adjudication. In identical facts, a deposit of Rs. 1,000 towards penalty was dispensed with the Tribunal's order (Single Member Bench) dt. 8-7-1985.
(iv) The liability towards payment of income-tax in case the penalty is required to be deposited in terms of the ratio of (Hazi Aziz v. C.I.T.) and the immediate parting with the funds, notwithstanding the subsistence of the bank guarantee are also factors to be taken into account, in a consideration of the "undue hardship" that enables the Tribunal to dispense with a deposit thereof.
7. (a) In view of the very serious charge against us of having, obviously deliberately, substituted the word "include" in the place of the word "exclude" in the order of Supreme Court, while extracting a part of the said order and relying on it in our judgments in and as well as , we had, necessarily, to take steps for obtaining all the orders made by the Hon'ble Supreme Court in the S.L.P. filed by Spencer & Co., [S.L.P. (Civil) No. 7762 of 1984]. Notwithstanding that it took us some time, the effort was rewarding. The word "exclude" in the order of the Supreme Court dt. 23-10-1984 (of which a certified copy was filed by Shri Gurbaxani on 5-9-1985), was an error which was rectified by the substitution in its place of the word "include" by the Hon'ble Supreme Court itself, on a mention made on 30-10-1984. The order dt. 30-10-1984 made in clarification of the earlier order dt. 25-10-1984 reads as follows:--
We are in agreement with the contention of the counsel for the petitioner that the expression 'undue hardship' occurring in the proviso to Section 35F of the Central Excises and Salt Act, 1944 would include consideration inter alia of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that [that] aspect has been completely ignored as was contended by counsel. With these observations, the special leave petition is dismissed.
(b) The effort of Shri Gurbaxani was, in the circumstances, calculated to mislead us into thinking that we committed an error in reproducing a part thereof or the insinuation and the charge were made recklessly--without any verification. In either case, it was reprehensible, to say the least.
8. (a) The S.L.P. in the Spencer case aforesaid was the sequel to our order No. 368/1984-A dt. 29-5-1984 in an application under Section 35F for dispensing with a deposit of Rs. 8.33 lakhs towards duty.
(b) In the application as well as in the course of the hearing, it was the existence of a prima facie case for the applicants and the balance of convenience that were urged to constitute undue hardship in the case the deposit were not dispensed with. We refrained from equating "undue hardship" in Section 35F with either of these and dismissed the application solely on the ground that the applicants were affluent enough to deposit the amount demanded in view of the annual turnover, the declaration of dividend during the relevant year and the accumulated reserves of the applicants.
(c) Our refusal to consider the existence of a prima facie case or the prejudice that may be caused to the applicants in the Spencer case did not result in the grant of special leave, as [it] should have, if our construction of the aforesaid expression was wrong. Quite to the contrary, it was the liquidity that was categorically laid down as the acid test of "undue hardship".
(d) What; then, is liquidity? In Black's Law Dictionary (5th Edition) liqui dity was defined to mean "the status or condition of the person or a business in terms of his or its ability to convert assets into cash" and "liquid" was itself said to mean substantial working capital. However, construing the expression "financial non-viability" occurring in Section 72A of the Income Tax Act, 1961 the Hon'ble Supreme Court in (1983) 4 SCC 392 (C. I. T. v. Mahindra & Mahindra, per Tulzapurkar, J.) cited with approval the incidents of "financial viability" furnished by NCAER (National Council of Applied Economic Research) in a study of industrial sickness in 1979, thus"financial viability consists of three interdependent elements of equal emphasis and weight, viz., profitability, liquidity and solvency, which are represented by cash profit or loss, net working capital, and net worth respectively." "Liquidity" is, therefore, to mean and imply "net working capital".
9. (A) In another decision of the Hon'ble Supreme Court in a writ appeal (Asstt. Collector of Central Excise v. Dunlop India Limited) it was observed, inter alia, that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown.
The Hon'ble Court had further observed, in continuation, More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest.
(B) It cannot be forgotten that the observations in Dunlop case were made in the context of interim orders of stay upon recovery of revenue in a writ petition, where the Court is unfettered by any statutory provision mandatorily requiring a deposit of the amount of duty or penalty to be made on pain of rejection of an appeal itself --Navin Chandra v. C.B.E.C. and specifying the criterion that circumscribes an exercise of discretion in dispensing with it.
