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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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5substantive 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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9of 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 :::: Downloaded on – 09/06/2013 14:58:00 :::
10(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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11(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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12be 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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13Court 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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14interest 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.) ::: Downloaded on - 09/06/2013 14:58:00 :::