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TMI Blog1985 (5) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... r had not been vacated nor was there any notice to show cause or adjudication proceedings commenced in respect of the aforesaid goods; (c) the financial situation of the applicant as per figures made upto July 31st, 1985 is none too good. They have got to pay the banks about Rs. 12,24,120/- as well as tax authority in a sum of Rs. 52,320/-; (d) in the condition in which the applicant is situated, a deposit of Rs. 1,00,000/- required to be made towards penalty in terms of the order-in-appeal would cause undue hardship if insisted upon; He, therefore, prayed that the requirement of deposit in terms of Section 129E of the Customs Act, 1962, may be dispensed with subject to his furnishing bank guarantee, if so required, in a sum not exceeding Rs. 10,000/-. 2. Shri Chatterjee, the learned JDR submitted that he has got to verify some of the factual averments made in the supplementary petition in particular, the allegation in relation to the attachment of leather goods in a value of Rs. 1,40,000/- and the subsistence of the said attachment order till now and he prayed for 10 days time to make such verification and file an affidavit, if necessary, in regard thereto. 3. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case he is prepared for the same. The Court observed that it would be premature to do so. We cannot go into the merits of the case at length at this stage. However, the facts and circumstances could be broadly referred to so that the matter could be considered with reference to context. 8. Shri Bagaria, the learned Counsel, submitted that in his opinion, a number of factors including prima facie case, balance of convenience and other relevant aspects could be taken into account while considering a request for the stay of an order. However, there are a number of cases which they have pleaded before the Tribunal (including three-member benches) in which the Tribunal has not agreed to their request in this respect and has insisted upon hardship being adjudged only on the basis of financial position of the applicant. In this case also, therefore, the Tribunal should consider their prayer keeping in mind the difficult financial position shown by them. 9. Shri Chatterjee, the learned JDR, opposed the grant of stay or waiver of the pre-deposit reiterating his submission that in view of the facts and circumstances of the case the credibility of the applicant is in jeopardy and profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of financial hardship or even undue financial hardship but merely that of undue hardship and according to Maxwell on the interpretation of Statutes (12th Edition) the primary rule is that of literal construction. To quote Maxwell - (iii) The first and most elementary rule of construction is that it is to be assumed that the words and phrases of technical legislation are used in their technical meaning if they have acquired one, and otherwise in their ordinary meaning and the second is that the phrases and sentences are to be construed according to the rules of grammar. The length and detail of modern legislation , wrote Lord Evershed M.R., has undoubtedly reinforced the claim of literal construction as the only safe rule. If there is nothing to modify, alter or qualify the language which the statute contains, it must be construed in the ordinary and natural meaning of the words and sentences. The safer and more correct course of dealing with a question of construction is to take the words themselves and arrive if possible at their meaning without, in the first instance, reference to cases. The rule of construction is to intend the Legislature to have meant what they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is the question of the public interest. There are many such factors worthy of consideration. (vi) Clearly, the lesson to be drawn from Supreme Court s judgment is that an interim order should not be based merely on consideration of one factor only and where a host of considerations are involved all the relevant factors should be borne in mind. (vii) In revenue matters the Supreme Court has in fact all along held that a strong prima facie is required to be shown before a prayer for Stay could be considered favourably, as evident from the judgment of the Hon ble Supreme Court! of India in the case of Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi (MR, Volume-71, Page-822) in which the Hon ble Supreme Court has observed inter alia - (viii) It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions and the stay will be granted in most deserving and appropriate cases where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application without taking into consideration the relevant facts and circumstances of the case. Hon ble High Court went on to observe that the Tribunal in granting exemption is bound to take into consideration the prima facie case made out by the Petitioner as also the interests of the Revenue which is substantially secured by the offer made by the petitioner. (xi) In view of the above position it is clear that one cannot pass a Stay Order merely on the basis of a Balance Sheet (or stated financial position). In fact, if we do so, we will be reducing ourselves to the level of Accountants and will be determining the