(C) The distinction between the grant of stay of recovery of an amount in dispute in a writ petition or other civil proceeding other than an appeal against a money decree (where ordinarily no stay of execution is ever granted) and dispensing with a statutory condition requiring a deposit of the disputed amount as a condition precedent for hearing an appeal is obvious. In the former, the writ petition or other civil proceeding is maintainable regardless of a stay upon recovery. An order of stay may, however, be made if the circumstances warrant. Ordinarily, a stay is granted if there is a prima facie case for the petitioner, or the balance of convenience is in favour of the grant of stay and no prejudice to the respondent is likely to be caused in the matter of recovery, in case the writ petition or other civil proceeding is ultimately dismissed. Even in such a case, the order of stay upon recovery of the disputed amount may be conditional to secure the interests of the respondent. In the latter case, however, the maintainability of the appeal itself is conditional upon a deposit of the disputed amount, unless it is dispensed with in an exercise of discretion by the appellate authority. While the right of appeal is not unfettered, the removal of the clog on the right of appeal is equally not left to the unguided requirement of deposit as a condition precedent for the maintainability of an appeal. To put it differently, if the identical criteria were applicable, where is the need for a statutory provision requiring a deposit to be made as a condition precedent for the hearing of the appeal--a deposit that can be dispensed with only for "undue hardship" means, precisely, any or all of the criteria for the grant of stay by an interlocutory order in a proceeding otherwise maintainable, where was the need to prescribe that as the only relevant consideration, even more so, when the Tribunal has, indisputably, ancillary or incidental power to grant stay in appropriate cases? Income Tax officer, Cannanore v. Mohd. Kunhi [1969] 71 ITR 822 : AIR 1969 SC 430. A legislative provision is not a superrogation. It cannot be reduced to a mere exercise in futility by a construction, to mean exactly what could have been even without that provision.
(D) Again "in interpreting an Act of Parliament, you are entitled, and in many cases bound to look to the state of the law at the date of passing the Act; not only the common law but the law as it then stood under previous statutes, in order properly to interpret the statute in question" (Fletcher Moulton L.G. enunciating the rule in Macmillan v. Dent (1907) 1 Ch 107, 120--extracted in Craies on Statute Law--Seventh Edition--1971). It [is] too much to presume that the reasons for prescribing deposit statutorily as a condition precedent for the hearing of the appeal--a deposit that can be dispensed with, if it would cause undue hardship--are, perhaps, identical with those that prompted the Hon'ble Supreme Court in the Dunlop case to deprecate the indiscriminate grant of stay in revenue matters in writ and other civil proceedings? If this were so, are we justified in construing an expression in the statute to mean and imply nothing but a consideration of such aspects that would have been germane prior to the enactment of Section 128E of the Act in the grant of stay in a writ or other civil proceeding--the existence of a prima facie case--balance of convenience et al?
10. It was for the aforesaid reasons, amongst others, that we had held in the cases , and that such aspects of the case as may be relevant for the grant of stay of recovery, by means of an interlocutory order in an appeal are not germane for a consideration of the question of fulfilment of condition relatable to the maintain ability of the appeal itself. This apart, in our opinion,
(a) If the existence of a prima facia case or prejudice in themselves cannot justify the grant of a stay order in a writ petition under article 226 of the Constitution the Dunlop case, they lose all relevance in the context of a mandatory requirement of a deposit statutorily prescribed as a condition precedent for maintainability of an appeal;
(b) In the context in which it occurs, "undue hardship" is inextricably linked to the mandatory deposit and cannot be any hardship unrelatable to the deposit or the pecuniary difficulties in making the deposit;
(c) If, on the contrary, existence of a prima facie case or the balance of convenience are the factors to be taken into consideration for dispensing with the deposit, nothing prevented the legislature from enacting to that effect straightaway rather than resort to an expression of an obscure import to convey its meaning. One cannot, however, read those factors into the expression "undue hardship" in the context in which it occurs, in the absence of a clear legislative intent to include them within the ambit of the said expression.
11. In terms of Section 35F of the Act, what is it to be dispensed with and why? It is the deposit of the duty demanded or penalty levied, if in the opinion of the Tribunal, The deposit of duty demanded or penalty levied would cause undue hardship.
