2013 (5) TMI 98 - HC - Customs

Pre deposit Condition precedent for entertaining the appeal Petitioner submits it cause undue hardship The DRI Officers intercepted a container of the petitioner and proceeded against the petitioner by that the goods did not possess the basic shape of the shoe upper and more than 50% of the consignment was unusable/used waster and the actual value of the goods was declared wrongly by the petitioner accordingly penalty of Rs.50 lakhs was imposed u/s 114 and 114-A in addition to recovery of the drawback amount. Petitioner filed appeal before the first respondent-CESTAT, the CESTAT came to the conclusion to entertain the appeal on condition of pre-deposit to be made by the petitioner, as extracted above. Held that - In this case, the CESTAT took into account all the above legal principles and was lenient in ordering only Rs.20 lakhs as pre-deposit as against Rs.50 lakhs, by waiving the balance penalty and the drawback amount in this regard, it is worthwhile to notice a decision of a Division Bench of this Court reported in Trendy Moods Vs. Customs, Excise and Gold Control 2008 (12) TMI 215 - HIGH COURT OF JUDICATURE AT MADRAS , wherein, the Division Bench, after taking into account the various decisions of the Supreme Court, for and against, ultimately came to the conclusion that the capacity of the appellant therein to pay the amount having been noticed and in the absence of any financial burden, it cannot be construed that there is an undue hardship for the appellant therein to resort to claim waiver of pre-deposit. Hence, it is not proper for the petitioner to approach this Court and challenge the impugned order of the CESTAT. Considering the submissions of the petitioner, he shall go before the first respondent-CESTAT and comply with the impugned order of the CESTAT, within a period of two weeks from the date of receipt of a copy of this order.

Summary

Issues Involved:
1. Legality of the pre-deposit condition imposed by the CESTAT.
2. Assessment of undue hardship and financial burden on the petitioner.
3. Validity of the penalty and recovery orders under Sections 114 and 114-AA of the Customs Act.
4. Authority of the Customs Department to issue detention notices under Section 142 of the Customs Act.

Detailed Analysis:

1. Legality of the Pre-Deposit Condition Imposed by the CESTAT:
The petitioner challenged the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) that required a pre-deposit of Rs. 20 lakhs for entertaining the appeal. The petitioner argued that this condition was too harsh and did not consider the undue hardship and financial burden on him. The court noted that the CESTAT had considered the entire material on record and concluded that a pre-deposit was necessary. The court upheld the CESTAT's order, stating that the tribunal had adopted a lenient approach by reducing the pre-deposit amount from Rs. 50 lakhs to Rs. 20 lakhs and waiving the balance penalty and drawback amount. The court found no merit in the petitioner's argument and confirmed the CESTAT's order.

2. Assessment of Undue Hardship and Financial Burden on the Petitioner:
The petitioner contended that the pre-deposit condition imposed by the CESTAT caused undue hardship and financial burden. The court referred to the principles laid down by the Supreme Court and other judgments, emphasizing that the capacity to pay, financial burden, and undue hardship must be considered while deciding on the waiver of pre-deposit. The court observed that the petitioner had not established undue hardship or financial burden before the CESTAT and had only raised these issues in the writ petition as an afterthought. The court concluded that the CESTAT had considered the prima-facie case and balance of convenience and had taken a lenient view. Therefore, the petitioner's plea was not sustainable.

3. Validity of the Penalty and Recovery Orders under Sections 114 and 114-AA of the Customs Act:
The petitioner was penalized under Sections 114 and 114-AA of the Customs Act for his involvement in fraudulent transactions related to the export of goods with misdeclared values. The original authority imposed a penalty of Rs. 50 lakhs and ordered the recovery of Rs. 1.37 crores jointly and severally from the petitioner. The CESTAT, while entertaining the appeal, directed the petitioner to pre-deposit Rs. 20 lakhs towards the penalty. The court noted that the penalty was commensurate with the gravity of the offense committed by the petitioner. The court found that the CESTAT had taken a balanced approach by waiving the balance penalty and drawback amount and ordering a reduced pre-deposit. The court upheld the validity of the penalty and recovery orders.

4. Authority of the Customs Department to Issue Detention Notices under Section 142 of the Customs Act:
The Customs Department issued a detention notice under Section 142 of the Customs Act for the recovery of revenue dues. The petitioner argued that the CESTAT's stay order on the recovery of the drawback amount should exonerate him from the recovery proceedings. The court clarified that the stay order did not exonerate the petitioner from the recovery of ineligible drawback, which was held as a joint responsibility by the original adjudicating authority. The court upheld the authority of the Customs Department to issue detention notices for the recovery of revenue dues and found no fault in the issuance of the detention notice in this case.

Conclusion:
The court dismissed the writ petition, confirming the CESTAT's order of pre-deposit and upholding the penalty and recovery orders. The court directed the petitioner to comply with the CESTAT's order within two weeks and instructed the CESTAT to dispose of the appeal on merits and in accordance with the law. The court found no undue hardship or financial burden on the petitioner that would warrant interference with the CESTAT's order.