Apparels Private Limited & Anr Vs. Union of India & Anr  Insc 943
(18 September 2007)
Sinha & Harjit Singh Bedi
APPEAL NO. 4340 OF 2007 [Arising out of SLP (Civil) No. 7225 of 2007] S.B.
Interpretation of the provisions of Section 129E of the Customs Act, 1962 (for
short "the Act") is in question in this appeal which arises out of a
judgment and order dated 4.10.2004 passed by a Division Bench of the High Court
of Gujarat at Ahmedabad in Special Civil Application No. 9569 of 2004.
adjudication proceeding was initiated against the appellant.
of Custom Duty was made. An appeal was preferred thereagainst. The said appeal
was dismissed for failure to pre-deposit a sum of Rs. 3,30,00000/- as directed
by the Court of Appeal.
may notice that in the earlier round of litigation when a statement was made
before the High Court that the Tribunal may hear the appeal on merit without
asking the appellant to make any pre-deposit, it was asked to make that prayer
before the Tribunal. Pursuant thereto an application was filed. The Tribunal in
terms of its order dated 14.01.2004 opined:
accordingly order that the appellant company deposit Rs. 3 crores out of the
total duty demand upon such deposit further deposit of duty and penalty imposed
on the company is waived and recovery thereof stayed. We further order that the
director of the company Shri R.C. Agarwal deposit Rs. 20 lakhs and the power of
attorney holder of the Company Shri H.R. Agarwal deposit Rs. 10 lakhs within 12
weeks of the date of the order.
on 26.4.2004. Appeal is liable to be rejected for non-compliance without
writ application filed by the appellants questioning the correctness of the
said order has been dismissed by reason of the impugned judgment.
C.N. Sreekumar, learned counsel appearing on behalf of the appellants, in
support of this appeal, inter alia would submit:
The High Court committed a manifest error insofar as it failed to take into
consideration the ingredients of Section 129E of the Act.
Section 129E, if construed properly, would not give rise to a conclusion that
in absence of any provision made in that behalf, non-compliance of the order of
pre-deposit itself would lead to automatic dismissal of the appeal.
A right of appeal conferred upon a suitor having been provided for in a
statute, the provision for pre-deposit must receive strict interpretation.
Provisions for payment of court fee and power to grant stay having been
conferred in the Tribunal, the impugned judgment could not have been passed
particularly when Section 129E of the Act does not provide for any consequence
arising out of non-compliance of the order of pre-deposit.
Vikas Singh, learned Additional Solicitor General appearing on behalf of Union
of India, on the other hand, would submit that interpretation of Section 129E
of the Act is concluded by a decision of this Court in Vijay Prakash D. Mehta
and Another v. Collector of Customs (Preventive), Bombay [(1988) 4 SCC 402].
Act was enacted to consolidate and amend the law relating to customs. It
provides for assessing an order of custom duty. It also provides for seizure of
goods. Penalty may also be levied by the adjudicating authorities. Chapter XV
of the Act provides for appeals to the Commissioner from any decision passed by
an officer of custom lower in rank than the said authority. Section 128A
provides for the procedure therefor. Section 129 provides for the constitution
of the appellate tribunal wherefor procedures have also been laid down. Proviso
appended to Section 129A enumerates the cases in respect whereof jurisdiction
of the appellate tribunal is barred. Sub-section (6) of Section 129A envisages
payment of court fee. Sub-section (2A) of Section 129B specifies a period of
three years during which the appeal may be disposed of. A Tribunal is also
empowered to grant stay. Section 129E, however, mandates pre-deposit of any
duty and interest in appeal which is preferred in respect of the goods which
are not under the control of the custom authorities or any penalty levied under
the Act. Proviso appended thereto, however, empowers the Commissioner of Appeal
or the appellate tribunal to dispense with such deposit if it comes to the
conclusion that the deposit of duty and interest would cause undue hardship to
right of appeal is not a fundamental right. It is a statutory right. As a right
of appeal is a statutory right, it may also be hedged by conditions. It is,
however, trite that conditions imposed may not be such which may for all intent
and purport take away a vested right of appeal. [See Dilip S. Dahanukar v. Kotak
Mahindra Co. Ltd. & Anr. 2007 (5) SCALE 452]
We, however, having regard to the facts and circumstances of this case are of
the opinion that the larger question, viz., interpretation of Section 129E of
the Act need not be gone into.
