2010 (2) TMI 627 - SC - Customs

Stay failure to meet export obligation - the Division Bench of the High Court should not have passed the impugned order for deposit of Rs.20,00,000/- for each of the appeals when the Appellate Authority had directed the appellant to make pre-deposit for Rs.5,00,000/- for both the appeals. The second proviso to sub-section (1) of Section 15 of the Act states that in the case of an appeal against a decision or order imposing a penalty or redemption charges, no such appeal shall be entertained unless the amount of the penalty or redemption charges has been deposited by the appellant. The third proviso to sub-section (1) of Section 15 of the Act, however, states where the Appellate Authority is of opinion that the deposit to be made will cause undue hardship to the appellant, it may, at its discretion, dispense with such deposit either unconditionally or subject to such conditions as it may impose. Hence, under the Act discretion is vested in the Appellate Authority to dispense with a pre-deposit of penalty either unconditionally or subject to such condition as the Appellate Authority may impose. If in exercise of such discretion, the Appellate Authority in the present case dispensed with the pre-deposit penalty of Rs.1,30,00,000/-in each of the two appeals subject to the appellant depositing a sum of Rs.5,00,000/-, the Division Bench of the Delhi High Court ought not to have enhanced the amount of pre-deposit to Rs.20,00,000/- for each of the two appeals.

Summary

Issues:
Appeal against orders of Appellate Authority for penalty imposition and dismissal of appeals due to failure in pre-deposit.

Analysis:
The appellant, engaged in the export business, failed to meet its export obligations under two Advance Licences issued in 1991. Consequently, show-cause notices were issued, leading to penalty imposition by the Adjudicating Authority under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992. Despite filing appeals against the penalty orders, the Appellate Authority directed a pre-deposit of Rs.5,00,000 for each appeal, which the appellant failed to comply with, resulting in dismissal of the appeals.

The appellant then approached the High Court through a Writ Petition seeking to set aside the orders of the Appellate and Adjudicating Authorities, requesting an extension for the pre-deposit, and seeking more time to fulfill export obligations. The Single Judge dismissed the petition, leading to an appeal before the Division Bench, which allowed the appellant to deposit Rs.20,00,000 in each appeal within 8 weeks. A subsequent Review Application was also dismissed by the Division Bench.

Upon review, the Supreme Court found that the Division Bench's order to deposit Rs.20,00,000 for each appeal was erroneous. Referring to the provisions of Section 15 of the Act, the Court highlighted the discretion vested in the Appellate Authority to dispense with pre-deposit of penalties based on undue hardship. As the Appellate Authority had already directed a pre-deposit of Rs.5,00,000, the Division Bench's enhancement to Rs.20,00,000 was deemed improper.

Consequently, the Supreme Court set aside the Division Bench's order and directed that if the appellant deposits Rs.5,00,000 within two months, the Appellate Authority's orders imposing penalties will be quashed, and the appeals will be heard afresh on merits. The Court allowed the appeals with no costs incurred.