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TMI Blog2004 (5) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... t petition. 3. All the writ petitions raise common questions of law on similar set of facts with minor variations relating to the date of setting up of the Factories in Assam and Tripura, the dates of the impugned order passed by the authority of Central Excise and the amounts in question involved and thus are being decided and disposed of by this common judgment and order enumerating the facts in WP(C) No. 2921/2004. Any reference to the impugned orders, place of Factory and the amount in question involved in this case shall be treated to be a reference to the same in respect of the other three writ petitions also. 4. By this writ petition, the petitioners seek to challenge the legality and validity of the order dated 6-6-2003 passed by the Deputy Commissioner of Central Excise, Guwahati holding the petitioners to be liable to pay an amount of Rs. 27,62,44,664/- on account of different heads as indicated in the order itself and the order dated 31-3-2004 passed by the Commissioner of Central Excise (Appeals), Guwahati directing the petitioners to deposit the said amount under Section 35F of the Central Excise Act, 1944 as pre-condition for hearing the appeal filed by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning tobacco. This was sought to be achieved by issuing Notification No. 6/2001 to have retrospective effect to amend notification No. 32/99 from its very inception viz. 8-7-99. Section 154 of the Finance Act, 2003 retrospectively amended Notification No. 32/99, withdrawing the benefit of exemption to Pan masala containing tobacco. 6-6-2003 : Impugned order issued by the Deputy Commissioner, Central Excise, Guwahati against the petitioners relying on Section 154 of the Finance Act, 2003 ordering refund and rejecting claim for refund as follows : (i) Recovery of an amount of Rs. 2,16,10,577.43 refunded to the petitioners in terms of Notification No. 32/99 during the period from 17-11-2000 to 28-2-2001. (ii) Confirmed a demand of Rs. 25,46,34,087/- which had been paid prior to the judgment dated 3-12-2003 in the writ appeal and as was permitted by the Court to be adjusted for payment of duty for future clearances from 3-12-2002. (iii) Rejected the refund claims of Rs. 85,31,17,836/- for the period from March, 2001 to April, 2003 which the petitioners were entitled to receive as per judgment in writ appeal since in the interregnum period duty had been paid without the benefit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant writ petition preferred by the petitioners." 5. It is in the above backdrop that the petitioners have approached this Court invoking its writ jurisdiction challenging the legality and validity of the aforementioned impugned orders. The basic thrust of argument made by Mr. Sridharan was that on the face of it the appellate authority having admitted that no notice was issued to the petitioners giving an opportunity of hearing and it also having noticed that the purported supersession of the earlier notification dated 8-8-2003 by subsequent notifications could not be placed on records and thus the earlier notification dated 8-8-2003 by which the decision to keep in abeyance the show cause notices and/or recoveries was conveyed held the field, could not have ordered for depositing the amount in question within 30 days of receipt of the order by way of rejecting the stay application. Placing reliance on the decision of the Apex Court in J.K. Cotton Spinning & Weaving Mills Ltd. v. Union of India as reported in 1987 (32) E.L.T. 234 (S.C.), it was argued by Mr. Sridharan that amendment to Section 154 of the Finance Act, 2003 retrospectively will always be subject to Section 11A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht by the Finance Act, 2003, there is nothing wrong in the action and that everything has been done as per contemplation of the provisions of Section 154 of the Finance Act, 2003. As regards the appellate order, he submitted that irrespective of any observation made by the said authority in respect of service of notice and supersession of the notification dated 8-8-2003, the said authority having recorded a prima facie satisfaction that the petitioner does not have a strong prima facie case on merit, more so, in view of the order of the Apex Court dated 12-1-2004, no amount of technicalities can come in aid of the petitioners and obliterate the statutory requirements of pre-depositing the amount in question towards entertaining and hearing the appeals. He also relied upon the aforesaid decision of the Apex Court in J.K. Cotton Spinning (supra). 8. The whole controversy centers around the pre-conditions laid down in Section 35F of the aforesaid Act towards entertaining an appeal as per which the persons desirous of appealing against the decision in respect of the duty demanded, the amount so demanded is required to be deposited. However, as per proviso to Section 35F, the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same as Bank Guarantee. 10. As noticed above, the entire argument on behalf of the petitioners is based on the two observations made by the appellate authority in the impugned order dated 31-3-2004. It is the case of the petitioners that the appellate authority having admitted that prior to passing of the impugned order dated 6-7-2003, no notice was given to the petitioner and that nothing could be brought on record to establish that the instructions issued by the CBEC by its letter dated 8-8-2003 has been withdrawn, it could not have and ought not to have ordered for depositing the entire amount as a pre-condition towards entertaining the appeal. It is in this context the aforesaid decision of the Apex Court in J.K. Cotton Spinning (supra) was pressed into service. The decision of the Calcutta High Court in BRPL (supra) case was also pressed into service to negative the plea of the appellate authority that financial hardship was not pleaded on behalf of the petitioner. In this decision the High Court of Calcutta held that the expression undue hardship would also cover a case where the appellant has a strong