Pre-deposit hardship under excise law cannot turn on admitted liability alone; financial inability must govern discretion.

The proviso to Section 35F permits dispensation of pre-deposit where it would cause undue hardship, and the relevant enquiry is the appellant's financial capacity rather than whether part of the demand is admitted. Here, the Tribunal found the appellant's finances weak, with losses and liabilities exceeding assets, but relied mainly on alleged admitted liability to insist on a pre-deposit. That was an irrelevant consideration and a misdirection in law. The pre-deposit direction was therefore an improper exercise of discretion, the deposit condition was dispensed with, and the appeals were to proceed on merits.

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Issues: Whether the Appellate Tribunal correctly exercised its discretion under the proviso to Section 35F of the Central Excises and Salt Act, 1944 in directing pre-deposit of Rs. 3 lakhs despite the appellant's claimed financial hardship.

Analysis: The right of appeal under Section 35B is subject to the condition of pre-deposit under Section 35F, but the proviso authorises dispensation where deposit would cause undue hardship. In considering such an application, the relevant enquiry is the appellant's financial hardship, not whether any part of the demand is admitted to be due. The Tribunal itself found the appellant's finances to be not comfortable, with losses and liabilities exceeding assets, yet relied principally on the alleged admitted liability to require pre-deposit. That was an irrelevant consideration for Section 35F and amounted to misdirection in law. The appellant's financial position showed that insistence on pre-deposit would cause undue hardship.

Conclusion: The direction requiring pre-deposit was not a proper exercise of discretion and was liable to be set aside; the condition of deposit stood dispensed with and the appeals were to be heard on merits.

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