TaxTMI 
TaxTMI 
1994 (12) TMI 169
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....he point of irreparable losses which the company may suffer on account of requirement of the depositing any amount. This contention may also be examined in the light of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and the objects under which such restrictions have been made". 2. As a consequence of the above order, the appellants were issued notice for hearing the stay petition on the above issue. 3. We have heard Shri G.L. Rawal, ld. Advocate for the appellants and Shri S.K. Sharma, ld. JDR for the Revenue. 4. Shri G.L. Rawal, ld. Advocate vehemently argued his case and submitted that the Hon'ble High Court has been given specific direction to consider the irreparable losses which the company may suffer on account of requirement of the depositing the duty amount of Rs. 5 lakhs, as also given a direction to examine this point in the light of the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 and the objects under which restrictions have been made. Pointing out to the provisions of the said Act and the judgment rendered by Hon'ble Supreme Court in the case Maharashtra Tubes Ltd. v. Sta....
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.... the option of winding up of the unit can be resorted to". Further reading the judgment, the ld. Advocate submitted that in para 14 of the said judgment, the Supreme Court had categorically laid down that if the financial institution and Banks or statutory Corporations are permitted to resort to independent action in total disregard of the pending inquiry under Sections 15 to 19 of the 1985 Act, then the entire exercise under the said provisions would be rendered nugatory by that time. Therefore, the ld. Counsel vehemently submitted that once an order for declaring a unit as sick unit has been passed, then the recovery proceedings should stop, inasmuch as, even due payments required or task payments should also be withheld. This is only to enable the unit to revive. He submitted that this is a view expressed by Calcutta High Court also in the case of Himalaya Rubber Products Ltd. v. Board for Industrial & Financial Reconstruction as held in 1992 (61) E.L.T. 210. In this judgment, the recovery of sales tax was also considered and the Court held that withholding of the Sales Tax declaration forms on account of non-payment of arrears of Sales Tax dues is a similar process such as exec....
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....eposit an amount of Rs. 5 lakhs within a period of three months from 29-10-1993 as against the duty liability of Rs. 14,50,267.00 imposed on the applicants under the impugned order passed by the Collector of Central Excise, Jaipur. The appellants thereafter moved a writ petition before Hon'ble High Court of Rajasthan. The Court has directed vide its stay order dated 10-2-1994 as follows :- "The arguments of both the learned counsel have been heard. To grant or not to grant or partly grant the stay is discretion of the Tribunal and this court is not exercising the power as an appellate authority in respect of the orders passed by the Tribunal particularly against an order which is of interlocutory nature. The special circumstances which have been pointed out in the present case shows that the Tribunal has not examined the matter of the petitioners in the light of one of the requirement for considering the stay application, that is, irreparable losses which the company may suffer if it is directed to make the payment of Rs. 5 lacs as a pre-condition for entertainment of the appeal. This contention has force. Exercise of power under Section 35F of the Act no doubt is not a step for....
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....ions of the SICA, 1985, that irreparable loss would be caused to the applicant company if they are to make any pre-deposit in terms of Section 35F of the CESA, 1944. Application of the learned advocate for the applicants in my view is not sustainable. It is difficult to imagine any irreparable loss on account of pre-deposit of any amount. Pre-deposit of an amount in terms of Section 35F is a condition precedent for hearing the appeal under Section 35F of the CESA, 1944, as held by the Hon'ble Supreme Court in the cases of (1) Navin Chandra Chottelal v. CBEC & Ors. - 1981 (8) E.L.T. 679 (SC) = 1971 (3) SCR 357 and (2) Vijay Parkash D. Mehta v. C.C. - 1989 (39) E.L.T. 178 (SC) = 1988 (18) ECR 369. Right of appeal, no doubt a statutory right is a conditional one in terms of provisions of Section 35F and in view of the rulings of the Supreme Court, mentioned supra. The applicants, therefore, cannot claim it as a matter of right. The provisions of Section 35F of CE & SA, 1944 would not be overridden by provisions of Section 22 of SICA, 1985. 10. Learned advocate has, however, laid great stress on a very recent judgment of the Supreme Court in the case of Maharashtra Tubes Ltd. v. Sta....
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.... hardship' would be caused to the applicants such pre-deposit is not dispensed with. Undue hardship is examined by the Tribunal from various angles such as strong prima facie merits in the case of the appellants/applicants, acute financial hardship etc., as has been laid down by the Hon'ble Supreme Court in the case of Spencer & Co. Ltd. quoted in Tribunal's judgment in the case of Jayashree Insulators Ltd. v. Collector of Central Excise, Calcutta-II [1987 (28) E.L.T. 279 (Tribunal). Observations of the Supreme Court are as follows :- "We are in agreement with the contention of the counsel for the petitioner that the expression `undue hardship' occurring in the proviso to Section 35F of the Central Excises & Salt Act, 1944, would include consideration, inter alia of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that aspect has been completely ignored as was contended by counsel. With these observations, the special leave petition is dismissed." It will, therefore, be observed that the Tribunal is not merely to take the prima facie merits of the case but also the aspect of liquidity possesse....
