Pre-deposit waiver under Section 35F can still be granted despite mandatory penalty provisions, with interim confiscation relief on conditions.

The appellate power under Section 35F to dispense with pre-deposit remained available despite the mandatory penalty framework under Section 11AC, so waiver of pre-deposit of the penalty was granted. Interim protection was also justified against enforcement of the confiscation order over plant, machinery and related assets, to avoid disruption of the unit's operations, but only subject to safeguards that the assets were not disposed of during the appeal and a bank guarantee was furnished. The stay applications were accordingly allowed on the stated conditions.

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Issues: (i) whether pre-deposit of penalty imposed under Section 11AC could be waived under Section 35F; (ii) whether the order of confiscation of plant, machinery and related assets should be kept in abeyance pending disposal of the appeal.

Issue (i): whether pre-deposit of penalty imposed under Section 11AC could be waived under Section 35F.

Analysis: Section 11AC prescribes mandatory penalty equal to the duty short levied when the matter is finally adjudicated, while Section 35F confers power on the appellate forum to dispense with deposit of duty or penalty or both. The power under Section 35F was held not to be curtailed by Section 11AC for the limited purpose of stay or waiver, and voluntary payment of the duty also supported grant of relief.

Conclusion: Waiver of pre-deposit of the penalty was granted in favour of the assessee.

Issue (ii): whether the order of confiscation of plant, machinery and related assets should be kept in abeyance pending disposal of the appeal.

Analysis: Relief against confiscation was considered appropriate so that the unit's functioning was not disturbed, subject to safeguards ensuring that the assets were not disposed of during the pendency of the appeal and a bank guarantee was furnished.

Conclusion: The confiscation order was directed to remain in abeyance pending disposal of the case, subject to the stated conditions.

Final Conclusion: The stay applications were allowed by granting waiver of pre-deposit of penalty and interim protection against enforcement of confiscation, subject to compliance with the conditions imposed.

Ratio Decidendi: The appellate power to dispense with pre-deposit under Section 35F remains available even where the penalty provision is mandatory under Section 11AC, and such stay relief may be granted on facts including voluntary payment of duty.

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