Pre-deposit waiver under Section 35F depends on prima facie merit and financial hardship; cash deposit may be modified.

Under Section 35F, waiver of pre-deposit turns on a judicial assessment of prima facie case and financial hardship. The note explains that where the duty demand raises substantial questions on limitation, clubbing of units, and exemption under Notification No. 175/86, the appellate authority must consider the merits and the pleaded hardship before insisting on cash deposit. In the discussed matter, the direction to deposit part of the demand in cash was treated as lacking sound judicial basis and as overlooking the prima facie merits to some extent, so the pre-deposit condition was modified and bank guarantee was accepted instead of cash deposit.

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Issues: Whether, while considering waiver of pre-deposit under Section 35F, the appellate authority had to assess prima facie case and financial hardship and whether the impugned order directing cash deposit of part of the demand was justified.

Analysis: The governing factors under Section 35F are prima facie case and financial hardship. The challenge to the duty demand raised substantial questions regarding limitation, clubbing of the two concerns, and availability of exemption under Notification No. 175/86. The authority was therefore required to evaluate the merits and the pleaded hardship in a judicial manner. The order requiring deposit of Rs. 8 lakhs was found not to rest on sound judicial principles and to have overlooked the prima facie merit of the case to some extent. In such circumstances, the appellate order was held to be arbitrary and liable to be modified.

Conclusion: The pre-deposit condition was modified, the appeals were directed to be heard on merits without insisting on cash deposit, and the petitioners were required to furnish bank guarantee in place of cash deposit.

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