TaxTMI 
TaxTMI 
1986 (12) TMI 178
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....w and prima facie un justifiable. Although there may not be any financial hardship if the duty demanded is deposited before the appeal is heard, yet it would cause undue hardship inasmuch as the demand made is illegal and not tenable at all in the facts and circumstances of the case. He relies for this proposition on Calcutta High Court's judgement reported in 1986 (23) E.L.T. 74-Cal. in the case of American Refrigeration Co. Ltd. The learned Judge of the Calcutta High Court has observed therein that "the Tribunal in granting exemption is bound to take into consideration the prima facie case made out by the petitioner as also the interest of the Revenue..". He also relies on an order of the Tribunal of Special Bench-B reported in 1986 (23) E.L.T. 234 (Tribunal) in the case of Bata India Ltd. v. Collector of Central Excise, Calcutta. In this order, Tribunal after considering the prima facie case as well as other factors, fixed the amount of prior deposit. 3. Shri P.K. Ajwani, learned SDR, opposing the application has submitted that admittedly financial position being very sound, there is no question of dispensing with. the prior deposit of duty. Ambit of the appellate author....
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....rned counsel has submitted that Supreme Court itself has observed (in para 5) in Dunlop India's aforementioned case that interim order would be justified where there has been "gross violation of law". Instant case, he pointed out, comes within the aforesaid observation of the Supreme Court inasmuch as duty is purported to be charged on the value of an article which is purchased from the market and which is not an integral part of the product manufactured by him. The impugned order is against the well-settled law of excise levy. He has also relied upon Allahabad High Court's observation in 1985 (20) E.L.T. 243 (Allahabad) Para 5. 6. We have carefully considered the pleas advanced on both sides. Firstly, we observe that the expression 'undue hardship' occurring in Section 35F cannot be taken to mean 'financial hardship' alone. Had that been the intention, nothing prevented the legislature to use that expression. 'Undue hardship' can be considered in contrast with 'due hardship' or legal hardship. This expression in Section 35F should, therefore, embrance hardship caused by a prima-facie illegal or untenable order as well. This construction flows from the meanings, interalia, ....
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....aken into consideration for deciding the question of 'stay' of an order under appeal within the scope of inherent incidental and ancillary powers of an appellate authority, it has to consider the factor of only financial hardship in respect of dispensing prior deposit vis-a-vis maintainability of the appeal under the Act. Repercussions of not granting a "stay" are not as far-reaching as that of not dispensing with the prior deposit in an appropriate case. In the former event, an appeal would be heard and decided on merits and the appellant has a chance of vindicating his stand; in the latter case he is debarred at the threshold and the very appellate remedy gets extinguished. 10. Accordingly, we consider that all relevant factors have to be taken into consideration in coming to a conclusion of 'undue hardship' in terms of the proviso to Section 35F. 11. Applying the above general observations to the facts and circumstances of this case including its prima-facie strength and the liquidity position of the appellant, (and without commenting in particular on any single fact since the matter is sub-judice before us) we dispense with the prior deposit of duty demanded sub....
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....d with AIR 1971 S.C. 2280 - Navin Chandra Choteylal v. the Central Board of Excise and Customs]; (b) the different criteria that have to be adopted in the grant of stay ordinarily and dispensation of the mandatory prerequisite of a deposit, in consequence of the distinction between the two; (c) the intent of the legislature in providing for a deposit mandatorily and dispensing with such requirement for "undue hardship"; (d) the consequences of construing "undue hardship" to mean and imply all such criteria as are applicable to the grant of stay ordinarily. A legislative provision cannot be a more supererogation and no construction is to be adopted that may render it so. There need be no provision for a mere stay which could, even otherwise, be ordered on such considerations as may be germane, like e.g. existence of prima facie case, in exercise of the incidental or ancillary powers of the Tribunal. Is the expression "undue hardship" to be construed to mean and imply all those criteria which may be germane for the grant of stay? (e) the necessity to interpret the order of the Hon'ble Supreme Court in the Spencer case aforesaid in the context of the pleadings facts on rec....
