Court sets aside deposit order due to undue hardship, directs bond issuance. Hearing on appeal ordered.

The court set aside the order directing the petitioner to deposit Rs. 66,62,032/- due to undue hardship, as the petitioner had a strong prima facie case. Instead, the petitioner was directed to furnish a bond for the said sum, and the tribunal was instructed to hear the appeal on merits. The court emphasized the need to consider undue hardship genuinely and not just asserted, highlighting the importance of safeguarding the interest of revenue in such cases.

---

---

Issues Involved:

1. Rejection of the application for waiver of pre-deposit.
2. Applicability of the doctrine of unjust enrichment concerning the interest paid.
3. Consideration of undue hardship in the context of pre-deposit requirements.
4. The statutory right to appeal and the conditions for pre-deposit.

Issue-wise Detailed Analysis:

1. Rejection of the Application for Waiver of Pre-deposit:

The petitioner impugned the order dated 24th June 2009, wherein their application for waiver of pre-deposit was rejected, and they were called upon to pre-deposit a sum of Rs. 66,62,032/- along with applicable interest. The petitioner argued that they had already deposited Rs. 33,17,170/- towards duty, and the balance was towards interest. They contended that under Section 11B(2) proviso (c) of the Customs Act, the doctrine of unjust enrichment would not apply to the interest paid.

2. Applicability of the Doctrine of Unjust Enrichment Concerning the Interest Paid:

The petitioner submitted that the doctrine of unjust enrichment, as per Section 11B(2) proviso (c) of the Customs Act, refers only to the refund of duty and not to the interest. Therefore, the interest paid should not be subject to unjust enrichment. The court noted that prima facie, the doctrine of unjust enrichment would not be applicable in this case, particularly concerning the interest paid by the petitioner.

3. Consideration of Undue Hardship in the Context of Pre-deposit Requirements:

The court emphasized that the right to appeal is a statutory right and can be circumscribed by the fulfillment of conditions such as pre-deposit. In considering applications for waiver of pre-deposit, the tribunal must evaluate three factors: prima facie case, balance of convenience, and irreparable loss. The court referred to various judgments, including Ravi Gupta v. Commissioner of Sales Tax and Benara Valves Ltd. v. Commissioner of Central Excise, which highlighted the need to consider undue hardship and safeguard the interest of revenue. The court reiterated that undue hardship must be genuine and not merely asserted. The tribunal must judiciously exercise discretion based on relevant materials, honesty, and objectivity.

4. The Statutory Right to Appeal and the Conditions for Pre-deposit:

The court discussed Section 35F of the Central Excise Act, 1944, which mandates the deposit of duty or penalty pending appeal unless undue hardship is demonstrated. The tribunal has the discretion to dispense with the deposit subject to conditions that safeguard the interest of revenue. The court referred to several judgments, including B.M. Malani v. Commissioner of Income Tax and Sangfrod Remedies Ltd. v. Union of India, which underscored the relevance of factors such as economic hardship, state of the economy, and liquidity of businesses in determining undue hardship.

Conclusion:

The court concluded that the petitioner had made out a strong prima facie case, and calling upon them to deposit the amount would occasion undue hardship. Consequently, the impugned order directing the petitioner to deposit Rs. 66,62,032/- was set aside. The petitioner was directed to furnish a bond for the said sum, and the tribunal was instructed to hear the appeal on merits. The rule was made absolute with no order as to costs.

---