2005 (9) TMI 120 - HC - Central Excise

Principles of balance of convenience - Stay/Dispensation of pre-deposit u/s 35F of CEA and penalty demanded - HELD THAT - In MEHSANA DIST. CO-OP. MILK PU. LTD. VERSUS UNION OF INDIA 2003 (3) TMI 113 - SC ORDER , the Supreme Court considered the case of dispensation of pre-deposit condition and held that the Appellate Authority must address to itself to the prima facie merits of the appellant's case and upon being satisfied of the same, determine the quantum of deposit taking into consideration the financial hardship and other such related factors. In DELHI ADMINISTRATION (NOW N.C.T. OF DELHI) VERSUS. MANOHAR LAL 2002 (8) TMI 851 - SUPREME COURT , the Supreme Court held that power vested by Statute in a public authority should be viewed as a trust coupled with duty to be exercised in larger public and social interest and no authority including the appropriate Government can be permitted to act in a routine course to exercise its powers as its sweet will, pleasure and whim or fancy, for the reason that if any authority is permitted to act as it wants to, it will reduce the legislative will to a mere dead letter at the whim of such an authority. A provision of appeal is a substantive right which is a statutory creation in the wisdom of the Legislature and it can also impose condition precedent, like pre-deposit for the purposes of hearing appeal. Courts should not interfere but must ensure strict compliance of the statutory provisions but if the Legislature, in its wisdom, while imposing conditions confers power to waive one or all such conditions like pre-deposit in certain condition/situations the concerned Authority is under a statutory obligation and bound to examine whether the relevant conditions are fulfilled or not so as to dispense with or waive the condition of pre-deposit - There is no doubt that when Legislature provides enabling or discretionary power upon a public authority, even though the words are permissive in character, the concerned authority is required to exercise that power reasonably on relevant considerations and not in a arbitrary or mala fide manner particularly when such exercise of power involves legal right or entitlement or enjoyment and for effectuating such right in favour of someone. The aforesaid view stands fortified in view of the fact that the Court/Tribunal/Authority has to proceed giving strict adherence to the provisions of law. The impugned judgment and order dated 29-8-2005 (Annexure-1 to the writ petition) passed by the respondent no. 4 is hereby set aside with the direction to decide the stay application afresh after giving opportunity to the parties - Petition allowed.

Issues Involved:
1. Failure of the Appellate Authority to consider relevant circumstances and documents.
2. Evaluation of the prima facie case and undue hardship.
3. Requirement for the Appellate Authority to balance interests between the appellant and the revenue.
4. Legal precedents on the waiver of pre-deposit conditions.

Detailed Analysis:

1. Failure of the Appellate Authority to Consider Relevant Circumstances and Documents:
The petitioner contended that the Appellate Authority ignored relevant circumstances and documents while deciding on the application for dispensing with the pre-deposit condition. Specifically, the petitioner highlighted paragraphs 6 and 7 of their application, which referenced significant financial documents (Annexures A, B, and C) demonstrating financial hardship. The court found that the Appellate Authority failed to take these documents into account, which was a critical oversight.

2. Evaluation of the Prima Facie Case and Undue Hardship:
The petitioner argued that the Appellate Authority should have waived the pre-deposit condition entirely due to a strong prima facie case. The court referenced several judgments, including Bongaigaon Refinery & Petrochem Ltd. v. Collector of Central Excise and Hoogly Mills Co. Ltd. v. Union of India, which established that a strong prima facie case could justify the waiver of pre-deposit conditions. The court noted that the Appellate Authority acknowledged the arguable nature of the case but did not explicitly find a "strong prima facie" case, which was necessary for a complete waiver.

3. Requirement for the Appellate Authority to Balance Interests:
The court emphasized that the Appellate Authority must balance the appellant's financial hardship against the revenue's interest. Citing decisions like I.T.C. Ltd. v. Commissioner of Central Excise and Customs and Mehsana District Cooperative Milk P.U. Ltd. v. Union of India, the court reiterated that while financial hardship is a factor, the authority must also consider the merits of the case and the potential impact on the appellant if the pre-deposit is enforced.

4. Legal Precedents on the Waiver of Pre-Deposit Conditions:
The judgment reviewed several legal precedents that guide the waiver of pre-deposit conditions. In particular, it highlighted the need for the Appellate Authority to exercise discretion reasonably and not arbitrarily. The court cited cases such as J.N. Chemicals Pvt. Ltd. v. CEGAT and Sri Krishna v. Union of India, which underscored that undue hardship includes scenarios where enforcing the pre-deposit would make the appeal process nugatory.

Conclusion:
The court found that the Appellate Authority had not adequately considered the financial documents and the strong prima facie case presented by the petitioner. It emphasized the need for the Appellate Authority to balance the interests of the appellant and the revenue and to apply legal precedents appropriately. Consequently, the impugned order was set aside, and the Appellate Authority was directed to reconsider the stay application, taking into account all relevant factors and legal principles, within four weeks. The writ petition was allowed, and no costs were awarded.

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