2004 (10) TMI 96 - HC - Customs

Summary

Issues Involved:
1. Legality of the partial waiver of pre-deposit of penalties.
2. Financial hardship claimed by the petitioners.
3. Validity of Section 129E of the Customs Act.
4. Entitlement to duty drawback.
5. Procedural aspects and interlocutory nature of the Tribunal's order.

Detailed Analysis:

1. Legality of the Partial Waiver of Pre-deposit of Penalties:
The petitioners challenged the partial waiver granted by the respondent, arguing that it was arbitrary and illegal as it did not consider the "undue hardship" that would be caused to them. The respondent required pre-deposit amounts of Rs. 1 crore, Rs. 75 lacs, Rs. 20 lacs, and Rs. 50 lacs for different entities. The court noted that Section 129E of the Customs Act allows the appellate authority to dispense with the deposit of duty or penalty in cases of undue hardship. The court found that the Tribunal exercised its discretion based on relevant material, honestly, bona fide, and objectively. The Tribunal had waived more than 50% of the disputed amount of penalty, which was deemed reasonable under the circumstances. The court concluded that the Tribunal did not misdirect itself or commit any illegality in granting partial waiver.

2. Financial Hardship Claimed by the Petitioners:
The petitioners argued they were not in a financial position to make the pre-deposits. However, the court noted that the petitioners had admitted to exporting goods worth approximately Rs. 40 crores and receiving the amounts through their bankers. The court found that the petitioners did not provide details of where the Rs. 40 crores had gone. The Tribunal had observed that the plea of financial hardship could not be taken at face value and granted partial relief as a matter of grace. The court upheld the Tribunal's decision, noting that the petitioners' claims of financial hardship were not substantiated.

3. Validity of Section 129E of the Customs Act:
The petitioners made a feeble attempt to challenge the validity of Section 129E of the Customs Act based on a judgment in Madia Chemicals Limited v. Union of India. However, the court noted that there was no challenge to the validity of Section 129E in the writ petition. The court also distinguished the case of Madia Chemicals Limited, noting that it involved a different statute and was not applicable to the Customs Act. The court upheld the validity of Section 129E, citing the Supreme Court's interpretation in Vijay Prakash D. Mehta v. Collector of Customs (Preventive), Bombay.

4. Entitlement to Duty Drawback:
The petitioners argued that they were entitled to duty drawback, which the department was illegally withholding. The court noted that the department disputed this claim and that a writ petition for payment of duty drawback had been dismissed by the Division Bench and the Supreme Court. The court found that the argument lacked merit and did not exempt the petitioners from making the pre-deposits.

5. Procedural Aspects and Interlocutory Nature of the Tribunal's Order:
The court noted that the Tribunal's order was interlocutory and that no final order had been passed as the appeal was pending. The Division Bench in M/s. L. Kant Paper Mills (P) Ltd. v. CEGAT had held that it was not proper to interfere under Article 226 of the Constitution against an interim order, particularly when there was no apparent error on the face of the order. The court upheld this view, noting that the Tribunal had acted within its jurisdiction and there was no manifest error of law.

Conclusion:
The court permitted the petitioners to amend their writ petition to include the relief sought. The court found that the Tribunal had exercised its discretion appropriately in granting partial waiver and that the petitioners' claims of financial hardship were not substantiated. The validity of Section 129E of the Customs Act was upheld, and the argument regarding duty drawback was dismissed. The court directed the matter back to the Tribunal to reconsider the petitioners' offer to deposit a consolidated amount of Rs. 50 lacs. The writ petitions were disposed of without any order as to costs.