question arithmatically rather than judicially. The Calcutta High Court has deprecated the practice of proceeding in Stay matters mechanically and on technical grounds. Therefore, whichever way we look at it, from the point of view of construction of Section 129E of Customs Act, 1962 (Section 35F of Central Excise Act) or from the point of view of the criteria required to be exercised while granting Stay in exercise of inherent powers the totality of facts and circumstances is required to be taken into account to arrive at a just and fair order. Applying this prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant company could not be prepared right from 1981-82; (c) the cash in hand is no more than Rs. 6,499.92 only, while, amongst other liabilities, the dues to the Banks, by themselves, amount to Rs. 14,24,120/-; (d) on or about 13-6-1983 (Annexure B to the Supplementary petition), the finished stock of the applicant valued by the preventive officer at Rs. 1,40,000/- (but valued by the applicant at Rs. 2,87,875.00) had been seized and attached in terms of Section 110(1) of the Act, and in these circumstances, requiring the applicant to deposit an amount of Rs. 1,00,000/- towards penalty as a condition precedent to the hearing of his appeal would cause the applicant undue hardship and, accordingly, prayed such pre-deposit be dispensed with subject to furnishing a bank guarantee in a sum of Rs. 10,000/-in terms of the proviso to Section 128E of the Act. If the deposit is not dispensed with, the applicant would be denied its right to file an appeal and have it heard. 16. On 20-9-1985, it was additionally submitted for the applicant, as per our Order of that date dictated in open Court, that the attached goods were neither released nor a notice to show cause issued till that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er assume to be so. He does not, anywhere in the course of the Order he proposes, find that the applicant s financial condition is such that it will not cause him undue hardship if he were required to deposit the amount demanded. Quite to the contrary, he concedes that the applicant is not financially sound ( in the instant case, the applicant has nothing to show beyond its claim of financial difficulty - p.6 ante). He, however, proceeds to decide the issue on the grounds that - (a) undue hardship occurring in the proviso to S.128-E of the Act is not merely the financial capacity or liquidity or the inability of the applicant to deposit the amount of duty or penalty required to be deposited but includes a host of other considerations like for e.g. the existence of a prima facie case, the balance of convenience, and the prejudice that will be caused to the Revenue in case the deposit is dispensed with; and (b) on a consideration of these aspects, as distinguished from financial hardship , the requirement of a deposit of penalty in a sum of Rs. 1,00,000/- does not deserve to be dispensed with. In sum, he comes to the conclusion that the deposit of the aforesaid amount ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indication that aspect has been completely ignored as was contended by the Counsel. With these observations, the Special Leave Petition is dismissed. (b) In another decision of the Hon ble Supreme Court in a writ appeal reported in 1985 (19) E.L.T. 22 (Asstt. Collector of Central Excise v. Dunlop India Limited) it was observed, inter alia, that where matters of public revenue are concerned, it is of the utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. The Hon ble Court had further observed, in continuation, More is required. The balance of convenience must be clearly in favour of the passing of an interim order and there should not be the slightest application of prejudice to public interest . (c) It will be observed, straightaway, that our refusal to consider the existence of a prima facie case in the Spencer case or the prejudice that may be caused to the Applicant therein, if a deposit were not dispensed with or our insistence upon a scrutiny of the financial ability of the applicant in a consideration of undue hardship did not result in the grant of special leave to appeal, if our construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of stay upon recovery of the disputed amount may be conditional to secure the interests of the Respondents. In the latter case, however, the maintainability of the appeal itself is conditional upon a deposit of the accounted amount, unless it is dispensed with in an exercise of discretion by the appellate authority. While the right of appeal is not unfettered, the removal of the clog on the right of appeal is equally not left to the unguided or untrammeled discretion of the appellate authority. Unless the deposit is made or dispensed with in accordance with the statutory requirements, the appeal itself is in peril of rejection. The deposit, unless dispensed with, is relatable to the maintainability of the appeal itself - the appeal remains infructuous till it is ultimately rejected - whereas a stay of recovery in any other case, like for e.g. a Writ Petition, is interlocutory in nature in a proceeding otherwise maintainable. (g) While the Hon ble Supreme Court in the Dunlop case is concerned with a stay on recovery of revenue, quasi-judicially determined to be due, merely because of prejudice, inconvenience or the existence of