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....he Collector of Central Excise (Appeals), Calcutta". The "prayer" at the end of the appeal read as follows :- "Since the amount is not payable, it is prayed that the recovery may kindly be stayed and the appeal is posted for hearing very early as recurring demands are being issued". 3. It may be mentioned that no specific reference has been made in the application to Section 35F, Central Excises and Salt Act, or to waiver of the pre-deposit required in terms of that Section. Nevertheless, before the Special Bench (consisting of learned Brothers S/Shri M. Gouri Shankar Murthy and P.C. Jain) which heard the application, the question of waiver of pre-deposit not only appears to have been mentioned but also to have been given predominance. This would be seen from the first para in the order of Member, Shri P.C. Jain, which reads as under :- "Short question involved in this stay application is whether in considering dispensation of prior deposit of duty and/or penalty in terms of Section 35Fof the Central Excises and Salt Act, 194 (hereinafter referred to as the Act) question of financial hardship alone is to be considered by the Tribunal, while dispensing with the prior d....
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.... of difference as framed by the two Members. If this was not so, and it was proposed to have the hearing on the basis of a point or points different from those formulated by the two Members, the two parties should be apprised of the points as formulated by the Members and given an opportunity to make their submissions thereon. 8. Shri Ajwani was informed that it had become necessary for the President to formulate the point of difference because the two learned Members could not agree on a common formulation. At the instance of the Bench, Shri R.P. Sharma, JDR, read out the views of the two learned Members as to what the points of difference were. Shri Ajwani then accepted that the question as framed by the President and communicated to the two parties covered the basic point of difference between the two learned Members as expressed by them. 9. Shri Ajwani then made a further submission that the two learned Members should have included another point of difference which according to him would run somewhat as follows :- "Whether decisions of other Benches would not be binding on another Bench having concurrent and identical jurisdiction." 10. On being invited fo....
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....1984 of the Hon'ble Supreme Court in the case of Messrs. Spencer & Co. Ltd., amended on 30-10-1984 on SLP No. 7762 of 1984 had similarly not been reported. He was informed that with this point in mind the Registry had been directed to make a compilation of copies of such unreported judgements/orders, of which there were six. Copies of the compilation were given by the Court Master to learned representatives of both sides. Shri Ajwani filed copies of the Tribunal's order No. 368/1984A dated 29-5-1984 in the case of Messrs. Spencer & Co. Ltd., leading to the above mentioned order of the Hon'ble Supreme Court. These were also taken on record. The hearing of the application was then proceeded with. 14. At the outset, it may be made clear that the present Bench is not required to reach any decision with reference to the facts of the particular case. As regards financial hardship, the applicants have frankly admitted (and this was confirmed by Shri Agarwal) that they are not taking this plea. As to whether the applicants deserved relief on the basis of a prima facie case, balance of convenience, etc., no specific finding has been given by Member, Shri Murthy, having regard to his....
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....d" edited by John B. Saunders, 2nd Edition (Vol. II, p. 347). Therein there is reference to a judgment of an overseas court to the effect that "The word 'hardship' is capable of being descriptive of adverse repercussions of every kind..... It may be physical or mental.....". He also cited AIR 1975 SC 415 (Sterling General Insurance Co. Ltd. v. Planters Airways Pvt. Ltd.) wherein it was held, in interpreting the expression "undue hardship", that "undue" must mean something which is not merited by the conduct of the claimant, or is very much disproportionate to it". This had reference, to the question of extension of time to refer a, matter to arbitration. Shri Agarwal also referred to Law Lexicon by T.P. Mukherjee, wherein a similar definition has been given. He also referred to Stroud's Judicial Dictionary (2th Edition, p. 1210) and Law Lexicon by Venkataramaiya (2nd Edition, p. 994), wherein it has been stated that the term "hardship" includes any matter of appreciable detriment, whether financial, personal or otherwise. 19. Shri Agarwal thereafter took up certain judicial and other decisions relating to the question of stay or waiver of pre-deposit. The Calcutta High Cour....
