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Issues: (i) Whether the appellate authority was bound to decide the assessee's application for dispensation of pre-deposit under the proviso to Section 35F before coercive recovery of the disputed demand was permitted; (ii) whether recovery of the disputed demand should remain stayed until that application was decided.
Issue (i): Whether the appellate authority was bound to decide the assessee's application for dispensation of pre-deposit under the proviso to Section 35F before coercive recovery of the disputed demand was permitted.
Analysis: Section 35F imposed a statutory obligation to deposit duty or penalty as a condition for appeal, but its proviso empowered the appellate authority to dispense with such deposit where undue hardship was shown, subject to conditions safeguarding revenue. Once that power was invoked by a pending application, the authority was required to exercise its discretion and pass an appropriate order. Failure to do so, while recovery of the disputed dues was being pursued, would defeat the purpose of the proviso and deprive the appellant of the statutory protection conferred by it.
Conclusion: The appellate authority was required to decide the pre-deposit application and could not leave it pending while coercive recovery proceeded.
Issue (ii): Whether recovery of the disputed demand should remain stayed until that application was decided.
Analysis: Since the application for dispensation had not been decided and coercive steps were threatened, equity and justice required protection of the assessee pending adjudication of the application. The court therefore directed a time-bound disposal of the application and, in the meantime, protection against recovery of the disputed amount.
Conclusion: Recovery of the amount disputed in appeal was stayed until the application under the proviso to Section 35F was decided.
Final Conclusion: The writ petition succeeded to the extent that the appellate authority was directed to decide the pre-deposit application within a fixed time and recovery of the disputed dues was restrained in the interim.
Ratio Decidendi: When a statutory proviso confers a discretionary power to dispense with pre-deposit on proof of undue hardship, the appellate authority must exercise that power on the application being made and cannot permit coercive recovery to frustrate the pending request.
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