a prima facie case, the provision we are to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p - are, perhaps, identical with those that prompted the Hon ble Supreme Court in the Dunlop case [1985 (19) E.L.T. 22 S.C.) to deprecate the indiscriminate grant of stay in revenue matters in Writ and other Civil proceedings just because of a prima facie case, inconvenience or prejudice? If this were so, are we justified in construing an expression in the statute to mean and imply nothing but a consideration of such aspects that would have been germane, prior to the enactment of S.128E of the Act, in the grant of stay in a Writ or other Civil proceeding - the existence of a prima facie case - balance of conveniee et al? 22. It was for the aforesaid reasons, amongst others, that we had held in the cases cited at (c), (d) and (e) supra that such aspects of the case may be relevant for the grant of stay of recovery, by means of an interlocutory order in an appeal or other civil proceeding are not germane for a consideration of the question of fulfilment of condition relatable to the maintainability of the appeal itself. This apart, in our opinion, (a) if the existence of a prima facie case or inconvenience or prejudice in themselves cannot justify the grant of stay order in a wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutorily prescribed mandatory prerequisite of a deposit that is decisive of the maintainability of the proceeding itself. (c) In terms of the provision, what is it to be dispensed with any why? It is the deposit of the duty demanded or penalty levied and not the impugned order. It is the deposit that is to be dispensed if, in the opinion of the Tribunal, the deposit of duty demanded or penalty levied would cause undue hardship . It is not the impugned order that causes the undue hardship but the deposit of duty demanded or penalty levied. Undue hardship is the result of a deposit - and has a nexus with it rather than the impugned order. The provision cannot be understood to mean that the operation of the order impugned is to be dispensed with or stayed if it appears that it will cause undue hardship for any reason whatsoever. If, on the contrary, one has to look for undue hardship in the order appealed against, should not the provision provide for dispensing with the deposit if in the opinion of the Tribunal the order appears unjustified or inappropriate on the face of it or suffers from an error apparent or has resulted in miscarriage of justice. Is the expression undu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with a deposit, on the ground that when the Department (Revenue) applies for stay it was itself requesting that it had a prima facie case. Therefore, he submitted that it would not be proper for the Department to urge that at the stage of stay application prima facie case should not be looked into at all . The submission, in my view, ignores the distinction between a stay that is ordinarily granted in a writ or other civil proceeding and dispensing with a statutory requirement of a mandatory deposit for undue hardship . When the Revenue, as an appellant, apply for stay of operation of an order under appeal, it is not a prayer for dispensing with a mandatory deposit. The Revenue, as an appellant, are not required to make any deposit and there is no question of dispensing with any such deposit for undue hardship for the Revenue. Nor is there any condition of securing the interests of the respondent while dispensing with a mandatory deposit. While, therefore, the existence of a prima facie case is relevant for the grant of stay of operation of the order under appeal, it is not so for the purposes of S.35F of the Central Excises and Salt Act, 1944 ( = S.128E of the Act). The deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aordinary jurisdiction under Article 226 the Courts have not ceased to have jurisdiction to grant interim orders in view of the ratio of the Dunlop case. As observed by the Hon ble Court, the only declaration of law which can be said to be binding in respect of interim orders is that it is not only the prima facie case on which an interim order should be granted in taxation matters but the Court must further consider if there was balance of convenience in favour of the petitioner in Civil proceedings. (b) Insofar as Section 35F of the Central Excises and Salt Act (S. 128E of the Act) was concerned - (i) it was found, for a fact, that the Tribunal had indeed considered the undue hardship in making the deposit and dispensed with the deposit of the entire amount demanded provided that 25% of the duty demanded is deposited and a bank guarantee was furnished for the balance; (ii) on a writ petition filed, the High Court held that the Tribunal had not considered the refusal of the Bank and directed the Tribunal to reconsider the application for modifying its earlier order keeping in view the fact that the State Bank of India would not furnish a guarantee unless cash is dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficulties faced by the petitioner in compliance with the Tribunal s order after consideration of the undue hardship that would be caused to him in the light of his financial position. 