Undue hardship is the result of a deposit and has a nexus with it. It is often "fallacious in considering the meaning of a phrase consisting of two words (like e.g. unfair competition) to find a meaning which each has separately and then infer that the two together cover the combination so arrived at" (Maxwell). The two together, as here, have acquired, in the context in which they occur a special meaning of their own. The separate meanings given in Black's Law Dictionary to the words "undue" (P. 1370--5th Edition, 1979) and "hardship" or in other law lexicons cited and relied upon for the applicants in inviting us to read both of them together cannot be the meaning of both the words together in the context in which they occur. The meaning given to "undue hardship" in Stroud's Judicial Dictionary (Fourth Edition, 1974, p. 2863) is more in point.
For a hardship to be 'undue' it must be shown in my opinion, that the particular burden to the applicants to have to observe is out of proportion to the nature of the requirement itself and benefit which the applicants would derive from compliance with it." (Per O'Bryan, J in the Re Walsh (1944 VLR 147, 153).
The burden, in terms of Section 35F of the Act is the deposit of duty or penalty, (as the case may be) demanded. The requirement of deposit is in the nature of an insurance against any possibility whatsoever that' may delay or defeat or frustrate any attempt at recovery thereof, notwithstanding the ultimate success of the respondent (the revenue) in the appeal before the Collector (Appeals) or the Appellate Tribunal, as the case may be. The benefit derived is that the appeal becomes maintainable, is heard in due course and may even be decided in favour of the applicants. If the burden on the applicants in compliance with the requirement of deposit outweighs the nature of the requirement (namely, the necessity of insuring recovery of the duty or penalty demanded) as well as the benefit which the applicants would derive from compliance with it (namely, the maintainability of the appeal and ultimate success therein) then it is, that undue hardship is caused to the applicants. Such will, obviously, be the case only if the immediate pecuniary condition of the applicants is such that, regardless of insuring recovery of duty or penalty and prospect of eventual success in the appeal, the deposit cannot be insisted upon. At any rate, the burden in compliance with the requirement of deposit outweighs the eventual prospect of success in the appeal, i.e., existence of prima facie case. If this were so, the burden cannot mean what it outweighs, namely the prima facie case.
12. Nor can the reliance upon (Sterling General Insurance Co. v. Planters Airways Pvt. Ltd.) avail the applicants seeing that the expression "undue hardhip" construed therein is in a different context altogether. It was in the construction of Section 37(4) of the Arbitration Act that the Supreme Court had to consider the meaning of the aforesaid expression. The time within which certain steps had to be taken as a prelude to the commencement of arbitration could be extended by the Court in terms of the aforesaid provision if in the circumstances of the case the Court is of opinion that refusal to do so would cause undue hardship to the applicants. "The time limit clauses used to operate most unjustly on claimants for they found their claims barred by some oversight and it was to avoid that injustice that the legislature intervened so as to enable the Courts to extend time whenever 'in the circumstances of the case, undue hardship would otherwise be caused'."
13. Relying upon the later trend in English decisions in the construction of the aforesaid expression their Lordships of the Supreme Court held that undue hardship meant unmerited hardship disproportionate to the conduct of the claimant. As already observed, however, in the context in which the expression occurred in Section 35F of the Act undue hardship is relatable to the hardship in making the deposit only and no other consideration can have any relevance to it.
14. The penalty is not one levied under Rule 226 only, but under Rule 173Q as well. The contention that the penalty exceeds the limit prescribed in Rule 226 is without substance.
15. Even if the bank guarantee is still subsisting, it is important to remember, firstly, that it was primarily to secure the fine in lieu of confiscation rather than the penalty. The applicants had, at his instance, the benefit of the release of the confiscated goods on furnishing a bank guarantee instead of having to pay the same in cash. If the fine is paid at least now long after the goods were released, the guarantee can be discharged. Secondly, we have to be satisfied, in the first instance that the deposit, if insisted upon, would cause undue hardship to the applicants. It is then that we can consider to what extent the balance of convenience vis-a-vis the interests of the revenue are ensured. There is no question of balance of convenience unless the deposit would cause undue hardship. This is apart from the fact that in matters of revenue the balance of convenience is more often than not in favour of the revenue. If the applicants succeed the amount deposited can always be refunded. If the applicants fail, however, the recovery of the amount would not be prejudiced. Again, if the deposit is made the guarantee can always be discharged and terminated if at all it covers the penalty as well (the guarantee was not produced before us). A deposit and a guarantee for the payment of the amount deposited need not and cannot co-exist. The delay in communication of the order-in-adjudication was in reality to the advantage of the applicants who cannot, in the circumstances, complain of it. Order No. 306/Cal/85-2585 dated 8th July, 1985 of my learned brother dispensing with the deposit of a sum of Rs. 1,000 demanded towards penalty turns on its own facts and in any view the various decisions adverted to hearinbefore of the Tribunal do not appear to have been brought to his notice.