129E of the Act would be attracted where the goods in question are not in the
custody of the Revenue. The said provision, therefore, would be attracted only
when the ingredients thereof exist.
learned Additional Solicitor General very fairly submits that a part of the
goods is in custody of the respondents. If that be so, in our opinion, it was
obligatory on the part of the Tribunal to take that factor into consideration
in making the order of pre-deposit. Furthermore, while exercising its
jurisdiction, the Tribunal was also required to apply its mind in regard to the
question of undue hardship on the part of the appellants upon considering
existence of a prima facie case. Merit of the case ordinarily should not
otherwise be gone into unless the question on the face of it appears to be
The Tribunal while imposing the condition of pre-deposit was required to apply
its mind in regard to the existence or otherwise of the conditions laid down in
Vijay Prakash D. Mehta (supra), applicability or interpretation of Section 129E
of the Act came up for consideration before this Court wherein it was held:
Right to appeal is neither an absolute right nor an ingredient of natural
justice the principles of which must be followed in all judicial and quasi-
judicial adjudications. The right to appeal is a statutory right and it can be
circumscribed by the conditions in the grant.
These observations cannot be applied to the facts of this case. Here we are
concerned with the right given under Section 129A of the Act as controlled by
Section 129E of the Act, and that right is with a condition and thus a
conditional right. The petitioner in this case has no absolute right of stay.
He could obtain stay of realisation of tax levied or penalty imposed in an
appeal subject to the limitations of Section 129E. The proviso gives a
discretion to the authority to dispense with the obligation to deposit in case
of "undue hardships". That discretion must be exercised on relevant
materials, honestly, bona fide and objectively. Once that position is
established it cannot be contended that there was any improper exercise of the
jurisdiction by the Appellate Authority. In this case it is manifest that the
order of the Tribunal was passed honestly, bona fide and having regard to the
plea of 'undue hardship' as canvassed by the appellant. There was no error of
jurisdiction or misdirection.
is not the law that adjudication by itself following the rules of natural
justice would be violative of any right-constitutional or statutory, without
any right of appeal, as such, if the statute gives a right to appeal upon
certain conditions, it is upon fulfilment of those conditions that the right
becomes vested and exercisable to the appellant.
proviso to Section 129E of the Act gives a discretion to the Tribunal in cases
of undue hardships to condone the obligation to deposit or to reduce. It is a
discretion vested in an obligation to act judicially and properly."
Mr. Sree Kumar, however, submits that inter alia having regard to the decision
of the Madhya Pradesh High Court in Kishori Pujari Granite Pvt. Ltd. v. Union
of India [184 ELT 225] and the decision of the Kerala High Court in Ashoka
Rubber Products v. Collector of C.Ex. [1989 (43) ELT 605], the matter requires
reconsideration. As at present advised, we are not inclined to do so.
are satisfied that in a case of this nature, where a part of the goods which is
the subject matter of the proceedings under the Act is in possession of the
Revenue, proviso appended to Section 129E of the Act should have been invoked.
Justification for enacting such a provision has been considered by a
Constitution Bench of this Court in Mardia Chemicals Ltd. and Others v. Union
of India and Others [(2004) 4 SCC 311] wherein it was held:
The contention of the petitioners is that in the first place such an oppressive
provision should not have been made at all. It works as a deterrent or as a
disabling provision impeding access to a forum which is meant for redressal of
the grievance of a borrower. It is submitted where the possession of the
secured assets has already been taken over or the management of the secured
assets of the borrower including the right to transfer the same, in that event
it would not at all be necessary to burden the borrower doubly with deposit of
75% of the demand amount. In a situation where the possession of the secured
assets have already been taken over or its management, it is highly
unreasonable further to ask for 75% of the amount claimed before entertaining
the grievance of the borrower.