26. Even assuming that the existence of a prima facie case is a consideration relevant for dispensing with the deposit under Section 128E of the Act, does it mean that even if the applicant happens to be unable in view of his financial condition to make a deposit of the duty demanded or penalty levied, as the case may be, such deposit cannot be dispensed with? In other words, where the appellant has no prima facie case, should we refuse to dispense with deposit of the duty or penalty, as the case may be, although it may be that he is not in a position financially to make the deposit? If we cannot refuse to dispense with the deposit notwithstanding the absence of a prima facie case, in a case of proven financial hardship, does it not mean and imply that undue hardship is only the financial hardship and nothing else? Should the appellant be deprived of his right of appeal in such a case just because he has no prima facie case? 27. In the instant case, it is conceded by my learned Brother that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the orders passed by the learned Brothers. Shri Bagaria, the learned Advocate has pleaded that the applicants are facing acute financial difficulties. The total paid up capital of the company is Rs. 2,00,000/- and the value of the confiscated goods is worth Rs. 1,96,000/-. He has further argued that in another matter the applicants goods worth Rs. 2,88,000/- were seized by the revenue authorities and their adjudication order is yet to be passed. Shri Bagaria, the learned Advocate pleads that the business of the company was closed down since 1st July, 1973. There is acute financial hardship and in case the applicants prayer for dispensing with the predeposit of the penalty amount of Rs. 1,00,000/- is not accepted, the applicants will loose the right of the hearing of appeal on merits. He has pleaded that in case, the applicants prayer is rejected, it will mean denial of justice, he has referred to the judgment of the Tribunal in the case of M/s. R.K. Containers Steel Fabricators v. Collector of Central Excise Customs, reported in 1986 (7) E.C.R. 109. He has pleaded that this is a judgment of the Special Bench and the Tribunal had held that : Undue hardship is the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be looked into on application for dispensing or stay of recovery, thereof . 35. Shri Chatterjee, learned J.D.R., has referred to the Order-in-Original, and has argued that the description of the goods shown on the invoice was leather wallets 10,000 pieces. He has also referred to page 10 of the Order-in-Original and has laid special emphasis on para No. 4.11 which was the statement of Shri P.N. Tudu, Appraiser and has been reproduced. He has pleaded that the value of the goods confiscated is just Rs. 25,000/- whereas the applicant has inflated the sum of Rs. l,96,000/-. 36. Shri Chatterjee, the learned Departmental Representative has pleaded that the Bench should appreciate the totality of the circumstances, and the applicant s request for the dispensing with the pre-deposit of the penalty amount, should be declined. He has pleaded for the rejection of the Stay Application. 37. Shri Bagaria, the learned Advocate has pleaded that even prima facie, the applicant has got a good case. He has argued that in the present matter both the Members viz. Member (Technical) as well as Member (Judicial) agreed to the conclusion that the applicant is having financial hardship but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. There was no question of any balance of convenience being in favour of the respondent-Company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere Bank Guarantees. We notice that very often some courts act as if furnishing a Bank Guarantee would meet the ends of justice. No governmental business or for that matter no business of any kind can be run on mere Bank Guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the interest. We are very sorry to remark that these considerations have not been borne in mind by the High Court and interim order of this magnitude had been granted for the mere asking. The appeal is allowed with costs. 43. The Tribunal in the case of M/s. R.K. Containers Steel Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hardship unrelatable to the deposit or the pecuniary difficulties in making the deposit, since it is the deposit of the duty demanded or penalty levied would cause undue hardship. (g) In the premises we are not inclined to hold that we have to look into the existence of a prima facie case in a consideration of undue hardship in terms of Section 35F of the Act. 44. In view of the Hon ble Supreme Court s judgment in the case of M/s. Spencer Co. Ltd., Madras v. Union of India, I am of the view that liquidity of the applicant is very relevant. There may be a situation that the applicant s financial position is not good and prima facie he has got no case. If the Court has to take a view in granting the stay about prima facie case, then the applicants will loose the right of the hearing of appeal on merits, and their appeal will be rejected for non-compliance of the provisions of Section 129E of the Customs Act, 1962. 45. In view of the above discussion, I agree with the conclusion of learned Brother Shri M.G.S. Murthy, Judicial Member. I dispense with the pre-deposit of the penalty amount of Rs. 1 lakh on the condition of applicant, depositing a sum of Rs. 10,000/- (Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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