prima facie case and that it even covers a situation where there is an ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght about by the Finance Act, 2003 for the period from March, 2001 to April, 2003 which stood at Rs. 85,31,17,836/-. The Deputy Commissioner also found that the petitioner cleared their finished goods without payment of appropriate duty since 2nd fortnight of November, 2002 amounting to Rs. 25,46,34,087/- calculated upto 31st May, 2003 and kept informing the department from time to time by their various correspondences that in defiance of the judgment and order of this Court dated 3-12-2002 passed in the writ appeals, the duty payable on clearance may be adjusted from the amount of pending refund which the department never exceeded to. Having regard to the provisions of Section 154 (3) of the Finance Act, 2003, he observed that the said judgment and order dated 3-12-2002 is not enforceable and consequently the duty not paid by the petitioners during the period from 2nd fortnight of November, 2002 till 30th April, 2003 is liable to be recovered. It is on this basis recovery of the amount of Rs. 25,46,34,087/- has been ordered as duty not paid against the goods cleared during the aforesaid period along with interest payable. 13. In the impugned order dated 31-3-2004 although the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments advanced by the learned counsel for the petitioner is accepted in toto, the submissions made by the learned counsel for the respondents expressing agreement for acceptance of 50% of the amount in question and even 25% of the same by way of Bank Guarantee will have to be understood and considered. However, the concession shown by the respondents having not been accepted by the petitioners, there is no question of deliberating upon the same and the question will have to be answered either by way of favouring dispensation of the entire amount or by way of rejecting the claim of the petitioners. 15. It is one thing to say that the impugned order dated 6-6-2003 is bad in law because of non-issuance of notice to the petitioners before passing the order but it is altogether different to say that such non-issuance of notice resulted in prejudice to the petitioners. The main thrust of argument on behalf of the petitioners was that before passing the impugned order, they ought to have been issued with a notice and this aspect of the matter having been dealt with by the appellate authority prima facie in favour of the petitioner, the said authority ought to have formed opinion towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals and the effect and retrospective operation of Section 154 of the Finance Act, 2003 coupled with the stay order passed by the Apex Court. Undisputed facts for which there is no plausible explanation from the petitioners dilute the plea of non-issuance of notice to the petitioners. The principle that in addition to breach of natural justice, prejudice must also be proved has been developed in several cases. The Apex Court have also emphasized that not mere violation of natural justice but de-facto prejudice, other than non issue of notice has to be proved. In the case of K.L. Tripathi v. State Bank of India as reported in (1984) 1 SCC 43, the Apex Court quoting Wade's Administrative Law observed as follows : "It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to whiter scope and extent. There such thing as a merely technical infringement of natural justice. The requirements of natural justice must depend on the facts and circumstances of the case, the nature of the inquiry, the rules under which the Tribunal is acting, the subject matter to be dealt with, and so forth." The Apex Court has consistently applied the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken may kindly be communicated in order to inform the Board. Yours faithfully (Lakhinder Singh) Joint Secretary (Legal)" 18. In reference to the aforesaid letter dated 27/29-4-2004, it was argued on behalf of the petitioners in reference to the decisions of the Apex Court in Commissioner of Police v. Gordhandas Bhanji as reported in AIR 1952 SC 16 and Mahinder Singh Gill v. Chief Election Commissioner as reported in (1978) 1 SCC 405 that the issue will have to be decided as it stood at the time of passing of the impugned orders towards judging their validity and must not be allowed to be supplemented by fresh reasons in the shape of an affidavit or otherwise. This argument is totally fallacious, firstly because, as noticed above the Notification dated 8-8-2003 will have to be judged in the context in which the same was issued and the two subsequent notifications referred to above. The appellate authority has also only observed that nothing could be produced to show supersession of the Notification dated 8-8-2003. It did not make any reference to the Notifications dated 25-8-2003 and 30-1-2004. The above quoted letter dated 27/29-4-2004 has only clarified the position without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 154 of the Finance Act, 2003 upon discussion and evaluation of the materials on record including the earlier judgments and orders of this Court in the writ petitions and the writ appeals. The appellate authority has taken note of the stay order passed by the Apex Court and after arriving at the aforesaid finding that the petitioners do not have any prima facie case on merit passed the impugned order dated 31-3-2004 which cannot be said to be illegal and arbitrary. Both the orders have been passed on the given and admitted fact situation. 