Calcutta High Court
Tata Iron And Steel Co. Ltd. vs Commr. (Appeals), C. Ex. on 19 June, 1997
Equivalent citations: 1998(98)ELT350(CAL)
ORDER Vinod Kumar Gupta, J.
1. The order dated 27-5-1997 passed by the respondent No. 1 has been challenged by the petitioner primarily on the ground that this respondent did not take into account all the relevant factors while disposing of the petitioner's prayer for dispensing with the requirements of pre-deposit of the amount of the duty of the Central Excise in the seven appeals filed by the petitioner before him. It is on the following main consideration that the respondent No. 1 has declined to dispense with the pre-deposit of the amount of duty :
"The ground that the appellant has a strong case is urged by every appellant and that is the reason why, based on their belief, they file an appeal. It is not a ground sufficient enough to grant waiver of pre-deposit unless, in addition, the appellant is able to establish that pre-deposit would cause undue hardship to them."
2. During the course of hearing today, the parties agreed that this petition may be finally disposed of today itself without inviting the respondents to file the affidavit-in-opposition. Since, however, the affidavit-in-op-position has not been filed, as I observed, that none of the allegations in the writ petition shall be deemed to have been admitted by the respondents.
3. Chapter VIA of the Central Excises and Salt Act, 1944, relates to the appeals by persons aggrieved by any decision or orders passed under the Act by a Central Excise officer. Section 35 of the Act contained in Ch. VIA gives right to such a person to file an appeal before the Commissioner (Appeals), Central Excise. Various procedural aspects relating to the filing of the appeal are contained in Section 35 and in the sections following Section 35. Section 35F, however, relates to the requirement of the appellant depositing with the adjudicating authority the amount of duty of the Central Excise or any penalty levied against the appellant as a condition precedent for filing the appeal. This deposit is required to be made during the pendency of the appeal. Proviso to Section 35F, however, permits an appellant to request the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, to dispense with the requirement of the deposit of the amount subject to such conditions, as the appellate forum may deem fit to impose as to safeguard the interests of the Revenue. Insofar as the question relating to the dispensing with the deposit is concerned, the proviso stipulates that this question has to be decided by the appellate forum upon considering whether the deposit of the duty or the penalty would cause undue hardship to the appellant. How is undue hardship caused to an appellant in the matter of the deposit of the duty or penalty would depend upon the facts of each case. Undue hardship is a term which may vary from case to case and in every case the appellant has to satisfy the appellate forum that, if it is required to deposit the amount of duty or the penalty, such requirement shall cause undue hardship to the appellant.
4. In the case of Vijay Prokash D. Mehta and Jawahar D. Mehta v. Collector of Customs (Preventive), Bombay, , Their Lordships of the Supreme Court observed while dealing with Section 129E of the Customs Act, which is pari materia to Section 35F of the Central Excises and Salt Act, 1944, that the proviso gives the discretion to the authority to dispense with the obligation to deposit in case of undue hardship and that such discretion must be exercised on relevant materials honestly, bona fide and objectively. Their Lordships further. observed that in the facts and circumstances of each case, all the relevant factors, viz., the probability of the prima facie case of the appellant and the conduct of the parties have to be taken into consideration by the appellate forum while it is to decide the question whether the deposit has to be dispensed with or not.
5. A single Bench of the Kerala High Court, in the case of V.I.T. Sea Foods v. Collector of Customs, observed as under :-
"11. In exercising the discretion under the proviso to Section 129E, the Tribunal should consider, at least prima facie, the question involved in the appeal, inter alia, the existence of a prima facie case on merits, constitutes an important relevant factor in the consideration of the question of undue hardship. This is so because it causes undue hardship to any assessee to be called upon to make payment of amounts which are not legally due. The very mandate of Article 265 of the Constitution is that there can be no levy or collection of tax without the authority of law. The accepted rule of interpretation of provisions regarding appeals is to adopt that interpretation which will uphold the right of appeal rather than defeat it. While it is true that the right to appeal conferred by Section 129E is a conditional one, hedged in by the conditions of deposit imposed by Section 129E, it is equally important that the discretion to dispense with the deposit should be exercised judiciously based on relevant factors and circumstances, prima fade case is one such. That prima facie case is relevant in this context is the ratio of the decision in Hari Fertilisers v. Union of India, . In Re : America Refrigeration Co. Ltd., and in Thampi v. Collector of Central Excise, 1987 (1) KLT 562 of this Court, all rendered under the analogous provisions of the Central Excises and Salt Act, 1944."
6. A bare look at the impugned order dated 27-5-1997 passed by the respondent No. 1 suggests that he did not take into account all the relevant factors while deciding the question relating to the prayer of the petitioner for dispensing with the pre-deposit of the amount in question. In fact, it does appear to me that the ld. Commissioner passed the order in a slipshot manner perhaps without proper application of mind. He appears to have been guided and influenced by a single consideration that the appellant despite having prima facie case was required to satisfy the Commissioner about any undue hardship being caused to it in the event of it being required to deposit the amount in question. The observation of the Commissioner extracted in the opening part of his judgment suggests that he was of the view that the existence of a prima facie case is a wholly irrelevant consideration in deciding the question about permitting or not permitting the appellant to ask for dispensing with the deposit of the amount in question. Perhaps the Commissioner was not correct in his approach since prima facie case, albeit, a strong and excellent prima facie case is indeed a relevant factor in deciding the question under the proviso to Section 35F of the Act as to whether an appellant is entitled to the relief of dispensing with the deposit of the amount of duty or penalty. Undoubtedly financial hardship, administrative inconvenience and such like other factors are also of paramount importance in entitling an appellant to ask for the dispensing with the deposit of amount but at the same time, if the appellant succeeds in establishing an excellent prima facie case and persuades the appellante forum to take a view, at the stage of admission of appeal or at the stage of an application seeking dispensation of deposit that the order appealed against patently suffered from legal infirmittes, this is a highly determinative factor for the appellate forum to consider while deciding the question as to whether the appellant was to be granted the relief of dispensation-of deposit of the amount in question. Unfortunately, however, in the manner the impugned order has been granted or passed by the ld. Commissioner he did not take into consideration all these relevant factors, thus resulting in miscarriage of justice.
7. I am of the view, however, that this Court while exercising its writ jurisdiction should not itself embark upon the enquiry relating to the existence or otherwise of all relevant factors, which constitute the gravamen of Section 35F of the Act. For these reasons, therefore, while quashing and setting aside the order impugned in this petition, I direct the respondent No. 1 to reconsider the entire question under Section 35F of the Act upon the prayer of the petitioner for dispensing with the requirement of deposit of the amount in question in all these seven appeals and after hearing the parties on the question and in the light of the observations made hereinabove and the law on the subject to pass a fresh order. Till the respondent No. 1 considers and disposes of afresh the petitioner's application for dispensation with the deposit, the recovery of the amount demanded shall stay, and thereafter the order that the Commissioner passes shall take effect. The respondent No. 1 shall very very expeditiously dispose of the matter relating to the question of deposit and in any event within 3 months from today.
8. The petition is, thus, finally disposed of. No order as to costs.
9. All parties to act on a signed xerox copy of this dictated order on usual undertaking.