Secondly, it is submitted that, it would not be possible for a borrower to
raise funds to make deposit of the huge amount of 75% of the demand, once he is
deprived of the possession/management of the property namely, the secured
the condition of deposit is a condition of impossibility which renders the
remedy made available before the DRT as nugatory and illusory.
learned Attorney General refutes the aforesaid contention. It is further
submitted that such a condition of pre-deposit has been held to be valid by
this Court earlier and a reference has been made of Gujarat to submit that such a provision is
made to regulate the exercise of the right of an appeal conferred upon a
person. The purpose is that right of appeal may not be abused by any
recalcitrant party and there may not be any difficulty in enforcing the order
appealed against if ultimately it is dismissed and there may be speedy recovery
of the amount of tax due to the corporation.
The condition of pre-deposit in the present case is bad rendering the remedy
illusory on the grounds that
is imposed while approaching the adjudicating authority of the first instance,
not in appeal,
is no determination of the amount due as yet
secured assets or its management with transferable interest is already taken
over and under control of the secured creditor
special reason for double security in respect of an amount yet to be determined
75% of the amount claimed by no means would be a meager amount
will leave the borrower in a position where it would not be possible for him to
raise any funds to make deposit of 75% of the undetermined demand. Such
conditions are not alone onerous and oppressive but also unreasonable and
arbitrary. Therefore, in our view, sub-section (2) of Section 17 of the Act is
unreasonable, arbitrary and violative of Article 14 of the Constitution."
The Constitution Bench, therefore, was of the opinion that such a condition
would be onerous and, thus, arbitrary if a suitor is required to deposit such
an amount at the initial stage and not at the appellate stage.
are not oblivious that the taxing statute must be strictly construed.
Manish Maheshwari v. Asstt. Commissioner of Income Tax and Anr. 2007 (3) SCALE
627 and Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and
E.T.I.O. and Ors., 2007 (7) SCALE 392] We are also not oblivious of the fact
that only because the word "shall" is used, the same may not be
construed to be imperative in character.
Management, Pandiyan Roadways Corp. Ltd. v. N. Balakrishnan [2007 (7) SCALE
758], this Court observed:
On a plain reading of the said provision and particularly in view of the fact
that the word "shall" has been used, prima facie it would be
construed to be imperative in character. It may, however, be held to be
directory in certain situation. While construing a statute of this nature, the
context plays an important role. Interpretation of a statute would also depend
upon the fact situation obtaining in the case. There are, however, certain
exceptions to the said rule. The question came up for consideration before this
Court in U.P. State Electricity Board v. Shiv Mohan Singh and Anr. wherein it
was, inter-alia, noticed:
although the word shall is considered to be imperative in nature but it has to
be interpreted as directory if the context or the intention otherwise demands.
(See Sainik Motors v. State of Rajasthan AIR para)
is important to note that in Crawford on Statutory Construction at p. 539, it
Miscellaneous implied exceptions from the requirements of mandatory statutes,
where a statute is clearly mandatory or prohibitory, yet, in many instances,
the courts will regard certain conduct beyond the prohibition of the statute
through the use of various devices or principles. Most, if not all of these
devices find their justification in considerations of justice. It is a
well-known fact that often to enforce the law to its letter produces manifest
injustice, for frequently equitable and humane considerations, and other
considerations of a closely related nature, would seem to be of a sufficient calibre
to excuse or justify a technical violation of the law."
view of our findings aforementioned, the matter, in our opinion, requires
reconsideration at the hands of the Tribunal. The Tribunal failed to take into
consideration the limitation of its jurisdiction under Section 129E which
emanates from the custody of the goods and as a part of the goods is in the
custody of the Revenue and furthermore in view of the fact that the High Court
instead of considering the question as to whether direction to deposit the
amount would cause undue hardship or not has gone into the merit of the matter,
the interest of justice would be subserved if the impugned judgments are set
aside and the matter is remitted to the Tribunal for consideration of the
matter afresh. We direct accordingly. We would request the Tribunal to consider
the desirability of disposing of the matter as early as possible.
The appeal is allowed to the aforementioned extent. No costs.