2005 (4) TMI 77 - HC - Central Excise

Stay/Dispensation of pre-deposit - Undue hardship - Powers Of Tribunal under the proviso to Section 35F - HELD THAT - The Tribunal found in terms of the order dated 10-8-2004 that the appellant did not have a good prima facie case at all in its favour; that the appellant had not even pleaded any financial hardship; that in such circumstances, the Tribunal was of the view that in lieu of the requirement of pre-depositing a sum of Rs. 35 crores towards duty and another sum of Rs. 35 crores towards penalty which was the subject-matter of appeal, deposit of a sum of Rs. 25 crores may be sufficient and deposit of the balance duty and penalty were all waived and stay to that extent granted; but the assessee on coming up with an application for raising additional grounds, additional grounds wherein the assessee sought to contend that the activity was not even excisable, for the first time before the Tribunal, the Tribunal suddenly gets active to sit in appeal over its earlier order dated 10-8-2004, virtually holds that the earlier order is wrong, further holds that prima facie the contention of the appellant as raised in the additional grounds that the products supplied by it to its customers did not involve an occasion to levy excise duty is the correct proposition. It holds on this occasion that the appellant-assessee has a strong prima facie case in its favour and in such view of the matter, deems it proper to modify the earlier interim order to grant full waiver of the pre-deposit requirement in respect of duties demanded which were subject-matter of appeals in Appeal. It is also clear that the Tribunal after having exercised jurisdiction for the purposes of passing an order for waiver of pre-deposit under the proviso to Section 35F of the Act cannot modify that order subsequently like an appellate authority, nor can keep tinkering with the order as and when applications for modification of the order are filed. It is significant to notice that the Supreme Court has ruled that the Tribunal does not even have the power to review its orders while exercising its appellate power u/s 35C of the Act, 2002 (12) TMI 87 - SUPREME COURT C.C.E. v. A.S.C.U. Ltd., when this is the legal position with regard to the exercise of the power in respect of the main appeal itself, it cannot be higher while passing orders in exercise of the power under the proviso to Section 35F, which is a provision stipulating the condition for the maintainability of the appeal. The exercise of power becomes totally arbitrary and if the petitioner complains detriment to its interest before this Court, this Court cannot shut its eyes to such glaring disparities writ large on the face of the record in the name of non-interference with an order of the Tribunal just because it is urged that the Tribunal has jurisdiction to pass an order in exercise of such statutory power. The argument of non-interference with an order passed by the Tribunal with jurisdiction is called in aid only to safeguard and protect the order which the assessee has managed to obtain before the Tribunal. It may be in the interest of the assessee to retain such order and obviously the assessee seeks to support the order. But, the question is as to whether such an order can pass the test of a reasoned order. An order which cannot speak for itself, an order which has not taken into consideration all relevant aspects, particularly, the statutory requirements of the proviso to Section 35F of the Act, in my view is an order that is not at all sustainable. It is a clear case of abuse and misuse of the powers under the proviso to Section 35F of the Act. The impugned order dated 13-12-2004 passed by the Tribunal on applications for pre-deposit filed in Appeal are hereby quashed. A writ of certiorari is issued. Rule issued and made absolute. The Tribunal is directed to reconsider the matter in the light of the statutory requirements under the proviso to Section 35F of the Act and in the light of the observations made in the course of this order and to pass appropriate orders in accordance with law. Writ Petitions allowed. Parties are left to bear their own costs. The modification order allows the assessee to maintain the appeal without depositing any part of Rs. 35 crores of duty and the penalty of Rs. 35 crores that it was liable to pay under the order appealed against. Even while passing this order, the Tribunal neither shows any awareness that the requirement of pre-deposit causes any undue hardship to the assessee nor any awareness shown with regard to the safeguard that is required by way of conditions to be imposed on the assessee to protect the interest of the revenue.

Issues Involved:
1. Legality of the Tribunal's order granting full waiver of pre-deposit requirements.
2. Tribunal's jurisdiction and exercise of power under the proviso to Section 35F of the Central Excise Act.
3. Consideration of undue hardship and safeguarding the interest of the revenue.
4. Procedural propriety and adherence to principles of natural justice.

Detailed Analysis:

1. Legality of the Tribunal's Order Granting Full Waiver of Pre-Deposit Requirements:
The High Court examined the legality of the Tribunal's order that granted a full waiver of the pre-deposit requirement for the respondent. The Tribunal had initially ordered a partial waiver, requiring the respondent to deposit Rs. 25 crores. Subsequently, the Tribunal modified its order, granting a total waiver of Rs. 64 crores in duties and penalties. The High Court found that the Tribunal's modification lacked due consideration of statutory requirements and relevant aspects, rendering the order arbitrary and non-speaking.

2. Tribunal's Jurisdiction and Exercise of Power Under Proviso to Section 35F:
The Tribunal's jurisdiction to pass orders under the proviso to Section 35F was not in dispute. However, the High Court scrutinized the manner in which the Tribunal exercised this jurisdiction. The Tribunal had initially found that the respondent did not have a strong prima facie case and had not pleaded financial hardship. Despite this, the Tribunal later modified its order without adequate reasoning, effectively acting as an appellate authority over its own earlier decision. The High Court held that the Tribunal cannot modify its earlier orders like an appellate or review authority, especially without statutory provisions conferring such power.

3. Consideration of Undue Hardship and Safeguarding the Interest of the Revenue:
The High Court emphasized that the Tribunal must be satisfied that the requirement of pre-deposit would cause undue hardship to the appellant and must impose conditions to safeguard the interest of the revenue. The Tribunal's order failed to demonstrate any awareness of undue hardship or the necessity to safeguard revenue interests. The High Court rejected the notion that a strong prima facie case alone constitutes undue hardship, citing the Supreme Court's caution in similar contexts.

4. Procedural Propriety and Adherence to Principles of Natural Justice:
The High Court noted procedural irregularities, including the Tribunal's failure to consider the respondent's financial hardship and the lack of opportunity for the revenue to respond to additional grounds raised by the respondent. The Tribunal's modification of its earlier order without proper reasoning and procedural adherence was found to be against the principles of natural justice.

Conclusion:
The High Court quashed the Tribunal's order dated 13-12-2004, citing it as arbitrary, non-speaking, and lacking jurisdiction. The matter was remanded to the Tribunal for reconsideration in light of statutory requirements and observations made by the High Court. The Tribunal was directed to pass a reasoned order that considers undue hardship and safeguards the interest of the revenue. The writ petitions were allowed, and each party was directed to bear its own costs.

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