16. While it may be that a penalty imposed may not be allowed as a deduction in the computation of the total income assessable to income tax AIR 1961 SC 663--Haji Aziz v. C.I.T. this, by itself, does not mean that payment of such penalty in compliance with the order of quasi-judicial authority is per se a hardship, much less an undue hardship. If this were so. the statutory requirement of deposit of the duty or penalty, as the case may be, in terms of Section 35F of the Act will be rendered altogether nugatory in every case. One can hardly be heard to say that since payment of penalty in compliance with a quasi-judicial order adds to the burden of income tax, a deposit thereof will cause undue hardship to oneself.
17. For the reasons aforesaid we cannot hold that the deposit of Rs. 50 thousand towards penalty would cause any undue hardship to the applicants and accordingly we cannot accede to the prayer for dispensing with it. Nor can we restrain the respondent from appropriation of the bank guarantee furnished towards the fine in lieu of confiscation seeing that the goods had already been taken away by the applicants and the payment of the fine in lieu of confiscation is long overdue. This is apart from the fact that Section 35F does not speak of dispensing with payment of such fine in lieu of confiscation. The payment of a fine is optional and not mandatory. And any order touching the payment of such fine tantamounts to deciding on the legality of the confiscation itself. It is premature to decide that issue now.
18. In the premises the application is dismissed.
S.K. Bhatnagar, Member
1. With due respect to learned Member (Judicial), I am unable to agree with his observations, interpretation and the conclusion.
2. I observe that in Section 35F of the Central Excise Act, 1944 the crucial words are "undue hardship"; and "undue" means "not due owing: unjustifiable; inappropriate: excessive" (Chambers Twentieth Century Dictionary, 1982 Edition). Therefore, it is necessary to see whether in view of the facts and circumstances [as] a whole, the impugned order was unjustified, unfair or inappropriate on the face of it; whether an error apparent had crept in and the order was palpably wrong or it has apparently led to blatant miscarriage of justice or irreparable injury was likely to be caused. It is important to note in this connection that Section 35F does not speak of financial hardship or even undue financial hardship, but merely that of undue hardship and according to Maxwell "On the Interpretation of Statutes" (12th Edition) the primary rule is that of literal construction. To quote Maxwell--
The first and most elementary rule of construction is that it is to be assumed that the words and phrases of technical legislation are used in their technical meaning if they have acquired one, and otherwise in their ordinary meaning and the second is that the phrases and sentences are to be construed according to the rules of grammar. 'The length and detail of modern legislation,' wrote Lord Evershed M.R., 'has undoubtedly reinforced the claim of literal construction as the only safe rule'. If there is nothing to modify, alter or qualify the language which the statute contains, it must be construed in the ordinary and natural meaning of the words and sentences. The safe and more correct course of dealing with a question of construction is to take the words themselves and arrive if possible at their meaning without, in the first instance, reference 50 cases.
The rule of construction is "to intend the legislature to have meant that they have actually expressed". The object of all interpretation is to discover the intention of Parliament, "but the intention of Parliament must be deduced from the language used", for "it is well accepted that the beliefs and assumptions of those who frame Acts of Parliament cannot make the law."
Maxwell goes on to say that:
Omissions not to be inferred:
It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said: 'It is a strong thing to read into an Act of Parliament words which are not there and in the absence of clear necessity it is a wrong thing to do.''We are not entitled', said Lord Loreburn L.C. 'to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself.
3. From this it is apparent that the Tribunal is not competent to add or interpolate the word--'"financial"--in Section 35F and the word undue hardship--should be given its normal and ordinary or natural meaning in which it is, generally, understood. Therefore, it would be incorrect to grant stay merely because an applicant is able to show that financially his position was not sound at a given moment of time and equally incorrect to refuse stay merely on the ground that his financial position was not bad. In fact, undue hardship can only be judged with reference to the context provided by the facts and circumstances of the case as a whole and the relevant provisions of law. The financial position is and can only be one of the considerations and not the only consideration in deciding whether the prayer of the applicant was justified or unjustified.
4. This is apparent from the case of Assistant Collector of Central Excise, West Bengal v. Dunlop India Ltd. and Ors. [1985] 4 ECC 103 (SC) : (1985) 19 ELT 22 (SC), page 23 in which the Hon'ble Court has observed, inter alia,--
There are, of course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the Court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of public interest. There are many such factors worthy of consideration.
