1986 (12) TMI 178 - AT - Central Excise

Issues Involved:
1. Interpretation of "undue hardship" in Section 35F of the Central Excise and Salt Act, 1944.
2. Whether financial hardship is the sole criterion for waiving pre-deposit of duty or penalty.
3. Consideration of prima facie case and other factors in waiving pre-deposit.

Issue-wise Detailed Analysis:

1. Interpretation of "undue hardship" in Section 35F of the Central Excise and Salt Act, 1944:
The core issue in this case is the interpretation of the term "undue hardship" as mentioned in Section 35F of the Central Excise and Salt Act, 1944. The Tribunal had to determine whether "undue hardship" should be limited to financial hardship or if it should also encompass other factors such as the prima facie strength of the appellant's case.

2. Whether financial hardship is the sole criterion for waiving pre-deposit of duty or penalty:
The learned counsel for the applicant argued that financial hardship should not be the sole criterion for waiving the pre-deposit. He cited the Calcutta High Court's judgment in the case of American Refrigeration Co. Ltd., which stated that the Tribunal must consider the prima facie case made out by the petitioner as well as the interest of the Revenue. The counsel also referenced decisions from the Tribunal and the Supreme Court to support the argument that other factors should be considered alongside financial hardship.

The learned SDR, opposing the application, contended that financial hardship is the primary consideration under Section 35F. He cited several Tribunal decisions and the Supreme Court's judgment in the case of Dunlop India Ltd., which emphasized that a prima facie case alone is not sufficient for granting an interim stay; other factors must also be considered.

3. Consideration of prima facie case and other factors in waiving pre-deposit:
The Tribunal examined whether factors other than financial hardship, such as the prima facie strength of the appellant's case, should be considered when deciding on the waiver of pre-deposit. The learned counsel for the applicant argued that the demand was illegal and untenable, and that the undue hardship caused by complying with this demand should be considered. The learned SDR, however, maintained that the expression "undue hardship" has been interpreted by the Tribunal to mean financial hardship only.

Observations and Rulings:

1. Interpretation of "undue hardship":
The Tribunal concluded that the expression "undue hardship" in Section 35F should not be limited to financial hardship alone. The term "undue" can also mean "not lawful" or "illegal," and thus, "undue hardship" can encompass hardships caused by a prima facie illegal or untenable order. This interpretation aligns with the meanings provided in various dictionaries and legal references.

2. Financial hardship as the sole criterion:
The Tribunal observed that considering only financial hardship would go against the observations of the Supreme Court in the Dunlop India case and other judgments. The Tribunal held that all relevant factors, including financial hardship, prima facie strength of the appellant's case, amount of demand, balance of convenience, and potential irreparable injury, should be considered in determining "undue hardship."

3. Consideration of prima facie case and other factors:
The Tribunal emphasized that the existence of a prima facie case, balance of convenience, and potential irreparable injury should also be considered in addition to financial hardship. The Tribunal cited various judgments, including those of the Supreme Court and High Courts, which supported the view that multiple factors should be considered in granting interim relief or waiving pre-deposit.

Final Order:
The Tribunal decided to waive the prior deposit of duty demanded, subject to the furnishing of a bank guarantee for the full amount to the satisfaction of the departmental authorities within six weeks. This decision took into account the prima facie strength of the appellant's case and the liquidity position of the appellant.

Dissenting Opinion:
One member dissented, arguing that financial hardship should be the primary consideration, based on several Tribunal decisions and the Supreme Court's judgment in the Spencer & Co. Ltd. case. The dissenting member emphasized the distinction between stay applications and applications for dispensing with pre-deposit, arguing that the latter should be based solely on financial hardship.

Resolution by the President:
The President resolved the difference of opinion by stating that "undue hardship" should not be limited to financial hardship but should also cover other factors such as the existence of a prima facie case. The case was then remanded to the original Bench for orders in light of this decision.

Conclusion:
The Tribunal's final order waived the prior deposit of duty demanded, subject to the furnishing of a bank guarantee, considering all relevant factors, including the prima facie strength of the appellant's case and liquidity position. The decision emphasized a broader interpretation of "undue hardship" that includes multiple factors beyond financial hardship.

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