JUDGMENT
Paripoornan, J.
1. Petitioner is the proprietor of M/s. Vitco Rubber Industries. He is engaged in the manufacture of Tread Rubber. This commodity is excisable. There was a surprise visit of the petitioner’s factory by the officers of the Central Excise Department on 3-8-1985. Subsequently, by Ext. P-l. notice dated 29-1-1986, the petitioner was asked to show cause as to why a duty of Rs. 17,47,091.53 should not be levied besides penalty under Rule 52A (5) of the Central Excise Rules. Finally, by Ext. P5 order dated 19-6-1986, the first respondent demanded duty of Rs. 17,47,091.53 besides penalty of Rs. 5,00,000/-. The petitioner filed an appeal before the 2nd respondent, Appellate Tribunal, evidenced by Ext. P7. He also filed Ext. P8 application along with an affidavit, Ext. P9, for stay of recovery of the entire amount levied by way of excise duty, penalty, etc. By Ext. P10 order dated 27-10-1986, the Appellate Tribunal directed the petitioner to make a deposit of Rs. 5,00,000/- on or before 29-1-1987 and further observed that subject to the said prior deposit, the balance of duty and penalty would stand dispensed with. It was ordered that the appeal will be posted to 30-1-1987. In this original petition the challenge is against Ext. P-l notice, Ext. P5 order passed by the first respondent and Ext. P10 order passed by the 2nd respondent.
2. I heard counsel for the petitioner Mr. Sivasankara Panicker as also the Central Government Standing Counsel Sri P.V. Madhavan Nambiar. Ext. P 1 notice has merged in Ext. P 5 order. That order is the subject matter of an appeal before the 2nd respondent. The petitioner has availed of the statutory remedy by way of filing the appeal. In such circumstances, there is no justification in invoking the jurisdiction of this Court under Article 226 of the Constitution of India praying to quash Exts. P1 and P5. I reject the aforesaid prayer contained in the Original Petition. It should be remembered that the remedy under Article 226 of the Constitution is not a concurrent one. (McDowell & Co.’s case, 1985 KLT 428). The more serious attack was against Ext. P10. Along with the appeal the petitioner filed Exts. P 8 and P 9 invoking the jurisdiction of the 2nd respondent under Section 35F of the Central Excises and Salt Act, 1944. The 2nd respondent has also exercised the powers vested in it under the proviso to Section 35F of the Act. Petitioner’s counsel contended that the facts and circumstances disclosed in Exts. P7 to P9 would go to show that the deposit of duty demanded or penalty levied would cause undue hardship to the petitioner. Briefly stated, the petitioner has a case that he had no opportunity to put forward his plea or substantiate it before the first respondent, and there is violation of the principles of natural justice. It is also contended that the duty levied is unjustified and lacks factual and legal basis. There is also a contention that the assessment ex facie is not on the petitioner. According to the petitioner, these and other matters pleaded on the merits would go to show that the petitioner has a prima facie or arguable case. If that be so, in the present context, when the petitioner is not in a position to make any deposit of the amount demanded, a direction insisting a pre-deposit will really render any decision that is likely to be rendered in the appeal ineffectual or illusory. The question posed for consideration requires detailed analysis on the merits. In exercising the discretion under the proviso to Section 35F of the Act the Appellate Tribunal should have considered, at least prima facie, the question involved in the appeal, as to whether a prima facie view of the matter discloses an arguable case as against a frivolous one, besides looking into the economic circumstances of the assessee. The amount involved in the case is certainly relevant. If it is a heavy amount, and if the petitioner is able to show a prima facie case, to insist on payment of a substantial amount which the assessee is not in a position to deposit, would constitute undue hardship. The proviso to Section 35F of the Act itself lays stress that the Appellate Tribunal may dispense with the deposit of the amount demanded if it would cause undue hardship to the assessee, subject of course to such conditions as may be included to safeguard the interest of the Revenue. On these premises, it was contended that a look at Ext. P10 would show that the Appellate Tribunal has totally failed to go into the merits of the case and has passed on order directing the petitioner to deposit a sum of Rs. 5,00,000/- in view of the financial background of the petitioner. According to counsel, the Appellate Tribunal has failed to exercise its discretion in accordance with law.
3. Mr. Madhavan Nambiar, Central Government Standing Counsel, argued that on a reading of Ext. P10 as a whole, it would be evident that the Appellate Tribunal had borne in mind the hardship that may possibly be caused to the assessee and keeping in mind the financial background of the assessee, directed him only to pay less than 25 per cent of the total amount levied as excise duty and penalty. Hence, he submitted that Ext. P10 cannot be attacked as illegal or unreasonable.
4. Having considered the rival contentions of the counsel appearing on both sides, I am of the view that the 2nd respondent has failed to bear in mind the essential aspects in exercise of its discretion under Section 35F of the Act. It cannot be said that the merits involved in the case are totally irrelevant in considering the matter. The question involved in the appeal and as to whether the assessee, the petitioner has a prima facie case as opposed to a frivolous one, is an important aspect that should be borne in mind in exercise of the discretion under the proviso to Section 35F of the Act. It is true that stress is laid under the proviso to Section 35F, on the undue hardship that may be caused to the assessee if the duty demanded or the penalty levied is not dispensed with. In this case, the Appellate Tribunal has not adverted to the undue hardship that would be caused to the petitioner, if the duty and the penalty demanded are not dispensed with. As observed by Sukumaran J. in O.P. 5638/86, it is not the interest of the Revenue that should weigh with the Appellate Authority in dealing with the request for waiving the deposit of the amount as a pre-condition for filing the appeal. Since the Appellate Tribunal has totally eschewed from consideration the merits involved in the case and has failed to advert to the present economic position and circumstance of the assessee and the amount involved, in a proper perspective, I am of the view that the Appellate Tribunal has not exercised its discretion under the proviso to Section 35F, in accordance with law. Material and vital factors germane to the issue that arose for consideration, were ignored. The arguments of the petitioner’s counsel are entitled to acceptance. Ext. P10 order is infirm. It deserves to be quashed. I do so. the 2nd respondent is directed to re-consider the matter in accordance with law and in the light of the observations contained herein above. The appeal posted to 30-1-1987 will adjourned till the disposal of Exts. P8 and P9 applications filed under the proviso to Section 35F of the Act.
5. Counsel for the petitioner, Mr. Sivasankara Panicker submitted that revenue recovery proceedings have been initiated in pursuance to Ext. P5 assessment order. It is stated that pending the appeal, it will be really unfair if Ext. P5 is implemented. In this Original Petition the initiation of recovery proceedings in pursuance of Ext. P5 is not directly challenged. If, as stated by the petitioner, recovery proceedings have been initiated to give effect to Ext. P5, it is open to the petitioner to make an appropriate application before the respondents (respondents 1 and 2) for keeping in abeyance Ext. P5 order.
The Original Petition is disposed of as above.
Issue photostat copy of this judgment to counsel for the petitioner on usual terms.