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....den duty of the court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against public authority." It followed from this that each and every fact of the case before the Bench had to be gone into. Further, unlawful deprivation of money was by itself a hardship. Therefore, whenever a prima facie case was shown to exist, stay should be granted without going into the financial position of the applicant. 23. Shri Agarwal also cited the decision of the Allahabad High Court in the case of U.P. Lamination, reported in 1985 (20) E.L.T. 243 (All.), where the decision of the Hon'ble Supreme Court in the case of Dunlop India Ltd., had been referred to. In para 5 of its order, the Hon'ble High Court had observed that "the only declaration of law [arising from the Dunlop India case] which can be said to be binding in respect of interim order is that it is not only the prima facie case on which an interim order should be granted in taxation matters but the C....
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.... 28. On the first question, Shri Agarwal stated that he agreed with the view of Member, Shri Murthy, but went on to say that in most cases there were parallel applications for stay and waiver of pre-deposit, and the same criteria should apply to both. (He had already referred to similar observations in para 9 of the order of Member, Shri Jain). 29. As regards the second question, Shri Agarwal replied that in the interests of justice such detailed examination should be made even while disposing of applications for waiver of pre-deposit. 30. Replying on behalf of the Collector, Shri P.K. Ajwani raised a number of preliminary issues. He submitted that there were a number of decisions of Benches of the Tribunal, including Special Bench A, to the effect that only the financial position should be considered for purposes of Section 35F. He submitted that the decision of other Benches having concurrent or identical jurisdiction would be binding on the present Bench. In the present case, the President should be considered as being a Member of a three-Member Special Bench. In this view he, as well as the entire Bench, would be bound by the decisions of previous three-Me....
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....te that in the case of Tata 'Engineering & Locomotive Co. Ltd., (TELCO), where the Tribunal had rejected a stay application (sic), on the basis of a satisfactory liquidity position, the Supreme Court had subsequently given a direction to the Tribunal to decide the appeal within a specified time limit, without prior deposit of the duty demanded. 36. He submitted however that the Hon'ble Supreme Court in its order did not mention a "prima facie case", or interpret the expression "undue hardship". 37. Referring to the wording of Section 35F, Shri Ajwani pointed out that the requirement was of deposit of duty or penalty. In other words, the burden on the appellant was financial in nature. The expression "undue hardship" should be read in its context, to mean that the grounds for waiver of the deposit should also be financial in nature. Shri Ajwani then referred to the Tribunal's order in the case of R.K. Containers & Steel Fabricators, reported in 1986 (7) ECR 109 = 1986 (24) E.L.T. 400. In that case a three-Member Special Branch had held that the expression "undue hardship" has to be related to the pecuniary difficulties in making the deposit, and that the existence of....
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....Central Excise, Varanasi in which stay applications were filed. The Collector rejected all the stay applications except one which has been allowed in part. Under the proviso to Section 35F, the appellate authority may grant stay if the demand levied would Cause undue hardship to the person appealing. The Collector should pass a speaking order taking into account this aspect of the matter. He may also consider whether any part of the demand is prima facie barred by time before passing appropriate orders. With these observations the writ petition is dismissed. Shri Ajwani submitted that this was a very brief order. The High Court had only said that a prima facie case may also be considered, but there was no direction to the Collector to this effect. 43. Shri Ajwani then referred to the order of the Andhra Pradesh High Court in the case of Srinivasa Cement Works (para 20 supra). He submitted that the question there was of grant of a stay and not waiver of pre-deposit under Section 35F. That decision would, therefore, not be relevant to the present question. 44. Referring to the order of the Tribunal in the case of Bata India (para 31 supra), Shri Ajwani submitted that th....
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....t went back to the Tribunal seeking further indulgence, which was refused. It was against this background that the High Court passed its order staying the Tribunal's earlier order. The judgement contained an interpretation of the observations of the Supreme Court in the Dunlop India case, relating to the making of interim orders. There was no question of a prima facie case being taken into consideration. 50. Dealing with the argument of Shri Agarwal that the right of appeal was a statutory right, Shri Ajwani stated that he had no quarrel with this proposition. However, that statutory right was circumscribed by the provisions of Section 35F. He cited the decision of the Supreme Court in the case of Navin Chandra Chhotelal, reported in AIR 1971 S.C. 2280. In that case the Supreme Court had held that where the pre-deposit was not made the appeal could be dismissed. 51. As regards the interpretation of the expression "undue hardship", Shri Agarwal had referred to various dictionaries, etc., with special reference to the meaning of "hardship". Shri Ajwani submitted that he had no quarrel with the proposition that the expression "undue hardship" should be understood in th....
