Customs, Excise and Gold Tribunal - Delhi
R.K. Containers And Steel Fabricators vs Collector Of Central Excise And Customs on 6 February, 1986
Equivalent citations: 1987(14)ECC451, 1986(7)ECR109(TRI.-DELHI), 1986(24)ELT400(TRI-DEL)
ORDER
M. Gouri Shankar Murthy, Member (Judicial)
1. This is an application under Section 35F of the Central. Excises and Salt Act, 1944 ("the Act" for short) for dispensing with a deposit in a sum of Rs. 1,45,301.69 p. demanded towards duty, Rs. 25000/- towards penalty and for consequential relief, implying, perhaps, stay upon recovery.
2. Originally, the demand in respect of duty was in a sum of Rs. 1,65,301.61, out of which an amount of Rs. 20,000/-was already deposited. The amount still outstanding is, hence, in a sum of Rs. 1,45,301.69 towards duty only.
3. In the course of the submissions before us, the learned advocate, Shri M.L. Lahoty submitted inter alia that-
(a) the applicant had a good case on merits;
(b) the insistence on a deposit of the balance amount of duty and the penalty in full will cause undue hardship to the applicant.
4(a). On a question as to whether we could decide the issue of prior deposit, in terms of Section 35F of the Act at this stage on the existence of a prima facie case, the learned counsel invited our attention to para 6 of the decision of the Allahabad High Court in 1985 (20) E.L.T. 243 [U.P. Lamination v. Union of India] and submitted that we have, necessarily, to go into the existence of a prima fade case in consideration of an application under Section 35F.
(b). It would be straightaway observed from a perusal of the said decision that it was contended for the Revenue in a Writ Petition that the Hon'ble High Court had ceased to have any jurisdiction to grant interim orders in view of the Supreme Court's decision in the Dunlop case [Assistant Collector of Central Excise v. Dunlop India Ltd.]-(1985) 1 S.C.C. 260=1985 (19) E.L.T. 22]. It was this contention that was repelled and it was held that in the exercise of its extraordinary jurisdiction under Article 226 the courts have not ceased to have jurisdiction to grant interim orders in view of the ratio of the aforesaid Dunlop case. As observed by the Hon'ble Court, "the only declaration of law which can be said to be binding in respect of interim orders is that it is not only the prima facie case on which an interim order should be granted in taxation matters but the court must further consider if there was balance of convenience in favour of the petitioners" in Civil proceedings. In so far as Section 35F of the Central Excises and Salt Act (=Section 128E of the Customs Act, 1962) was concerned,-
1) it was round, for a fact, that the Tribunal had indeed considered the undue hardship in making the deposit and dispensed with the deposit of the entire amount demanded provided that 25% of the duty demanded is deposited and a bank guarantee was furnished for the balance ;
(ii) on a writ petition filed, the High Court held that the Tribunal had not considered the refusal of the Bank and directed the Tribunal to reconsider the application for modifying its earlier order keeping in view the fact that the State Bank of India would not furnish a guarantee unless cash is deposited ;
(iii) the Tribunal held that it did not see any reason to modify its earlier order on the ground that although the petitioner had shown losses in the balance-sheet, an amount of Rs. 5,72,000/- shown as sundry debts was not explained and the petitioner had failed to show that if the State Bank of India was insisting upon a cash deposit, the petitioner had approached any other Bank;
(iv) the petitioner once again filed another writ petition which was disposed of by directing him to approach the Tribunal once again and place the relevant material to establish if there were any assets available with him ;
(v) in pursuance of the order of the Hon'ble High Court the petitioner filed another application, disclosing certain facts to prove the petitioner's inability to comply with the order of the Tribunal requiring a deposit to be made and a guarantee to be furnished ;
(vi) no counter affidavit was filed by the Department;
(vii) the Tribunal, however, relying upon the aforesaid Dunlop case again held that sufficient sympathy has been shown to the petitioner and it was not possible to grant any more indulgence ;
(viii) the High Court held that the allegations in the affidavit that the petitioner had no assets from which he could deposit 25% or could furnish a guarantee stood un-rebutted and further observed that the Tribunal obviously did not "appreciate the import of the words 'undue hardship' to the applicant occurring in the proviso to Section 35F. Nor was there any finding in the order as to what would happen if the interim order is not granted in favour of the petitioner. It was further observed that in the absence of any finding on undue hardship, the exercise of discretion by the Tribunal is obviously erroneous. On the facts stated, the High Court was of the view that in case an interim order is not granted then the entire business which is on a small scale would come to a stand-still and consequently the High Court thought it to be a fit case where the power under Article 226 could be exercised on the principles laid down by the Supreme Court in the Dunlop case.
