2003 (10) TMI 70 - HC - Central Excise

Appeal Ruling Overturned: Appellate Authority Must Reassess Key Issues, Financial Hardship Focus Found Improper.

The court set aside the impugned order dated 8-10-2003, finding that the Appellate Authority failed to address the substantive issues in the appeal, ... Stay/Dispensation of pre-deposit - Writ jurisdiction - Undue hardship for waiver of pre-deposit - HELD THAT:- While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition. The arguments that appellant is in a position to deposit or if he succeeds in appeal, he will be entitled to get the refund, are not the considerations for deciding the application. The order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with the law. The expression 'undue hardship' has a wider connotation as it takes within its ambit the case where the assessee is asked to deposit the amount even if he is likely to exonerate from the total liability on disposal of his appeal. Dispensation of deposit should also be allowed where two views are possible. While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority to stay/waive the pre-deposit condition, would be reduced to nugatory/illusory. Undoubtedly, the interest of the Revenue cannot be jeopardized but that does not mean that in order to protect the interest of the Revenue, the Court or authority should exercise its duty under the law to take into consideration the rights and interest of an individual. It is also clear that before any goods could be subjected to duty, it has to be established that it has been manufactured and it is marketable and to prove that it is marketable, the burden is on the Revenue and not on the manufacturer. Thus, we are of the considered opinion that as the Appellate Authority has not addressed to itself any of the issues involved in the appeal rather has gone to the issue of financial hardship which was unwarranted and uncalled for in the fact situation of this case. The order impugned cannot be sustained in the eyes of law and we have no option but to allow this petition and set aside the order impugned. Thus, the petition succeeds and is allowed. The order impugned dated 8-10-2003 is hereby set aside. The case is remanded to the Appellate Authority to decide the application for stay/waiver afresh in accordance with law, as explained above. Issues Involved:1. Jurisdiction and statutory right of appeal.2. Conditions for maintaining an appeal.3. Examination of prima facie case and undue hardship for waiver of pre-deposit.Summary:Jurisdiction and Statutory Right of Appeal:The court emphasized that an appeal is a statutory right created by the legislature and cannot be conferred by acquiescence, consent, or court order. Jurisdiction is a legislative function and cannot be usurped by the courts (United Commercial Bank Ltd. v. Their Workmen, AIR 1951 SC 230; Union of India v. Devki Nandan Agrawal, AIR 1992 SC 96). The court cited several precedents to reinforce that jurisdiction must be conferred by statute and cannot be derived from erroneous interpretations or acquiescence (Kesar Singh & Ors. v. Sadhu, (1996) 7 SCC 711; A.R. Antuley v. R.S. Nayak, AIR 1988 SC 1531).Conditions for Maintaining an Appeal:The court noted that the right to appeal is not absolute and can be conditioned by the legislature. Conditions such as pre-deposit requirements are lawful as long as they are not so onerous as to render the right illusory (Vijay Prakash D. Mehta & Jawahar D. Mehta v. Collector of Customs (Preventive), Bombay, AIR 1988 SC 2010). The court reiterated that such conditions are meant to ensure compliance with the law and are not violative of Article 14 of the Constitution (Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad & Ors., (1999) 4 SCC 468).Examination of Prima Facie Case and Undue Hardship for Waiver of Pre-Deposit:The court held that the Appellate Authority must examine the prima facie merits of the appellant's case and consider financial hardship when deciding on the waiver of pre-deposit (Income-tax Officer v. M.K. Mohammad Kunhi, AIR 1969 SC 430; Mehsana District Cooperative Milk P.U. Ltd. v. Union of India, 2003 (154) E.L.T. 347 (S.C.)). The court emphasized that a strong prima facie case could justify waiving the pre-deposit condition (Luxco Electronics v. Union of India & Ors., 1987 (31) E.L.T. 883 (All.)).The court also highlighted that the burden of proving marketability and manufacture of goods lies with the Revenue (Collector of Central Excise, Baroda v. United Phosphorus Ltd., 2000 (117) E.L.T. 529 (S.C.)).Conclusion:The court found that the Appellate Authority had not addressed the issues involved in the appeal and had improperly focused on financial hardship. The impugned order dated 8-10-2003 was set aside, and the case was remanded to the Appellate Authority to decide the application for stay/waiver afresh in accordance with the law. The court directed that no recovery shall be made from the petitioner until the application for stay/waiver is decided.