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....f the occasion arose. 57. In reply, Shri Agarwal stated that he had not advanced his arguments on the basis of distinguishing one case from another. He relied on the authorities cited by him. 58. On Shri Ajwani's argument that orders passed by the same Bench should be the same, Shri Agarwal referred to the judgement of the Supreme Court in the case of Empire Industries Ltd., reported in 1985 (20) E.L.T. 179. He read from para 53 of that judgement wherein the Supreme Court had observed as follows :- "Every Bench hearing a matter on the facts and circumstances of each case should have the right to grant interim orders on such terms as it considers fit and proper and if it had granted interim order at one stage, it should have right to vary or alter such interim orders." (Shri Ajwani intervened to say that the Supreme Court was referring to interim orders and not orders under Section 35F). 59. As regards the definition of "undue hardship", Shri Agarwal stated that no doubt this was with reference to the making of a deposit. He had however tried to explain what was meant by "undue hardship", and he relied on the authorities which he had cited. 60. I have c....
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....ect is quite clear. The reference has to be to the President and the points of difference have to be decided by him. In view of this clear wording there would be no scope for the President to refer the matter to a Larger Bench. 63. Again, it may be noted that the phraseology used in the proviso is different from that in the main clause. The main clause states that the point or points of difference shall be decided according to the opinion of the majority of the Members including those who first heard it. In other words, the Members who make the reference and the Member or Members who hear it form a single Bench. However, the' wording of the proviso is significantly different. It states that the points of difference shall be decided by the President. It is clear from this that the President has been entrusted with a specific responsibility to reach a decision on the points of difference. No doubt, in doing so he would have regard to all relevant aspects, including the precedents which may have been cited. The wording would not, however, in any way support the argument of Shri Ajwani that the President should act as if the matter had been heard, in the first instance by a thr....
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.... the incidental and ancillary powers of the appellate authority [vide the decision of the Supreme Court in the Income-tax case of ITO v. Mohammed Kunhi, reported in AIR 1969 S.C. 430, which has been followed by the Andhra Pradesh High Court in the Central Excise case of K.V.N. Prasad & Others v. the C.B.E.C., reported in 1978 E.L.T. (3 697). 67. based on the difference in law, Member, Shri Murthy has taken the view that the considerations applicable to the two questions are not identical. According to his observation in the Exquisite Impex case, the appellate authority can take into account the existence of a prima facie case while considering grant of stay, whereas for waiver of pre-deposit only the financial position is relevant. Member, Shri Jain, in para 9 of his order under reference, has disagreed with this approach. 68. With great respect to my learned Brother Murthy, I am unable to agree with him that in the matter of the criteria for granting relief there could be any appreciable difference between a stay application and an application for waiver of pre-deposit. When this point was put to Shri Agarwal, he had submitted (vide para 28 supra) that in most case....
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....im in his present order, namely his orders in the case of Parasmal Solanki and Modi Gas and Chemicals, the learned Member had adopted a somewhat similar approach (though his final conclusion is the same, viz., that a prima facie case is not relevant for the waiver of pre-deposit). Thus, in para 5(f) of his order in the case of Parasmal Solanki [1985 (21) E.L.T. 704], quoted in the case of Modi Gas and Chemicals, he has recorded as follows :- "the reasons for prescribing a deposit statutorily as a condition precedent for the hearing of the Appeal - a deposit that could be dispensed with if it would cause undue hardship - are, presumably, identical with those that prompted the Hon'ble Supreme Court in 1985 (89) E.L.T. 22 (S.C.) = 1985 ECR 4 [Assistant Collector of Central Excise v. Dunlop India Ltd.] to deprecate the indiscriminate grant of stay, ostensibly in exercise of the jurisdiction under Article 226 of the Constitution of India". He had placed reliance on those observations to conclude that it is not sufficient to show that a prima facie case exists. 72. For the reasons set out above, I am of the view that the criteria for waiver of pre-deposit should be broadly ....