5. Clearly, the lesson to be drawn from Supreme Court judgment case is that an interim order should not be based merely on consideration of one factor only and where a host of considerations are involved all the relevant factors should be borne in mind.
6. Insofar as the Spencer's case is concerned, it is apparent that the copy of the Supreme Court's order produced by the applicant's representative, was authentic but contained an error apparent on the face of the record, which the Hon'ble Supreme Court had itself corrected subsequently by issue of a clarification vide order dated 30-10-1984. The learned representative of the applicant had shown the earlier order (dated 25-10-1984) but regretted the mistake when the correct position became known. Under the circumstances, he deserves to be given benefit of doubt and I do not consider it a case of deliberate attempt to mislead the Court.
7. The correct order of the Supreme Court as apparent from the record of proceedings of that case shows that the Hon'ble Supreme Court had observed that--
We are in agreement with the contention of the learned Counsel for the petitioner that the expression 'undue hardship' occurring in the proviso to Section 35F of the Central Excises Salt Act, 1944 would include consideration, inter alia, of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that aspect has been completely ignored as was contended by counsel. With these observations, the special leave petition is dismissed.
8. Here, in my view, it is significant that their Lordships of the Supreme Court have used the words "include" and "inter alia". In other words, the liquidity aspect is only one of the various aspects which are required to be taken into account while considering a stay application or prayer for waiver of pre-deposit under Section 35F of the Central Excises & Salt Act, 1944, and to my mind, the judgment in the case of Dunlop India, can, in fact, be viewed as an elaboration of this theme.
9. Indeed the Tribunal, itself, has already come round to the view that it is proper and fair to keep the position disclosed by a prima facie case and other relevant factors in mind while passing appropriate orders in matters in which waiver of pre-deposit has been prayed for, as evident from the Stay No. ED(SB)/ 1050/84-B in Appeal No. 2841/84-B in the case of Bata India Ltd., 24 Parganas v. Collector of Central Excise, Calcutta (Stay Order No. 161-85-B). A reading of this order shows that it is not the financial position of the company but the admitted facts of the case which obviously led the Tribunal to grant conditional stay.
10. That apart, the High Court of Calcutta has in its order passed on April 4, 1985 in the case of American Refrigerator Co. Ltd. set aside an order of the Tribunal and remanded the case on the ground that CEGAT had erred inas much as it had not taken all the relevant facts and circumstances into account. To quote the Hon'ble High Court--
It appears that there are errors of law apparent on the face of the order of the Tribunal inasmuch as the Tribunal rejected the application without taking into consideration the relevant facts and circumstances of the case.
Hon'ble High Court went on observing that--
The Tribunal in granting exemption is bound to take into consideration the prima facie case made out by the petitioner as also the interests of the revenue which is substantially secured by the offer made by the petitioner
11. It is noteworthy that the judgment of the Hon'ble Calcutta High Court cited above was passed with reference to Section 35F of Central Excises & Salt Act and was announced much after the Supreme Court's order in the Dunlop India case. It confirms the view that the judgment in the Dunlop India case does not bar consideration of the prima facie of the case and the Tribunal was, in fact, bound to take into account the prima facie case as well as other relevant aspects.
12. The belief that a correct interpretation of Section 35F allows considera tions of factors other than financial hardship, is further strengthened by the Tribunal's 3-Member Bench-Special Bench A's Order in the case of Sonodyne Television Co. v. Collector of Central Excise, Calcutta (1985) 22 ELT 582 (Tribunal). In this case, Hon'ble President Justice F.S. Gill has observed, inter alia, that--
We have also to take into account the balance of convenience before a stay is granted. The amount of substantial mischief, which would be caused to the applicants, if stay is declined, has to be weighed with the injury as would be caused to the revenue if the same is granted."
"In the present case, the ground of limitation is a factor which cannot be lost sight of and at the same time the assets of the petitioners are also not as bad as is depicted."
"After considering all aspects of the matter, we do not think it would be proper to ask the petitioner-company to deposit the entire duty and penalty amounts.
13. In fact, an overemphasis on financial aspect or consideration of financial aspect alone can by itself lead to undue hardship and indeed injustice and situations are conceivable where want of consideration of other factors can lead to irreparable injury.
14. The Hon'ble High Court of Calcutta has also deprecated the tendency of proceeding in stay matters mechanically and on technical grounds.
