Valves Ltd. & Ors Vs. Commissioner of Central Excise & Anr  Insc
844 (23 November 2006)
Pasayat & Lokeshwar Singh Panta
out of SLP (C) No.13028 of 2006) with CIVIL APPEAL No 5167 2006 (Arising out of
S.L.P (C) No.13171 of 2006) ARIJIT PASAYAT, J.
in these appeals is to the order passed by the Allahabad High Court dismissing
the writ petitions filed by the appellants who had filed the writ petitions
questioning correctness of the order passed by the Customs Excise and Service
Tax Appellate Tribunal, New Delhi (in short the 'Tribunal') dealing with the
applications filed for staying recovery of duty and penalty imposed pending
disposal of the appeals before the Tribunal. Allegations against the appellants
were to the effect that they were removing excisable goods clandestinely
without payment of duty and without raising Central Excise invoices/bills under
the guise of estimates/rough estimates to their front trading firms which they
called 'houses' and consequently to the ultimate customer. Searches were
conducted at the premises of manufacturing units and other connected concerns,
through whom the goods were allegedly sold. During the search, incriminating
documents were allegedly recovered from various premises and statements of the
concerned persons have also been recorded.
issuing notice under Central Excise Act, 1944 (in short the 'Act'), Central
Excise Rules, 1944 (in short the 'Rules') and Central Excise Rules, 2001 (in
short the '2001 Rules') the Commissioner of Central Excise, Kanpur demanded
Rs.2,05,31,762/- from M/s Benara Automotives Pvt. Ltd. (in short 'BAPL') and
penalty of equal amount was imposed under Section l1 AC of the Act.
Additionally, penalties were imposed on six other persons. The Commissioner
also confirmed the demand of Rs.24, 24,813/- in respect of M/s Benara Valves
Ltd. (in short 'BVL') and imposed penalty of equal amount.
Rs.1,00,000/- each was imposed on several other persons. Appeals were preferred
before the Tribunal challenging the determination. Prayer for stay of realisation
of demands raised till disposal of the appeals in terms of Section 35 F of the
Act was made. The Tribunal directed as follows:
considering the facts and circumstances of all these cases, we direct the
applicant to pre-deposit the following amounts within eight weeks under Section
35F of the Central Excise Act:
M/s. BAPL and M/s. BVL are directed to pre-deposit twenty-five percent of the
duty demanded from them:
The other applicants are directed to pre-deposit twenty-five percent of the
penalties imposed on them".
correctness of the order passed by the Tribunal, writ petitions were filed. By
the impugned orders, the High Court directed extension of time to comply with
the Tribunal's order. However, the prayer for dispensation of deposit was
counsel for the appellants submitted that demands raised will not stand the
test of appeal as correct legal and factual position were not kept in view
while adjudicating the issues. Mr. B. Dutta, learned Additional Solicitor
General for the respondents submitted that demands have been raised after
detection of large scale manipulations and evasions and no relief should be
extended to such dishonest manufacturers. According to him, neither any prima
facie case has been established, nor any case of irreparable loss or balance of
convenience has been made out.
relating to grant of stay pending disposal of the matters before the concerned
forums have been considered in several cases. It is to be noted that in such
matters though discretion is available, the same has to be exercised
applicable principles have been set out succinctly in Silliguri Municipality and Ors. v. Amalendu Das and Ors. (AIR 1984 SC 653) and M/s
Samarias Trading Co. Pvt. Ltd. v. S. Samuel and Ors. (AIR 1985 SC 61) and
Assistant Collector of Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330).
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 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.
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.
35-F of the Act reads as follows:
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:
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 :
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."
Two significant expressions used in the 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.
noted above there are two important expressions in Section 35(F). 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. (AIR 1994 SC 923) 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
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.
word "undue" adds something more than just hardship. It means an
excessive hardship or a hardship greater than the circumstances warrant.
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
instant case Tribunal has rightly observed that the rival stands have to be
examined in detail with reference to material on record.
only other question that needs to be examined is whether any reduction of the
amounts to be deposited as directed by the Tribunal is called for.
appears that pursuant to the direction given by this Court on 18.8.2006, the
appellants have paid Rs.4 lakhs and Rs.30 lakhs within the time stipulated.
Considering the nature of the dispute and the difficulties highlighted by the
appellants seeking dispensation of deposit, we direct that the appeals shall
now be heard without requiring further deposit, if the appeals are free from
other defects in accordance with law.
for the balance of the amount demanded, with a view to safeguard interest of
the Revenue, the appellants shall furnish such security as may be stipulated by
appeals are accordingly disposed of. No costs.