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....a revision petition to the Central Government and also applied for stay. The Central Government did not pass any orders on the stay application. The Hon'ble High Court observed that the revisional authority ought to have exercised its jurisdiction one way or the other. Instead of referring the case back to the revisional authority, the High Court gave relief to the extent it thought just and necessary. This decision would not be of much help in considering the question before us. 77. Shri Ajwani had referred to the judgement of the Allahabad High Court in the case of Hari Fertilizers (para 42 supra). In its brief order in this case, the High Court had observed that the Collector "may also consider whether any part of the demand is prima facie barred by time before passing appropriate orders". Shri Ajwani had sought to argue from the use of the word "may" that there was no direction to the Collector that the prima facie case should be considered. This is a somewhat surprising argument. When a High Court in such a context uses the word "may", it has to be presumed that it desired that aspect to be considered. In fact, if it appeared that any part of the demand was time-barred....
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....ler and the like". "13. ..... We consider that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the interest (sic)." 79. The above judgement of the Supreme Court has been referred to in the judgment of the Allahabad High Court in the case of U.P. Lamination (para 23 supra), the Allhabad High Court had observed that the only declaration of law (arising from the Dunlop India case) was that in respect of interim orders in taxation matters it is not only the prima facie case on which an interim order should be granted but the Court must further consider if there was balance of convenience in favour of the petitioner. 80. It would therefore appear that out of the various judgments cited, the most important ones for deriving guidance on the present issues are those of the Supreme Court in the cases of Spencer & Co. Ltd., and Dunlop India Ltd., and that of the....
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....e in a different context. In the Dunlop India case the Supreme Court felt it necessary to give guidance to Courts in the matter of making interim orders. In particular, the Supreme Court referred (vide para 7 of the judgement) to various interim orders by Courts which had far-reaching dimensions. It was in that context that the Supreme Court had stressed the need for circumspection and examination of all relevant considerations. Although, as I have observed earlier, the guidelines would be generally applicable in the case of stay orders or orders for waiver of pre-deposit passed by excise and customs authorities, this does not mean that in every case before them the appellate authorities should embark on a very detailed and minute examination of all the facts, circumstances and merits of the case. When this was put to Shri Agarwal (vide paras 27 to 29 supra), his reply was that in the interests of justice such a detailed examination should be made. In my view, this does not flow from the judgements cited. If Shri Agarwal's view were to be accepted, then every hearing of an application for stay or waiver of pre-deposit would become a kind of full-dress rehearsal of the main hearing ....
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....ly happen where the applicant has shown that even on the face of it he has a case which is not merely a prima facie case as ordinarily understood, but something much stronger. One example, which was put to Shri Ajwaril (vide para 54 supra), would be where there has been an evident error in calculation of the penalty amount. Another would be as in the case which was before the Allahabad High Court in the case of Hari Fertilizers (para 42 supra), where the demand is obviously barred by limitation. (Where questions arise as to whether there has been suppression, collusion, etc., and as to whether the normal time limit or the extended time limit would apply, the time-bar may not be accepted as "obvious"). Other cases would be where there is a decision of the Courts, or of the Tribunal itself, clearly in favour of the applicant. In all these cases it could be said that the balance of convenience is clearly in granting waiver of pre-deposit. Where on the very face of it, it is clear that an amount is not due from the applicant, the balance of convenience would not appear to lie in requiring him to deposit that amount, only so that it may be refunded to him a week or a month later. Theref....
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....e construed in its popular sense, that is, that sense which people conversant with the subject matter with which the statute is dealing would attribute to it. He cited a number of cases where this principle had been applied. These deal with the meanings to be attributed to such terms as "vegetables", "coal" and "cotton fabrics". It need hardly be said that interpretation of common nouns like the above is quite different from the interpretation of abstract qualities like "hardship" "truth" or "democracy". Widely varying meanings could be given to such abstract terms by equally intelligent persons, with equal confidence and vehemence. However, even if the principle of the above decisions is accepted, the question would be what class of people would be conversant with the subject of "hardship". Possibly the class of persons most conversant with this term would be the legal profession. We would then have to refer to judicial interpretations. 89. As pointed out by Shri Ajwani, we are not concerned with the term "hardship" in isolation. As regards the expression "undue hardship", I would again agree with Shri Ajwani that the decisions cited by Shri Agarwal had reference to other ....