15. Indeed, whichever way we may look at it, from the point of view of construction of Section 35F or from the point of view of criteria required to be kept in mind while considering stay applications in exercise of inherent powers, it is the totality of facts and circumstances which is required to be kept in view to enable us to arrive at a just and fair order.
16. Applying this principle to the instant case, I find that the applicant has been able to show that there was a prima facie case in his favour, inasmuch as, interestingly, the Collector has himself observed, inter alia, that--
As such, I do not find any mala fide intention on the part of the employees of the said company in giving approximate value .." (para 17) "In the light of what has been stated above, I hold that except for non-accountal of goods, the various other charges levelled against the company are not conclusively proved. (Para 18)
17. In other words, according to department's own case, no mala fides were involved, and the matter was not as serious as originally thought of.
18. Therefore, on the face of it, the applicant's plea that appropriation of an amount of Rs. 1 lakh towards the value of goods and imposition of a penalty of Rs. 50,000 is disproportionate appears to have some force.
19. Further, an irreparable injury has apparently been caused to the applicants by the mere fact that a bank guarantee for an amount of Rs. 1,91,727 taken from them, has remained in force" since 23-4-1980 [and this amount is more than the total of fine and penalty adjudged by Collector].
20. There are apparent inconsistencies also in the order of the Collector and the fact that the date of the order in original has been shown as 5-2-1983/22-10-1984, has not missed our eye; but this is not the stage to go into details; It is sufficient to observe that looking into the above facts and circumstances as a whole, it will be unfair to insist on the applicant's depositing the entire amount of penalty and in refusing to grant a stay of the order of appropriation.
21. There is apparently no risk to revenue and public interest is not likely to suffer by grant of stay. On the other hand, the applicant will suffer undue hardship if the prayer is not granted. Therefore, the balance of convenience is also in the favour of the applicant.
22. Hence, keeping in mind the observations of the Hon'ble Supreme Court and the Hon'ble Calcutta High Court and the learned President of the Tribunal in the cases cited above, I grant a stay of the operation of the order of the Collector and direct that--
i) the Collector should not appropriate any amount from the bank guarantee during the pendency of the appeal;
ii) Pre-deposit of the penalty is waived provided the applicant deposits Rs. 12,000 (Rupees twelve thousand only) in cash within a month of receipt of the order;
subject to the applicant's giving an undertaking to the Collector to the effect that the bank guarantee for Rs. 1,91,727 will remain in force till the disposal of the appeal.
28-5-1986 Harish Chhndek, Member
1. I have perused the order dictated by my learned Brothers Shri M. Gouri Shankar Murthy, Member (judicial) and Shri S.K. Bhatnagar, Member (Technical). Both the learned Brothers have expressed their view points at length.
2. Shri S.P. Kampani, the learned consultant with Shri Gurbaxani, has appeared on behalf of the applicants. He has briefly stated the facts of the case and has stated that the applicants manufacture the goods as per orders of the purchasers. In fact the items in dispute can be said to be custom built or tailor made. Shri Kampani, the learned consultant, has referred to the adjudication order and has argued that there is technical offence, as the applicant did not make proper entries in RG-1 Register, and these entries were not made because of the fact that the goods were not ready for despatch. The learned consultant has relied on learned Brother Shri S. K. Bhatnagar, Member (Technical)'s order and has further argued that the pre-deposit of Rs. 12,000 (Rupees twelve thousand only) as ordered by Shri S.K. Bhatnagar, Member (T) should also be dispensed with. He has pleaded that the penalty of Rs. 50,000 (Rupees fifty thousand only) is highly excessive. On behalf of the appellant Shri Gurbaxani has referred to the judgment of the Hon'ble Supreme Court in the case of M/s. Spencer & Ltd., Madras v. Collector of Central Excise, Madras vide petition for special leave to appeal No. 7762 of 1984. He has pleaded that the word "include" should be considered in a broad sense and exhaustive meaning should be given. He has referred to the judgment of the Allahabad High Court in the case of Commissioner of Sales Tax, U.P. v. Chawla Stores reported in [1977] 40 STC 57. He has referred to another judgment of the Hon. Allahabad High Court in the case of Commissioner of Sales Tax, U.P. v. Madan and Sons reported in [1979] 48 STC 207 wherein the Hon. High Court had held that the word "including" in the entry indicates that the various items specified after the word "including" do not exhaust the category of items, which are comprised in arms. Lastly, he has referred to judgment of the Madras High Court in the case of Commissioner of Income Tax, Madras v. I.G. Mackintosh and Anr. wherein the Hon. High Court had held that, Normally, the word 'include' is employed by Parliament and legislatures in defining words for the purpose of enlarging the meaning of the ordinary words or clearing any doubt that might arise in understanding the same. Therefore, the courts generally interpret it as enlarging the meaning of the words, and do not restrict the meaning to the particular words that follow in the inclusive part of the definition unless the context otherwise merits.