(c) The question as to whether the existence of a prima facie case is of any relevance whatsoever in a construction of the proviso to Section 3 5F had been considered by us in quite a few cases and in particular in our decisions reported in-
(i) 1985 (20) E.L.T. 384 [Brima Sugar Ltd. v. Collector of Central Excise];
(ii) 1985 (21) E.L.T. 558 [Modi Gas and Chemicals Ltd. v. Collector of Central Excise, Meerut] ; and
(iii) 1985 (21) E.L.T. 704 [Parasmal Solanki v. Collector of Customs}. The aforesaid decisions are binding on us and cannot be departed from.
(d) Apart from the aforesaid cases, in the case of Spencer & Co. Ltd., as well (Order No. 368/1984-A dated 29-5-1984) we refrained from going into the existence of a good case prima facie for the applicant as well as prejudice in case the deposit was not dispensed with, seeing that the applicant was affluent enough to deposit the amount demanded and consequently the deposit thereof would not cause any undue hardship to the applicant. An application for Special Leave under Article 136 of the Constitution of India was dismissed by the Hon'ble Supreme Court with the observations-
"We are in agreement with the contention of the Counsel for the Petitioner that the expression 'undue hardship' occurring in the proviso to S. 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 aspect has been completely ignored as was contended by the Counsel. With these observations, the Special Leave Petition is dismissed".
It will be observed straightaway that our refusal to consider the existence of a prima facie case or the prejudice that may be caused to the applicant if the deposit were not dispensed with and our insistence upon a scrutiny of the financial capacity of the applicant in a consideration of undue hardship did not result in the grant of Special Leave to appeal, as it would have, if our construction of the aforesaid expression was wrong.
(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 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 S. 35F, for dispensing with the mandatory requirement of deposit as a condition precedent for the maintainability of the appeal itself.
Were it not so, S. 35F need have been enacted, seeing that in every appeal, stay could be granted in exercise of the ancillary or incidental powers of the Tribunal, when there exists a good prima facie case or it is in the interests of balance of convenience, etc. The statutory provision in S. 35F cannot be interpreted so as to import all considerations as may be relevant in the grant of stay upon recovery into dispensing with the deposit in terms of S. 35F. If 'undue hardship' means precisely any or all 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 and incidental powers to giant 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 un-relatable 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 S. 35F of the Act.
5. The applicant is admittedly a partnership firm. In the application for dispensing with the deposit it was alleged that the applicant is a small scale unit and it would be extremely difficult to raise the balance amount of duty and penalty demanded, and if required to deposit the same, the applicant will have to close down the establishment. The applicant is, however, prepared to furnish a bank guarantee for the amount still remaining due. In support of his plea that the deposit of the amount of duty still due and the penalty would cause undue hardship, the learned counsel had invited our attention to the Balance Sheets of the applicant for the years ending on 31-12-1983 and 31-12-1984. A perusal thereof would reveal that the applicant had suffered losses for both the years ending on 31-12-1983 and 31-12-1984. The liquidity of the applicant [meaning net working capital-(1983) 4 S.C.C. 392 (C.I.T. v. Mahindra & Mahindra)] does not appear to be such that it could be said that the deposit of the full amounts still due would not cause undue hardship to the applicant.
6. Taking all the aspects into account we hereby direct the applicant shall deposit an amount of Rs. 25,000/- towards duty and furnish a bank guarantee for the remaining outstanding amount to the satisfaction of the concerned Collector within four weeks from the date of communication of this order, failing which this order shall automatically stand vacated and the entire amount yet remaining due shall become payable. Subject to the compliance with our aforesaid order there shall be a stay on the recovery of the amount demanded and required to be deposited.
7. Order accordingly.