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....L. Peeran) Member (J) 28-3-1994 13. [Order per : Lajja Ram, Member (T)]. - The point of difference, referred to me, is whether in the facts and circumstances of the case, the miscellaneous application, seeking modification of the Tribunal's stay order dated 20-10-1993, filed by M/s. Nirmal Steel Tubes (I) Limited, in pursuance of the orders passed by the Hon'ble High Court of Rajasthan, is to be allowed, or not. 14. The brief facts of the case are contained in the stay order passed by the Tribunal on 29-10-1993, and in their respective orders proposed by the learned Member (J), Shri S.L. Peeran and the learned Member (T), Shri P.C. Jain, on the applicant's miscellaneous application, referred to above. Under stay order dated 29-10-1993, the applicants were directed to pre-deposit an amount of Rs. 5 lakhs within a period of 3 months, from the date of the order, as against the duty liability of Rs. 14,50,267/- imposed on the applicants under the impugned order passed by the Collector of Central Excise, Jaipur. The learned Member (J) has proposed that the deposit of the amount of Rs. 5 lakhs as directed by the Tribunal under their stay order dated 29-10-1993, be waived and ....
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....s left the matter to be decided by the Tribunal in the light of their observations, and that the observations of the Hon. High Court have been dealt with by the learned Member (T), and he has come to a decision that no modification was called for in the stay order already passed by the Tribunal. He relied upon the Madras High Court decision in the case of Tamil Nadu Chromates Limited v. Union of India, reported at 1994 (70) E.L.T. 512 (Mad.) 18. In rejoinder, the learned Advocate stated that the various questions raised by the learned JDR had been dealt with by the Hon. Rajasthan High Court. 19. I have carefully gone through the matter. There were allegations against the appellants that they had cleared the excisable goods without obtaining Central Excise licence, without observing the Central Excise formalities and procedures, and without payment of any Central Excise duty. The show cause notice was issued on 9-10-1992, and the period involved was from 1-4-1991 to 25-4-1992. Relying upon the Tribunal's decision in the case of Calcutta Steel Industries v. C.C.E., 1991 (54) E.L.T. 90 (Tribunal), the Collector of Central Excise, Jaipur confirmed the demand of Rs. 14,50,267/-. C....
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....ating authority the duty demanded or the penalty levied : Provided that where in any particular case, the Collector (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Collector (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue." It is seen that while the provision regarding deposit of the duty demanded and the penalty levied during the pendency of the appeal is couched in mandatory terms, exception has been provided in case where under the mandatory provision of pre-deposit, undue hardship could be caused to the person desirous of appealing against the decision or order appealed against. The expression `Undue hardship' has not been explained in the Section but it appears to be comprehensive in nature. Decision under the proviso is a matter of judicial discetion of the Tribunal. 21. While exercising discretionary powers to consider exemption from the mandatory provision of Section 35F of the Act, under the proviso to that Section, the ....
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....egistered for not less than seven years) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year." "22. Suspension of legal proceedings, contracts, etc. (1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority." ....
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....viable sick industrial companies as quickly as possible. It also states that it would also be equally imperative to salvage any productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of these companies. Having the above factors in mind, the Statement of Objects and Reasons for enacting the said law states that a need has, therefore, been felt to enact in public interest a legislation to provide for timely detection of sickness in industrial companies and for expeditious determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch." Both `execution' and `distress' relate to methods of recovery of monies due from the industrial company. Thus, it is seen that the provisions of Section 22 of the Act of 1985 have no bearing on the exercise of the discretionary powers by the Tribunal to provide justice to the parties before it. 25. In the case of Maharashtra Tubes Limited and O....
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....ll not apply." 26. Thus, I consider that the judicial discretion of the Tribunal in taking a view under the proviso to Section 35F of the Act, is not circumscribed, or controlled, either way, by the findings of the BIFR. This could, however, be one of the many considerations for coming to a decision by the Tribunal whether the deposit of duty demanded or penalty levied would cause undue hardship to the petitioner or not. 27. The matter before the Hon'ble Gujarat High Court in the case of Testeels Limited, Ahmedabad v. Radhaben Ran Chhodlal Charitable Trust, Ahmedabad, AIR 1988 Guj. 213 related to winding up proceedings and have no relevancy to the facts of the present case. In the case of Himalaya Rubber Products Limited v. BIFR, 1992 (61) E.L.T. 210 (Calcutta), the Calcutta High Court was concerned with the refusal of the sales tax authority to give declaration forms, in Form `C', under Rule 4 of the Sales Tax Act, 1956. The Sales Tax authorities refused to issue declaration forms on the ground of petitioner's failure to pay the arrears of sales tax dues. The Calcutta High Court held in para 36 of their judgment that for the purposes of Section 22(1) of the 1985 Act, withhol....