SUPREME COURT OF INDIA
Messrs Benara Valves Limited and Others
Vs
Commissioner of Central Excise and Another
Appeal (Civil) 5166 of 2006 (Arising 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 and L. S. Panta, JJ)
23.11.2006
ARIJIT PASAYAT, J.
Leave granted.
Challenge 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.
After 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.
Additionally, 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:
"Therefore, 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:
(1) M/s. BAPL and M/s. BVL are directed to pre-deposit twenty-five percent of
the duty demanded from them:
(2) The other applicants are directed to pre-deposit twenty-five percent of the
penalties imposed on them".
Questioning 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 rejected.
Learned 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.
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
judicially.
The applicable principles have been set out succinctly in Silliguri
Municipality and Ors. v. Amalendu Das and Ors. and M/s Samarias Trading
Co. Pvt. Ltd. v. S. Samuel and Ors. and Assistant Collector of Central
Excise v. Dunlop India Ltd. .
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 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.
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.
Section 35-F of the Act reads as follows:
"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 : 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."
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.
As 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. 7 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.
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 word "undue" adds something more than just hardship. It means an
excessive hardship or a hardship greater than the circumstances warrant.
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.
In the instant case Tribunal has rightly observed that the rival stands have to
be examined in detail with reference to material on record.
The 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.
It 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. However, 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 the Tribunal.
The appeals are accordingly disposed of. No costs.