Order upheld requiring Rs 2 crore deposit, waiver denied; undue hardship must show disproportionate burden; three months to comply

SC upheld the HC's affirmation of the order requiring deposit of Rs. 2 crores and rejected the waiver of penalty, holding that "undue hardship" requires showing the burden is disproportionate to the requirement and benefit of compliance. The Court found no infirmity in the deposit direction, granted the appellant three months to deposit the amount fixed by the CESTAT, and ordered that failure to deposit within that period will result in dismissal of the appeal before the CESTAT.

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Issues:
Challenge to High Court order dismissing writ petitions regarding deposit of Rs. 2 crores as a condition for entertaining appeal before CESTAT under Customs Act, 1962. Appellant's plea for waiver of penalty due to financial hardship and classification dispute of imported product.

Analysis:
The appeal challenged the High Court's decision dismissing writ petitions against the order by CESTAT directing a deposit of Rs. 2 crores for entertaining the appeal. The dispute arose from the classification of imported products and the appellant's claim for benefits under DGFT Notifications. The penalty of Rs. 10 crores was imposed under Section 112(a) of the Customs Act, 1962, as the goods required a license for clearance, with a potential confiscation value of Rs. 66.57 crores. The Commissioner reaffirmed the penalty after remand for fresh adjudication.

The appellant argued financial distress due to significant losses, seeking a waiver of the pre-deposit requirement. The appellant's financial statements showed substantial losses, emphasizing the company's deteriorating financial position. The appellant highlighted confusion surrounding imports made from 1992 to 1997, referencing communications from DGFT and Indian Oil Corporation (IOC). In contrast, respondents contended that there was no prima facie case and financial hardship alone could not justify dispensing with the pre-deposit requirement.

The issue of dispensation of pre-deposit for a sick industry was discussed, citing Metal Box India Ltd. v. Commissioner of Central Excise. The Court emphasized that the discretion to grant stay pending disposal of matters must be exercised judiciously. The principles for granting stay were outlined in various cases, emphasizing the need for a balanced approach considering the factual scenario. Section 129-E of the Act mandated deposit pending appeal, with provisions for dispensation based on undue hardship and revenue protection.

The Court examined the expressions "undue hardship" and "safeguard the interests of revenue" under Section 129-E. Undue hardship required proof beyond mere assertion, with economic hardship being a key consideration. Precedents like S. Vasudeva v. State of Karnataka highlighted the concept of undue hardship. The order directing the deposit of Rs. 2 crores was upheld, granting the appellant three months to comply, failing which the appeal would be dismissed.

In conclusion, the appeal was disposed of without costs, affirming the order for deposit within the stipulated time frame.

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