Bombay High Court High Court

Ceat Limited vs The Union Of India & Ors on 1 September, 2009

Bombay High Court
Ceat Limited vs The Union Of India & Ors on 1 September, 2009
Bench: F.I. Rebello, D.G. Karnik
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                                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                                      
                                       CIVIL APPELLATE JURISDICTION




                                                              
                                     WRIT PETITION NO.  6879 OF 2009


    CEAT Limited                                                                .. Petitioner




                                                             
         V/s
    The Union of India & Ors.                                                   .. Respondents




                                                
    Mr. D.B. Shroff, Senior Advocate with Mr. Avinash Joshi i/b Mulla & Mulla 
                               
    Craigie Blunt & Caroe for the petitioner.

    Mr. R.V. Desai, Senior Advocate with Mr.R.B. Pardeshi for the respondents.
                              

                                          CORAM :  FERDINO I. REBELLO & D.G. KARNIK, JJ.
                                          DATE     :  1ST SEPTEMBER 2009





    ORAL JUDGMENT : (Per Ferdino I. Rebello, J.)

    1.      Rule.  Heard forthwith.

2. The petitioner by the present petition impugns the order dated 24th

June 2009 whereby the application of the petitioner herein for waiver of pre-

deposit has been rejected and the petitioner was called upon to pre-deposit a

sum of Rs.66,62,032/- along with the interest as applicable.

3. At the hearing of the petition, on behalf of the petitioner their learned

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counsel draws our attention to para 6 of the order of the Tribunal wherein it

is noted that the amount of Rs.33,17,170/- was deposited towards duty. The

balance is towards the interest. It is submitted that considering the

provisions of section 11B(2) proviso (c) of the Customs Act, the doctrine of

unjust enrichment would not apply. It is also pointed out that the said

section refers only to the refund of duty and not the interest. In other words,

it is submitted that the interest paid on the language of section itself would

not be the subject matter of unjust enrichment.

4. On the other hand, the learned counsel for the respondents supports

the order of the learned Tribunal.

5. We propose to consider the issue of pre deposit in this case, since

recently, a large number of matters are coming up before us from the orders

passed by the Tribunal in the matter of pre deposit. The right to appeal is

neither absolute nor ingredient of natural justice, principles of which must

be followed in all judicial and quasi judicial adjudication. The right to appeal

is statutory right and it can be circumscribed fulfillment of conditions, in the

instant case pre-deposit. In considering the case for such deposit, three

things are to be considered by the tribunal while dealing with the application

for dispensing with the pre deposit. They are prima facie case, balance of

convenience and irreparable loss. See Ravi Gupta Vs. Commissioner of Sales

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Tax, 2009 (237) E.L.T. 3 ( S.C.).

6. Insofar as section 35(F) of the Central Excise Act, 1944 is concerned,

the relevant provision may be reproduced as :

“35F. Deposit, pending appeal, of duty demanded or penalty

levied.–

Where in any appeal under this Chapter, the decision or

order appealed against relates to any duty demanded in

respect of goods which are not under the control of

Central Excise authorities or any penalty levied under

this Act, the person desirous of appealing against such

decision or order shall, pending the appeal, deposit with

the adjudicating authority the duty demanded or the

penalty levied: Provided that where in any particular

case the Commissioner (Appeals) or the Appellate

Tribunal is of opinion that the deposit of duty demanded

or penalty levied would cause undue hardship to such

person, the Commissioner (Appeals) or, as the case may

be, the Appellate Tribunal, may dispense with such

deposit subject to such conditions as he or it may deem

fit to impose so as to safeguard the interest of revenue:

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Provided further that where an application is

filed before the Commissioner (Appeals) for

dispensing with the deposit of duty demanded

or penalty levied under the first proviso, the

Commissioner (Appeals) shall, where it is

possible to do so, decide such application

within thirty days from the date of its filing.”

7. In a case thus where the Appellate Authority is of the opinion that the

deposit of duty demanded or penalty levied on the goods, undue hardship

may be occasioned to such person, the Appellate Authority may dispense

with such deposit subject to such conditions as it may deem fit to impose

as to safeguard the interest of the revenue. This had come up for

consideration in a large number of judgments. We may only refer to the

judgment in the case of Benara Valves Ltd. Versus Commissioner of Central

Excise, 2006 (204) E.L.T. 513 (S.C.) and gainfully reproduce the following

paragraphs :

“8 It is true that on merely establishing a prima

facie case, interim order of protection should not be

passed. But if on a cursory glance it appears that

the demand raised has no leg to stand, it would be

undesirable to require the assessee to pay full or

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substantive part of the demand. Petitions for stay

should not be disposed of in a routine matter

unmindful of the consequences flowing from the

order requiring the assessee to deposit full or part

of the demand. There can be no rule of universal

application in such matters and the order has to be

passed keeping in view the factual scenario

involved. Merely because this Court has indicated

the principles that does not give a license to the

forum/authority to pass an order which cannot be

sustained on the touchstone of fairness, legality and

public interest. Where denial of interim relief may

lead to public mischief, grave irreparable private

injury or shake a citizens’ faith in the impartiality of

public administration, interim relief can be given.

