Nissan Oxo Chemicals Ind.Ltd Vs. Union of India and Ors  Insc 1248 (11 December 2007)
Arijit Pasayat & Aftab Alam
APPEAL NO. 5795 OF 2007 (Arising out of SLP (C) No. 8041 of 2007) Dr. ARIJIT
Challenge in this appeal is to the order passed by the High Court of Gujarat
dismissing the writ petitions filed by the appellant.
Challenge before the High Court was to the order dated 10.1.2006 passed by the
Customs, Excise & Service Tax Appellate Tribunal (in short 'CESTAT')
directing deposit of rupees two crores as a condition precedent for
entertaining the appeal. It is to be noted that the total amount of penalty
imposed was Rs.10,00,00,000/-. The dispute relates to classification of the
product imported by the appellant and consequential benefits claimed by it
under various Notifications issued by the Director General of Foreign Trade.
customs authorities did not accept the stand of the appellant about its
classification. The levy of penalty was challenged by way of appeal before the
CESTAT. It was accompanied by an application seeking waiver of the penalty
imposed by the Commissioner of Customs (in short the 'Commissioner').
After hearing the parties, the CESTAT inter alia noted as follows:
learned Advocate for the applicants contends in one hand that a letter of Ms.
Indian Oil Corporation Ltd. written by its Assistant Manager, was on the record
of the Commissioner in these proceedings and was not considered in spite of the
directions in remand to consider all materials. It was also submitted that the
directions of the DGFT dated 17.12.1997 have not been complied, with even
though certificates showing the use of the return stream were on record in
parallel proceedings before the department. It was also submitted by the
learned advocate that if these certificates were considered, then they should
be granted the benefit of DGFT waiver of condition of the resale of the return
stream, vide their letter dated 17.12.1997 and they were not so liable to any
penalty. The Learned advocate took us through the Balance Sheet of the
applicant company which discloses that as on 31.3.2005, they have a loss of
Rs.12.20 crores and in the earlier year the said loss was Rs.17.74 crores. He
submits that they are a BIFR company and pleads for full waiver of the
pre-deposit requirement under Section 129E of the Customs Act to hear this
Learned SDR on the other hand takes us through the letter dated 17.12.1997 of
DGFT and submits that this letter exempts and is applicable only to import of
naphtha and return stream of such naphtha. He submits that the letter relied
upon by the advocate of Indian Oil Corporation, which he is making a grievance
about, it stating that heptene is not known and understood as naphtha. The
certificates of consumption of the return stream are also certifying the
utilization and the return stream of nonene and heptene and not to naphtha.
the submission in this matter, prima facie we are of the view that the waiver
granted of the condition by the DGFT is not applicable to the subject imports
in this case. The other issues raised will have to be gone into in detail at
the regular hearing. At this prima facie stage considering the merits and the
financial position as also the fact that this is the second round, we would
consider this case to be appropriate to direct the applicants to terms of
pre-deposit requirement to be effected under Section 129E of the Customs Act,
1962. We would, therefore, direct the applicants to deposit Rs.2,00,00,000/-
(rupees two crores only) and report compliance thereof within 12 (twelve) weeks
i.e. on 17.4.2006. On such compliance, being reported, the matter would be
listed for regular hearing. Failure to deposit and meet the requirement of
Section 129E calls for dismissal of the appeal without any further
penalty, it is to be noted, has been imposed under Section 112 (a) of the
Customs Act, 1962 (in short the 'Act'). A specific finding was recorded by the
Commissioner that in respect of the goods the assessee was required to obtain a
licence for clearance. However, the value of the goods which could have been
confiscated was in the neighbourhood of Rs.66.57 crores. As it was not possible
to direct confiscation since they were released to the appellant for use in the
factory premises, the Commissioner imposed penalty of Rs.10,00,00,000/-.
matter was earlier before the Tribunal and at that stage matter had been
remitted for fresh adjudication. By order dated 11.4.1998 the Commissioner
passed a fresh order and the levy of penalty of Rs.10,00,00, 000/- was
Learned counsel for the appellant submitted that the bona fide of the appellant
is writ large. The company has become a sick company and, therefore, insistence
on pre deposit even of a part which is in this case a huge sum of rupees two crores
would deprive the appellant of the statutory right of appeal. It is pointed out
that from the financial statements it is clear that the appellant has suffered
huge losses. For the assessment years 31st March, 2004, 31st March, 2005 and 31st
respectively the figures of losses are Rs.17.74 crores, Rs.12.20 crores and
Rs.8.28 crores. It is stated that the financial position has become dismal and
insistence on pre-deposit is by overlooking the financial sickness of the
company. The imports in question were made during the period 1992 to 1997.
There was lot of confusion and because of that dispute has arisen. Reference is
made to certain communications of the DGFT and Indian Oil Corporation (in short
Learned counsel for the respondents on the other hand has submitted that there
is no prima facie case and even if it is conceded for the sake of arguments
that there is financial hardship, that cannot be a ground to dispense with pre
deposit and in any event the balance of convenience is not in favour of the
shall deal with first the issue relating to the question of stay/dispensation
of pre deposit in respect of sick industry.
Metal Box India Ltd. v. Commissioner of Central Excise, Mumbai (2003 (155) ELT
13 (S.C.), this Court had clearly observed as follows:
Rana Mukherjee, the learned counsel for the appellants submits that in view of
Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for
short 'the Sick Industries Act'), the appellant need not deposit the amount, as
ordered by the Tribunal, as protection is available to the appellant under the
said provision. We are afraid, we cannot accept the contention of the learned
counsel for reasons more than one.
this aspect was not the subject matter of the order under challenge and,
secondly, Section 22 of the Sick Industries Act provides relief in regard to
the proceedings which relate to
up of the industrial company;
distress or the like against any of the properties of the industrial company;
appointment of a receiver in respect thereof, and
in regard to suit for recovery of money or for the enforcement of any security
against the industrial company or of any guarantee in respect of any loans or
advance granted to the industrial company.
of pre-deposit covered under Section 35F of the Central Excise Tax Act, 1944
does not fall under any of the above-mentioned categories in Section 22 of the
Sick Industries Act."
Principles 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
The applicable principles have been set out succinctly in Silliguri Municipality and Ors. v. Amalendu Das and Ors. (AIR 1984 SC 653), 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).
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 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.
Section 129-E of the Act reads as follows:
DEPOSIT, PENDING APPEAL, OF DUTY AND INTEREST DEMANDED OR PENALTY LEVIED. -
Where in any appeal under this Chapter, the decision or order appealed against
relates to any duty and interest demanded in respect of goods which are not
under the control of the customs 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 proper officer the duty and interest
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 and interest 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 interests of revenue."
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 129-E. 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"
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.
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.
The above position has been highlighted in M/s Benara Valves Ltd. and Ors. v.
Commissioner of Central Excise and Anr. (2006 (12) SCALE 303). Though the said
case related to dispute under the Customs Excise Act, 1944 (in short the
'Excise Act') the parameters are the same.
do not find any infirmity in the order directing deposit of Rupees two crores
as affirmed by the High Court. The appellant is granted three months time to
deposit the amount fixed by the CESTAT. If it is not deposited within the
aforesaid time, the appeal before the CESTAT shall stand dismissed.
The appeal is disposed of accordingly with no order as to costs.