Shri Gurbaxani has stated that in the case of Spencer & Co. v. Collector of Central Excise, Madras the Hon. Supreme Court had used the words "would include consideration, inter alia, of the aspect of liquidity possessed by the assessee". He has pleaded that the word "includes" should be understood in a proper sense. Shri Gurbaxani has referred to the provisions of Section 35F of the Central Excises and Salt Act, 1944. He has pleaded that "undue hardship" includes not only the financial hardship but prima facie the case of the applicants too. He has referred to the judgment of the Tribunal in the case of Bata India Ltd. v. Collector of Central Excise Calcutta, reported in (1986) 23 ELT 234 where the Tribunal had held that while disposing of an application for dispensing with deposit of duty or for stay not only financial hardship, but other relevant factors like merits of the case should be gone through and prima facie case looked into. He has pleaded that the applicants had executed a bank guarantee which is valid up to 22-4-1987. He has referred to another judgment of the Hon. Supreme Court in the case of Sterling General Insurance Co. Ltd. v. Planters Airways Pvt. Ltd. reported in AIR 1975 SC 415 where the Hon. Supreme Court had held that in interpreting Section 37(4) of the Indian Arbitration Act, 1940 the Court has to take a liberal view of the word "undue hardship". "Undue" must mean something such is not merited by the conduct of the claimant or is very much disproportionate to it. Shri Gurbaxani states that the order passed by learned Member (Technical) is correct in law.
3. Shri P.C. Jain, the learned JDR, has referred to the provisions of Section 35F. He has pleaded that undue hardship is only confined to financial hardship. He has relied on the order passed by learned Brother Shri M. Gouri Shankar Murthy. He has referred to the judgment of the Tribunal in the case of R.K. Containers and Steel Fabricators v. Collector of Central Excise & Customs, Baroda reported in [1987] 14 ECC-T 451 : (1986) 7 ECR 109, where the Tribunal had held that undue hardship is the only relevant consideration for dispensing with the mandatory deposit which is a condition precedent for the maintainability of an appeal; therefore a prima facie case which is a criterion applicable for grant of a stay in an otherwise maintainable appeal is of no relevance. Shri Jain, the learned JDR, has pleaded for the rejection of the stay application.
4. Shri Gurbaxani in reply has argued that in the case of R. K. Containers & Steel Fabricators v. Collector of Central Excise & Customs, Baroda reported in [1987] 14 ECC-T 451 : (1986) 7 ECR 109 the learned Member (Judicial) Shri M. Gouri Shankar Murthy is a party to the said judgment and as such no cognizance should be taken of it.
5. After hearing both the sides and going through the facts and circumstances of the case. I would like to observe that the applicants have solely based their plea for dispensing with the pre-deposit of the penalty amount at Rs. 50,000 on the ground of prima facie case. Para. Nos. 1 and 2 of the stay application are reproduced below:--
1. A perusal of the Appeal Memo will itself prima facie convince the Hon'ble Tribunal that this is not a case warranting imposition of fine in lieu of confiscation and/or penalty since the offence, if at all is venial in nature and the only charge being upheld by the adjudicating authority is non-accountal in R.G. 1 Register. Hence the order of the Collector appealed against is liable to be set aside to the extent it imposes fine/penalty.
2. The recovery of fine/penalty will cause the applicants undue hardship in view of present stringent economic conditions.
6. In support of the stay application the applicants have not attached any paper as to their financial position. The Hon. Supreme Court in the case of Spencer and Company, Madras v. Union of India had observed as under:--
We are in agreement with the contention of the counsel for the petitioner that the expression 'undue hardship' occurring in the proviso to Section 36.F of the Central Excises and Salt Act, 1944, would include consideration, inter alia, of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that aspect has been completely ignored as was contended by the counsel. With these observations, the Special Leave Petition is dismissed.
