2006 (1) TMI 138 - HC - Customs

Summary

Issues Involved:
1. Statutory requirement of pre-deposit under Section 129E of the Customs Act, 1962.
2. Tribunal's discretion in waiving the pre-deposit.
3. Interpretation of "undue hardship."
4. Tribunal's adherence to Supreme Court precedents.
5. Whether the Tribunal safeguarded the interest of the revenue.

Detailed Analysis:

1. Statutory Requirement of Pre-Deposit:
The Tribunal functions as a second appellate authority under Section 129 of the Customs Act, 1962, Section 35B of the Central Excise Act, 1944, and the Finance Act, 1994. The statutory requirement for maintaining an appeal before the Tribunal is found in Section 129E of the Customs Act, 1962, which mandates the deposit of the disputed amount pending the appeal.

2. Tribunal's Discretion in Waiving the Pre-Deposit:
Section 129E provides that the Tribunal may dispense with the deposit if it believes that the requirement would cause undue hardship to the appellant. However, this discretion is subject to safeguarding the interest of the revenue by imposing commensurate conditions on the appellant.

3. Interpretation of "Undue Hardship":
The term "undue hardship" has been a source of prolific litigation. The Tribunal's discretion under the proviso to Section 129E has been interpreted widely, often leading to the waiver of the pre-deposit requirement. The present case illustrates this issue, as the Tribunal granted a total waiver of the pre-deposit requirement based on the appellant having a strong prima facie case.

4. Tribunal's Adherence to Supreme Court Precedents:
The Revenue argued that the Tribunal's view that the appellant had a strong prima facie case was erroneous and contrary to the records. The Tribunal allegedly failed to appreciate the law laid down by the Supreme Court in Priya Blue Industries Ltd. v. Commissioner of Customs and other cases. The Tribunal did not show awareness or apply its mind to the requirement of safeguarding the interest of the revenue.

5. Whether the Tribunal Safeguarded the Interest of the Revenue:
The Tribunal's order was challenged on the grounds that it did not safeguard the interest of the revenue. The Tribunal granted a total waiver of the liability of Rs. 2,52,17,948/- without imposing any conditions to protect the revenue's interest. The Tribunal's awareness to the aspect of safeguarding the interest of the revenue was found lacking.

Judgment Summary:
The High Court found that the Tribunal had not shown awareness to the statutory requirement of pre-deposit and the need to safeguard the interest of the revenue. The Tribunal's order was deemed arbitrary and in violation of the statute.

The High Court quashed the Tribunal's order and directed the respondent-assessee to deposit 75% of the disputed amount within four weeks and furnish a bank guarantee for the remaining 25%. The Tribunal was instructed to proceed with the hearing of the appeal on merits upon compliance by the respondent-assessee.

The High Court emphasized that a prima facie case alone does not constitute undue hardship. The Tribunal must form an informed opinion that the pre-deposit requirement would cause undue hardship to the assessee before exercising discretion to waive the pre-deposit.

Conclusion:
The writ petition was allowed, and the Tribunal's order was quashed. The respondent-assessee was directed to comply with the deposit and bank guarantee requirements to proceed with the appeal. The High Court reiterated the importance of safeguarding the interest of the revenue while considering waiver applications under Section 129E of the Customs Act, 1962.