20. As noticed above, the requirement of Section 35F of the Act towards entertaining an appeal is to deposit the amount in question, subject however, formation of an opinion of undue hardship in which eventuality also interests of Revenue is to be protected. The Apex Court in the case of Assistant Collector of Central Excise v. Dunlop India Ltd. as reported in 1985 (19) E.L.T. 22 (S.C.) = (1985) 1 SCC 260 deprecating the practice of granting interim orders in revenue matters observes as follows : "Now coming to the facts of the present case, the respondent, Dunlop India Limited is a manufacturer of tyres, tubes and various other rubber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court held as follows : While the purpose of an interlocutory order is to preserve in status quo the rights of the parties during the pendency of the litigation, the court is also required to put into the scales the need to protect the interest of the respondent before it if the writ petitions ultimately fail and uncertainty as to their results is resolved in such respondent's favour. If the dispensation ordered by the High Court prevails, the respondent before it, even in the event of its success, would be faced with a fait accompli and it would well nigh be impossible for that respondent to gather the dues from the innumerable purchases of coal. The interim orders passed by the High Court do not protect his interests adequately if the final result does in his favour. Accordingly, the order under appeal is set aside." 22. In the same vein the Apex Court in the case of Union Territory of Pondicherri v. P.V. Suresh as reported in (1994) 2 SCC 70 as follows : "Before parting with the case, we feel constrained to reiterate our unhappiness about the interim injunction order made in the Mahe writ petitions. Passing of interim orders is not and cannot be a matter of course n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount in terms of proviso to sub-section (5) of Section 39 of the Act, should not have annoyed the Court while granting the relief in exercise of its powers under Article 226 of the Constitution. In that case the impugned order was held to be contrary to settled principles of law. The observations made by the Apex Court towards setting aside the judgment of the Division Bench of the High Court are worth quoting. "7. There cannot be any dispute that right of appeal is the creature of the statute and has to be exercised within the limits and according to the procedure provided by law. It is filed for invoking the powers of a superior court to redress the error of court below, if any. No right of appeal can be conferred except by express words. An appeal, for its maintainability, must have a clear authority of law sub-section (5) of Section 39 of the Act vests a discretion in the appellate authority to entertain the appeal if it is filed within sixty days and the amount of tax assessed along with penalty and interest, if any, recoverable from the person has been paid. The aforesaid restriction is subject to the proviso conferring discretion upon the appellate authority to dispense w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the application'. In section 6 of the Court-fees Act, the words are 'file' or 'shall be received'. It would appear from this that the Legislature was not at a loss for words if it had wanted to express itself in such forceful manner as is now suggested by counsel for the State. It has used the word 'entertain' and it must be accepted that it has used it advisedly. This word has come in for examination in some of the cases of the Allahabad High Court and we shall now refer to them. In our opinion, these cases have taken a correct view of the word 'entertain' which according to dictionary also means 'admit to consideration'. It would therefore appear that the direction to the court in the proviso to section 9 is that the court shall not proceed to admit to consideration and appeal which is not accompanied by satisfactory proof of the payment of the admitted tax. This will be when the case is taken up by the Court for the fist time. In the decision on which the Assistant Commissioner relied, the learned Chief Justice (Desai, C.J.) holds that the words 'accompanied by' showed that something tangible had to accompany the memorandum of appeal. If the memorandum of appeal had to be ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een shown. More is required. 12. In the instant case the prayer was made to grant stay on the ground that the petitioner has not collected any additional tax from the customers and is unable to deposit the amount of additional demand created by patently illegal order. The respondent-company nowhere mentioned to or referred to its inability to pay the amount on account of its alleged financial difficulties or incapacity to make the requisite payment. The legality of the additional demand created could not be the basis for insisting to entertain the appeal without prior payment, as that would have required the determination on the merits of the appeal. Relying upon the Full Bench judgment of the jurisdictional court in Emerald International Ltd.'s case (2001) 122 STC 382; STI (1997) P&H 113 the Tribunal was competent in passing the order (annexure P8) which was impugned in the High Court. The division Bench of the High Court was not justified in ignoring the Full Bench judgment and the judgment of another Bench of co-ordinate jurisdiction while allowing the writ petition of the company. The division Bench even failed to mention the circumstances which justified the passing of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in general is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution, to discern between falsity and truth, between shadow and substance, between equity and colourable glosses and pretences and not to do according to the will and private affections and ill will. It has to be done according to the rules of reasons and justice, not according to private opinion. It has to be done according to law and not humour. It is not arbitrary, vague and fanciful but legal and regular. 26. In the instant case the appellate authority applied its sound discretion in the matter towards passing the impugned order dated 31-3-2004. The object of Section 35F is to ensure protection of revenue. The appellate authority has also recorded its prima facie satisfaction that the petitioners do not have any prima facie case on merit. The findings arrived at by the appellate authority cannot be said to be perverse or based on no materials/evidence. The appellate authority has gone through the impugned order dated 6-6-2003 in which the factual aspect of the matter as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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