7. The Hon'ble Supreme Court in the case of Assistant Collector of Central Excise v. Dunlop of India Ltd. , has held that--
No counter has, however, been filed. Shri F.S. Nariman, learned Counsel, however appeared for the respondent. We do not have the slightest doubt that the orders of the learned single Judge as well as Division Bench are wholly unsustainable and should never have been made. Even assuming that the company had established a prima facie case, about which we do not express any opinion, we do not think that it was sufficient justification for granting the interim orders as was done by the High Court. There was no question of any balance of convenience being in favour of the respondent-company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere bank guarantees. We notice that very often some Courts act as if furnishing a bank guarantee would meet the ends of justice. No governmental business or for that matter no business of any kind can be run on mere bank guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance" to realise that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest. We are very sorry to remark that these considerations have not been borne in mind by the High Court and interim order of this magnitude had been granted for the mere asking. The appeal is allowed with costs.
8. The Tribunal in the case of R.K. Containers & Steel Fabricatore v. Collector of Central Excise and Customs reported in [1987] 14 ECC-T 451 : (1986) 7 ECR 199 (CEGAT) has held that "undue hardship" is the only relevant consideration for dispensing with the mandatory deposit which is a condition precedent for the maintainability of an appeal; therefore a prima facie case which is a criterion applicable for grant of stay in an otherwise maintainable appeal is of no relevance. Para. No. 4(e), (f), (g) are reproduced as under:--
(e) The distinction between grant of a stay of recovery of an amount in dispute in a proceeding, which is otherwise maintainable, and dispensing with a statutory condition requiring a deposit of the disputed amount, as a condition precedent for hearing an appeal, is obvious. In the one case, the proceeding is maintainable, regardless of an interlocutory stay upon recovery, which may be granted aliunde in exercise of incidental or ancillary powers. In the other, maintainability of the appeal itself is conditional upon a deposit of the disputed amount, unless it is dispensed with. This being so, the criteria applicable for the grant of a stay by an interlocutory order, in a proceeding otherwise maintainable, cannot be applicable to the exercise of discretion, statutorily circumscribed in terms of Section 35F, for dispensing with the mandatory requirement of deposit as a condition precedent for the maintainability of the appeal itself. Were it not so, Section 35F need not have been enacted, seeing that in every appeal, stay could be grated in exercise of the ancillary or incidental powers of the Tribunal, when there exists a good prima facie case a it is in the interests of balance of convenience, etc. The statutory provision in Section 35F cannot be interpreted so as to import all such considerations as may be relevant in the grant of stay upon recovery into dispensing with the deposit in terms of Section 35F. If "undue hardship" means precisely any or all the cirteria for the grant of slay by an interlocutory order in a proceeding otherwise maintainable, where was the need to prescribe that as the only relevant consideration, even more so when the Tribunal has, indisputably, ancillary and incidental powers to grant stay in an appropriate case?
(f) In the context in which it occurs, "undue hardship" is inextricably linked to the mandatory deposit and, therefore, it cannot be any hardship unrentable to the deposit or the pecuniary difficulties in making the deposit, since it is the deposit of the duty demanded or penalty levied would cause undue hardship.
(g) In the premises we are not inclined to hold that we have to look into the existence of a prima facie case in a consideration of 'undue hardship' in terms of Section 35F of the Act.
9. In view of the Hon'ble Supreme Court's judgment in the case of Spencer and Co, Ltd. Madras v. Union of India, I am of the view that liquidity of the applicant is very relevant. There may be a situtation that the applicant's financial position is not good and prima facie he has got no case. If the Court has to take a view in granting the stay about prima facie case, then the applicants will loose the right of the hearing of appeal on merits and their appeal will be rejected for non-compliance of the provisions of Section 35F of the Central Excises and Salt Act, 1944.
10. In view of the aforesaid discussion I hold that "undue hardship" occurring in proviso to Section 35F of the Central Excises and Salt Act, 1944 would include a consideration of immediate pecuniary hardship only. Accordingly I hold that the deposit of Rs, 50,000 (Rupees fifty thousand only) towards penalty would not cause any undue hardship to the applicant. In view of the above discussion I agree with the conclusion of any learned Brother Shri M. Gouri Shankar Murthy, Judicial Member. In the result the stay application is dismissed.
11. The matter will now go to the East Regional Bench, Calcutta for passing order in accordance with Sub-section (1) of Section 35D of the Central Excises and Salt Act, 1944 read with Sub-section (5) of Section 129C of the Customs Act, 1962.
By the Bench.
Following the majority decision the request for waiver of the pre-deposit is rejected.
The application is dismissed.