9. It has become an unfortunate trend to

casually dispose of stay applications by referring to

decisions in Siliguri Municipality and Dunlop India

cases (supra) without analysing factual scenario

involved in a particular case.

11. Two significant expressions used in the

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provisions are “undue hardship to such person” and

“safeguard the interests of revenue”. Therefore,

while dealing with the application twin

requirements of considerations i.e. consideration of

undue hardship aspect and imposition of conditions

to safeguard the interest of Revenue have to be

kept in view.

12. As noted above there are two important

expressions in Section 35F. One is undue hardship.

This is a matter within the special knowledge of the

applicant for waiver and has to be established by

him. A mere assertion about undue hardship would

not be sufficient. It was noted by this Court in S.

Vasudeva v. State of Karnataka and Ors.

MANU/SC/0199/1994 : [1993]2SCR715 that

under Indian conditions expression “Undue

hardship” is normally related to economic hardship.

“Undue” which means something which is not

merited by the conduct of the claimant, or is very

much disproportionate to it. Undue hardship is

caused when the hardship is not warranted by the

circumstances.

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13. For a hardship to be ‘undue’ it must be shown

that the particular burden to have to observe or

perform the requirement is out of proportion to the

nature of the requirement itself, and the benefit

which the applicant would derive from compliance

with it.

14. The word “undue” adds something more than

just hardship. It means an excessive hardship or a

hardship greater than the circumstances warrant.

15. The other aspect relates to imposition of

condition to safeguard the interest of revenue. This

is an aspect which the Tribunal has to bring into

focus. It is for the Tribunal to impose such

conditions as are deemed proper to safeguard the

interest of revenue. Therefore, the Tribunal while

dealing with the application has to consider

materials to be placed by the assessee relating to

undue hardship and also to stipulate condition as

required to safeguard the interest of revenue.”

8. This view thereafter has been reiterated in Pennar Industries Ltd.

Versus State of Andrha Pradesh & Ors. 2009 (3) SCC 177, in Ravi Gupta

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Versus Commissioner of Central excise, 2009 (237) E.LT.. 3 (SC), in

Monotosh Saha Vs. Special Director, Enforcement Directorate, 2008 (229)

E.L.T. 492 (S.C.) as also in Indu Nissan Oxo Chemicals India Ltd. v. Union of

India, 2008 (221) E.L.T. 7 (SC).

9. In B.M. Malani Versus Commissioner of Income Tax, (2008) 306 ITR

196 (SC), the Supreme Court in a case under the I.T. Act observed as under:

“Computation to pay any unjust dues per se would cause

hardship.”

After saying so the court observed that in in such cases the question

would arise as to whether the default in payment of the amount was due to

circumstances beyond the control of the assessee. Then considering the

concept of what can be “genuine hardship”, the court observed as under :

“The term `genuine’ as per the New Collins Concise English

Dictionary is defined as under:

‘Genuine’ means not fake or counterfeit, real, not pretending

(not bogus or merely a ruse)

For interpretation of the aforementioned provision, the

principle of purposive construction should be resorted to. Levy

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of interest is statutory in nature, inter alia for re-compensating

the revenue from loss suffered by non-deposit of tax by the

assessee within the time specified there for. The said principle

should also be applied for the purpose of determining as to

whether any hardship had been caused or not. A genuine

hardship would, inter alia, mean a genuine difficulty. That per

se would not lead to a conclusion that a person having large

assets would never be in difficulty as he can sell those assets

and pay the amount of interest levied.

The ingredients of genuine hardship must be determined

keeping in view the dictionary meaning thereof and the legal

conspectus attending thereto. For the said purpose, another

well-known principle, namely, a person cannot take Page 4276

advantage of his own wrong, may also have to be borne in

mind. The said principle, it is conceded, has not been applied

by the courts below in this case, but we may take note of a few

precedents operating in the field to highlight the

aforementioned proposition of law. See Priyanka Overseas Pvt.

Ltd. and Anr. v. Union of India and Ors. 1991 Suppl. (1) SCC

102, para 39; Union of India and Ors. v. Major General Madan Lal

Yadav (Retd.) MANU/SC/0355/1996 : [1996]3SCR785 ; Ashok

Kapil v. Sana
Ullah
(dead) and Ors. MANU/SC/1256/1996 :

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(1996) 6 SCC 342 ; Sushil Kumar v. Rakesh Kumar
MANU/SC/

0826/2003 : AIR2004SC230 ; first sentence, Kusheshwar Prasad

Singh v. State of Bihar and Ors.

MANU/SC/ 1542/2007 : 2007 (4)

SCALE 534, paras 13, 14 and 16.

Thus, the said principle, in our opinion, should be applied even

in a case of this nature. A statutory authority despite receipt of

such a request could not have kept mum. It should have taken

some action. It should have responded to the prayer of the

appellant.

