2018 (11) TMI 1515 - HC - Central Excise

Full waiver of pre-deposit - undue hardship - whether the Tribunal, having accepted the plea of undue hardship had discretion or obligation under the law to grant full waiver? - Section 35F of CEA - Held that - There are two important expressions in Section 35-F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient - 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 other aspect relates to imposition of condition to safeguard the interest of Revenue. This is an aspect which the Tribunal has to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the interests of the Revenue. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate conditions as required to safeguard the interests of revenue. In view of the decision of Supreme Court in the case of Benara Valves 2006 (11) TMI 6 - SUPREME COURT OF INDIA , there is no hesitation to hold that even though the Tribunal is satisfied with regard to undue hardship, it has discretion to grant waiver either full or in part. What should be relevant consideration has been indicated in the aforesaid judgment of the Supreme Court. We are inclined to answer in the manner that even though in a given case, the Tribunal has held that a case of undue hardship is made out, it is within the jurisdiction of the Tribunal to grant full or partial waiver of pre-deposit. Liberty granted to the appellant to approach the Tribunal to satisfy on what relevant considerations it claims full waiver of pre-deposit - appeal disposed off.

Summary

Issues:
1. Whether the Tribunal erred in not granting full waiver despite being satisfied with undue hardship and claim of waiver?

Analysis:
The appellant, aggrieved by the order of the adjudicating authority and Commissioner (Appeals), appealed before the Customs, Excise and Service Tax Appellate Tribunal seeking a waiver of pre-deposit due to undue hardship. The Tribunal initially passed an order against the assessee but later considered a plea for partial waiver, leading to the current appeal based on a substantial question of law related to the Tribunal's discretion in granting full waiver.

The legal position regarding the exercise of discretion by the Tribunal in granting waivers is governed by Section 35-F of the Act. The section mandates that the Tribunal may dispense with the deposit of duty demanded or penalty levied if it would cause undue hardship to the appellant, subject to imposing conditions to safeguard the interests of revenue. The expressions "undue hardship" and "safeguard the interests of Revenue" play a crucial role in the Tribunal's decision-making process.

To establish "undue hardship," the applicant must prove that the burden imposed is disproportionate to the requirement itself and the benefit derived from compliance. The term "undue" signifies an excessive hardship beyond what the circumstances warrant. Additionally, the Tribunal must consider imposing conditions to protect the revenue's interests, highlighting the dual aspects of undue hardship and revenue protection as key considerations in waiver applications.

The appellant argued that if the demand itself was impermissible under the law or already decided by a higher court, full waiver should be considered, emphasizing the importance of a strong prima facie case. Several judgments were cited to support this argument, underscoring the need for a thorough examination of the circumstances before deciding on the extent of waiver to be granted.

Based on the Supreme Court's ruling in Benara Valves, the Court held that the Tribunal, even when acknowledging undue hardship, retains the discretion to grant either full or partial waiver. While there is no fixed formula for determining the extent of waiver, the relevant considerations outlined by the Supreme Court must guide the Tribunal's decision-making process. The Court refrained from delving into the specifics of the case but granted the appellant liberty to present relevant considerations for full waiver before the Tribunal, with an expectation of a prompt decision within three weeks.