2015 (3) TMI 817 - HC - Customs

Restoration of appeal - Appeal dismissed for non compliance of pre deposit order - Whether the CESTAT is justified in dismissing the Appeal of the Appellant only on failure to pre-deposit and without considering on merits for nonest order passed by the adjudicating authority without jurisdiction? - Held that - even in matters of application seeking stay and waiver of the condition of predeposit, the Tribunal must apply its mind. The Tribunal must take into consideration relevant and germane tests particularly whether a prima facie and arguable case is made out and if there is any financial hardship and whether that aspect has been pleaded and sufficiently proved. Thus, the rights of the parties and their equities have to be balanced. - Tribunal must ensure that it gets adequate time to take up the Appeals and for final disposal, so that the parties and lower authorities are guided not only in terms of interpretation and exposition of law by the Tribunal s final orders and for application to given facts and circumstances. That is equally the duty of the Tribunal as a last fact finding authority and while supervising the subordinate authorities. Tribunal has referred to the conflicting views and opinions of different High Courts. It has also referred to several conflicting decisions and orders of its own and chose to analyse each of them and while deciding an interlocutory application. This is really uncalled for. - Assessee has been completely nonsuited because of its failure to comply with the condition of predeposit of ₹ 1 crore , we are of the view that this Appeal deserves to be allowed partly. If the Appellant before us deposits a sum of ₹ 30 lacs within a period of 6 weeks from today, the Tribunal shall restore the Appeal to its file and decide it on its own merits and in accordance with law, uninfluenced by any tentative and prima facie findings. - Decided conditionally in favour of assessee.

Summary

Issues:
1. Challenge to order passed by Customs, Excise and Service Tax Appellate Tribunal
2. Dismissal of appeal due to failure to comply with pre-deposit condition
3. Substantial questions of law raised in the appeal
4. Justification of pre-deposit amount by the Tribunal
5. Consideration of financial hardship and valuation in the order
6. Discretion exercised by the Tribunal
7. Balance of rights and equities in interlocutory applications
8. Weightage given to evidence and documents
9. Decision on appeal and restoration conditions

Issue 1: Challenge to order passed by Customs, Excise and Service Tax Appellate Tribunal
The appeal challenges the order of the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai, which directed the appellant to deposit a sum of Rs. 1 crore as a condition for seeking dispensation of pre-deposit and stay of recovery.

Issue 2: Dismissal of appeal due to failure to comply with pre-deposit condition
The appellant's appeal was dismissed as they could not comply with the condition of depositing Rs. 1 crore imposed by the Tribunal. Subsequent applications to relieve the appellant from this condition or reduce the amount demanded were also dismissed.

Issue 3: Substantial questions of law raised in the appeal
The appellant raised substantial questions of law regarding the justification of dismissing the appeal solely based on the failure to pre-deposit, the justification of the pre-deposit amount, the applicability of certain provisions of the Customs Act, and the rejection of the appeal by the Tribunal.

Issue 4: Justification of pre-deposit amount by the Tribunal
The appellant argued that the Tribunal's imposition of a Rs. 1 crore pre-deposit condition was unreasonable, especially considering the alleged financial hardship and the lack of proper valuation considerations. The respondent supported the Tribunal's order, stating it was reasonable given the extent of fraud and overvaluation.

Issue 5: Consideration of financial hardship and valuation in the order
The appellant contended that the Tribunal failed to consider financial hardship adequately and did not properly evaluate the valuation aspects required under the Customs Act. They argued that reliance on a certificate from the Consulate in Dubai was insufficient and did not justify the high pre-deposit amount.

Issue 6: Discretion exercised by the Tribunal
The Court noted that the Tribunal must balance the rights and equities of the parties when considering applications for stay and waiver of pre-deposit conditions. The Tribunal's discretion should be exercised judiciously, considering prima facie cases, financial hardships, and relevant tests without passing final orders at the interlocutory stage.

Issue 7: Balance of rights and equities in interlocutory applications
The Court emphasized the importance of maintaining a balance between the rights of parties and the need for a fair consideration of financial hardships and prima facie cases. It cautioned against passing final orders at the interlocutory stage and stressed the need for a judicious exercise of discretion by the Tribunal.

Issue 8: Weightage given to evidence and documents
The Court found merit in the argument that undue importance should not be given to a single document, such as a certificate, and that a broader view considering all materials, including statements under the Customs Act, should be taken. The Tribunal should independently assess factual materials without being unduly influenced by preliminary findings.

Issue 9: Decision on appeal and restoration conditions
The Court allowed the appeal partly, directing the appellant to deposit Rs. 30 lakhs within six weeks to restore the appeal for a decision on its merits. It clarified that the observations in the impugned order were tentative and should not influence the Tribunal during the appeal hearing.

This detailed analysis covers the key issues raised in the legal judgment, addressing the arguments presented by both parties and the Court's findings on each issue.