However, another principle should also be borne in mind,

namely, that a statutory authority must act within the four

corners of the statute. Indisputably, the Commissioner has the

discretion not to accede to the request of the assessee, but that

discretion must be judiciously exercised. He has to arrive at a

satisfaction that the three conditions laid down therein have

been fulfilled before passing an order waiving interest.”

10. We may also gainfully refer to the judgment in Sangfrod Remedies Lvt.

v. Union of India, 1998(103) ELT 5 (SC), where the Supreme Court was

pleased to observe that in considering an application for stay, the fact an

industry has been declared sick by the BIFR would be relevant relevant. In

Vijay Packaing System Ltd. v. Commissioner of Customs & Central Excise, 2000

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(118) ELT 553 (SC), in a matter arising under the Central Excise Act, the

Supreme Court was again pleased to hold that where the appellant was

before the BIFR, the appeal could be heard without calling on the assessee to

pre-deposit.

11. We may also consider the judgment in Vijay Prakash Mehta v. Collector

of Customs, 1989 (39) ELT 178 (SC), where the Supreme Court was pleased

to observe that a right to appeal is a statutory right and considering section

129E of the Customs Act, there was discretion in the authority to dispense

with the application of pre-deposit in case of undue hardship. The Court

then observed that the discretion must be exercised on relevant materials,

honesty, bona fide and objectively.

12. While considering undue hardship, balance-sheet of a company or of

an individual may be one of the relevant factors. However, at the same time,

the Courts cannot be oblivious of the state of economy and the need for

companies to have sufficient liquidity to proceed with the business on

industrial activity. Any burden by way of deposit of resources required to

keep the business running may have effect on productivity as also on

employment. No doubt, these are matters which a party approaching a

Tribunal must be in a position to establish and cannot be based merely on

whims or fancies. The economy therefore is another indicator which could

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be considered while applying the test of undue hardship.

13. Considering the law as stated above, a duty is cast on the tribunal

after it has considered whether the prima facie case has been made out while

considering the issue of balance of convenience and irreparable loss and

injury to examine the undue hardship as now understood and explained by

the Supreme Court in Benara Valves Ltd. (supra) and B.M. Malani (supra). It

is no doubt true that while considering the issue of pre deposit, the Tribunal

has a discretion. The application of discretion cannot be subject to any

standards. It would be within the jurisdiction of the Tribunal considering the

facts of each case by applying the law as declared by the Supreme Court and

this Court. If the party has made out a strong prima facie case, that by itself

would be a strong ground in the matter of exercise of discretion as calling

on the party to deposit the amount which prima facie is not liable to deposit

or which demand has no legs to stand upon, by itself would result in undue

hardship if the party is called upon to deposit the amount.

14. We may now set out a few relevant facts. There is a dispute as to

whether the petitioner was entitled to credit for duty paid along with the

interest. The petitioner had lost before this Court. Ultimately the matter

was taken to the Supreme Court. The Supreme Court allowed the appeal

filed by the petitioner herein. As there was no stay granted by the Supreme

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Court against the order of this Court, the petitioner had deposited with the

authority the amount of duty as referred to earlier. On the petitioner

succeeding before the Supreme Court, they called on the respondents to

adjust the credit and refund the amount. The respondents took no action.

The petitioner then suo muto took credit of that amount. This was the

subject matter of the show cause notice.

15. When the matter reached the Tribunal, the matter was remanded back

with a direction to the authority to consider the petitioner’s application for

refund as also the show cause notice. Learned counsel for the petitioner

points out that instead of one authority hearing both the issues, the matter

pertaining to unjust enrichment was heard by the Assistant Commissioner

who rejected the claim of the petitioner. The issue pertaining to the show

cause notice was heard by the Commissioner who by his order directed

payment of duty along with interest and penalty. Ultimately, the matter has

reached the Tribunal where the petitioner applied for stay in which the

impugned order came to be passed directing the petitioner to deposit.

16. In the instant case, considering the provisions earlier referred to, it

would be clear that the doctrine of unjust enrichment would not be

applicable. Prima facie, it is a case of refund of duty. Similarly insofar as the

interest is concerned, looking at the language of section 11-B proviso,

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interest paid by the petitioner could not be the subject matter of unjust

enrichment.

17. In these circumstances, in our opinion, the petitioner having made out

a strong prima facie case, calling upon the petitioner to deposit would

occasion undue hardship. The application for waiver of pre-deposit ought to

have been considered on that test.

18.

In the light of the above, the following order is passed:

(i) The impugned order to the extent it directs the petitioner to deposit

the duty along with interest in the sum of Rs.66,62,032/- is set aside. The

petitioner to furnish bond for the said sum. Rule is made absolute

accordingly with no order as to costs.

(ii) The learned Tribunal is directed to hear the appeal on merits.

    (D.G. KARNIK, J.)                                              (FERDINO I. REBELLO, J.)





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