1999 (8) TMI 982 - HC - Central Excise

Summary

Issues Involved:
1. Scope of jurisdiction under proviso to Section 35F of the Central Excise Act, 1944.
2. Interpretation of 'undue hardship' in the context of pre-deposit of duty/penalty.
3. Examination of prima facie merits in determining 'undue hardship'.

Summary:

1. Scope of Jurisdiction under Proviso to Section 35F:
The judgment addresses the conflict between two Single Bench judgments regarding the scope of jurisdiction under the proviso to Section 35F of the Central Excise Act, 1944. The referring judge noted that while M/s. Auma (India) Ltd. emphasized examining prima facie merits of the dispute, M/s. Sunshine Tube Pvt. Ltd. focused solely on financial hardship.

2. Interpretation of 'Undue Hardship':
The petitioner, a public limited company, challenged the demand for additional duty without a show-cause notice, which was initially set aside by the High Court of Madras. Upon re-issuance of the show-cause notice, the petitioner argued that the additional consideration should be added to the wholesale price, not the assessable value. The Appellate Authority partially waived the pre-deposit requirement, directing the petitioner to deposit Rs. 15 crores. The petitioner contended that the Appellate Authority failed to consider the strong prima facie case and relied on the decision of the Special Bench of CEGAT, affirmed by the Supreme Court.

3. Examination of Prima Facie Merits:
The court examined various judgments, including those from the High Courts of Calcutta, Bombay, Delhi, Karnataka, and Kerala, which supported the view that a strong prima facie case should be considered in determining 'undue hardship'. The court endorsed the view in M/s. Wipro Infotech Ltd., holding that authorities must balance the interests of the exchequer and fairness, considering the prima facie merits of the dispute. The court clarified that 'undue hardship' includes cases where the amount demanded is not legally due, and financial hardship is not the sole criterion.

Conclusion:
The court concluded that the petitioner had a strong prima facie case, supported by binding precedents, and insisting on the pre-deposit would cause undue hardship. The court modified the Appellate Authority's order, granting a complete waiver of the pre-deposit requirement, subject to the condition that the petitioner would pay the amount with interest if the appeal failed. The Appellate Authority was directed to dispose of the appeal without insisting on the pre-deposit. The judgment in M/s. Sunshine Tube Pvt. Ltd. was not approved to the extent it conflicted with this view.