2007 (12) TMI 220 - SC - Customs

Order passed by the Customs, Excise & Service Tax Appellate Tribunal directing deposit of rupees two crores as a condition precedent for entertaining the appeal Held that - For a hardship to be undue it must be shown that the particular burden to have 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. No infirmity in the order directing deposit of Rupees two crores as affirmed by the High Court. The appellant is granted three months time to deposit the amount fixed by the CESTAT. If it is not deposited within the aforesaid time, the appeal before the CESTAT shall stand dismissed.

Summary

Issues:
Challenge to High Court order dismissing writ petitions regarding deposit of Rs. 2 crores as a condition for entertaining appeal before CESTAT under Customs Act, 1962. Appellant's plea for waiver of penalty due to financial hardship and classification dispute of imported product.

Analysis:
The appeal challenged the High Court's decision dismissing writ petitions against the order by CESTAT directing a deposit of Rs. 2 crores for entertaining the appeal. The dispute arose from the classification of imported products and the appellant's claim for benefits under DGFT Notifications. The penalty of Rs. 10 crores was imposed under Section 112(a) of the Customs Act, 1962, as the goods required a license for clearance, with a potential confiscation value of Rs. 66.57 crores. The Commissioner reaffirmed the penalty after remand for fresh adjudication.

The appellant argued financial distress due to significant losses, seeking a waiver of the pre-deposit requirement. The appellant's financial statements showed substantial losses, emphasizing the company's deteriorating financial position. The appellant highlighted confusion surrounding imports made from 1992 to 1997, referencing communications from DGFT and Indian Oil Corporation (IOC). In contrast, respondents contended that there was no prima facie case and financial hardship alone could not justify dispensing with the pre-deposit requirement.

The issue of dispensation of pre-deposit for a sick industry was discussed, citing Metal Box India Ltd. v. Commissioner of Central Excise. The Court emphasized that the discretion to grant stay pending disposal of matters must be exercised judiciously. The principles for granting stay were outlined in various cases, emphasizing the need for a balanced approach considering the factual scenario. Section 129-E of the Act mandated deposit pending appeal, with provisions for dispensation based on undue hardship and revenue protection.

The Court examined the expressions "undue hardship" and "safeguard the interests of revenue" under Section 129-E. Undue hardship required proof beyond mere assertion, with economic hardship being a key consideration. Precedents like S. Vasudeva v. State of Karnataka highlighted the concept of undue hardship. The order directing the deposit of Rs. 2 crores was upheld, granting the appellant three months to comply, failing which the appeal would be dismissed.

In conclusion, the appeal was disposed of without costs, affirming the order for deposit within the stipulated time frame.