2014 (7) TMI 883 - HC - Central Excise

Waiver of pre-deposit - SEZ unit - Clearance of goods to DTA units without following the prescribed procedure - duty was confirmed holding that the material, which was cleared are not books within the meaning of Customs Tariff Heading 49.01, and that it will fall under 49.11 and not exempt from duty - notification No.21/2002 - Held that - there is a prima facie case in favour of the appellant that the goods are not liable to duty in terms of the exemption in Notification No.21/2002 Customs. The above fact, in the light of the Supreme Court decision in Gujarat Prestorp Electronics Ltd. s case 2005 (8) TMI 657 - Supreme Court of India , was not considered by the Tribunal for deciding the prima facie case. Undue hardship to such person and safeguard the interests of the Revenue - Held that - It has become an unfortunate trend to casually dispose of stay applications by referring to decisions in Siliguri Municipality v. Amalendu Das, 1984 (1) TMI 63 - SUPREME Court and CCE v. Dunlop India Ltd., 1984 (11) TMI 63 - SUPREME Court cases without analysing factual scenario involved in a particular case. For a hardship to be undue it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. - The word undue adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant. We find much force in the plea of the appellant regarding undue hardship and financial difficulty in pursuing the appeal on payment of the pre-deposit as ordered by the Tribunal. The same, therefore, requires to be modified considering the prima facie case of the appellant. - appellant is granted waiver of the entire amount ordered to be paid as pre-deposit by the Tribunal. - stay granted - decided in favor of assessee.

Summary

Issues Involved:
1. Justification of the Tribunal's order for pre-deposit of duty.
2. Classification of goods under Chapter Heading 49.01 or 49.11.
3. Consideration of financial hardship for waiver of pre-deposit.

Detailed Analysis:

1. Justification of the Tribunal's order for pre-deposit of duty:
The appellant contested the Tribunal's direction for a pre-deposit of Rs. 20,00,000 towards a total demand of over Rs. 50 lakhs. The Tribunal had concluded that there was no prima facie case for the appellant and noted a cash flow of Rs. 3.8 Crores for the year ending 31st March 2011, despite a reported loss of Rs. 25 Lakhs. The Tribunal considered the financial hardships but still directed the pre-deposit to safeguard the interests of the Revenue. However, the High Court found that the Tribunal did not adequately consider the Supreme Court's decision in Gujarat Prestorp Electronics Ltd., which supported the appellant's claim that their goods were exempt from duty under Chapter Heading 49.01. The High Court concluded that the Tribunal's order caused undue hardship and set aside the pre-deposit requirement.

2. Classification of goods under Chapter Heading 49.01 or 49.11:
The primary dispute was whether the goods cleared from the Special Economic Zone to the Domestic Tariff Area fell under Chapter Heading 49.01 (which includes printed books and similar printed matter and is duty-exempt) or under the residual heading 49.11 (which covers other printed matter and is subject to duty). The Tribunal acknowledged a classification dispute but leaned towards 49.11 without fully considering the Supreme Court's ruling in Gujarat Prestorp Electronics Ltd. that emphasized the precedence of specific headings like 49.01 over residual headings. The High Court highlighted that the Tribunal failed to consider this precedent, which established that the goods in question should be classified under 49.01 and thus be exempt from duty.

3. Consideration of financial hardship for waiver of pre-deposit:
The appellant argued that the pre-deposit would cause undue hardship, citing a carry-forward loss of Rs. 25,46,881. The Tribunal noted the appellant's financial inflow but did not sufficiently weigh the financial hardship against the prima facie case. The High Court referred to the Supreme Court's decision in Benara Valves Ltd., which emphasized that undue hardship must be considered in the context of the appellant's financial condition and the prima facie merits of the case. The High Court found that the Tribunal's order did not adequately balance these factors and thus warranted modification to grant a waiver of the pre-deposit.

Conclusion:
The High Court set aside the Tribunal's order requiring a pre-deposit, granted a waiver of the entire amount, and directed the Tribunal to dispose of the appeal expeditiously. The Tribunal was instructed to consider the appeal on its merits without being influenced by the observations made in the interlocutory application.