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CASE NO.: Appeal (civil)  5166 of 2006

PETITIONER: M/s Benara Valves Ltd. & Ors

RESPONDENT: Commissioner of Central Excise & Anr

DATE OF JUDGMENT: 23/11/2006

BENCH: ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

(Arising out of SLP (C) No.13028 of 2006) with  CIVIL APPEAL No 5167          2006 (Arising out of S.L.P (C) No.13171 of 2006)

ARIJIT PASAYAT, J.

Leave granted.

Challenge in these appeals is to the order passed by the  Allahabad High Court dismissing the writ petitions filed by the  appellants who had filed the writ petitions questioning  correctness of the order passed by the Customs Excise and  Service Tax Appellate Tribunal, New Delhi (in short the  ’Tribunal’) dealing with the applications filed for staying  recovery of duty and penalty imposed pending disposal of the  appeals before the Tribunal. Allegations against the appellants  were to the effect that they were removing excisable goods  clandestinely without payment of duty and without raising  Central Excise invoices/bills under the guise of  estimates/rough estimates to their front trading firms which  they called ’houses’ and consequently to the ultimate  customer. Searches were conducted at the premises of  manufacturing units and other connected concerns, through  whom the goods were allegedly sold. During the search,  incriminating documents were allegedly recovered from  various premises and statements of the concerned persons  have also been recorded.

After issuing notice under Central Excise Act, 1944 (in  short the ’Act’), Central Excise Rules, 1944 (in short the  ’Rules’) and Central Excise Rules, 2001 (in short the ’2001  Rules’) the Commissioner of Central Excise, Kanpur demanded  Rs.2,05,31,762/- from M/s Benara Automotives Pvt. Ltd. (in  short ’BAPL’) and penalty of equal amount was imposed under  Section l1 AC of the Act. Additionally, penalties were imposed  on six other persons. The Commissioner also confirmed the  demand of Rs.24, 24,813/- in respect of M/s Benara Valves  Ltd. (in short ’BVL’) and imposed penalty of equal amount.   Additionally, Rs.1,00,000/- each was imposed on several other  persons. Appeals were preferred before the Tribunal

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challenging the determination.  Prayer for stay of realisation of  demands raised till disposal of the appeals in terms of Section  35 F of the Act was made.  The Tribunal directed as follows:

"Therefore, considering the facts and  circumstances of all these cases, we direct the  applicant to pre-deposit the following amounts  within eight weeks under Section 35F of the  Central Excise Act:

(1) M/s. BAPL and M/s. BVL are directed  to pre-deposit twenty-five percent of the  duty demanded from them:

(2) The other applicants are directed to  pre-deposit twenty-five percent of the  penalties imposed on them". Questioning correctness of the order passed by the  Tribunal, writ petitions were filed. By the impugned orders,  the High Court directed extension of time to comply with the  Tribunal’s order. However, the prayer for dispensation of  deposit was rejected.

Learned counsel for the appellants submitted that  demands raised will not stand the test of appeal as correct  legal and factual position were not kept in view while  adjudicating the issues. Mr. B. Dutta, learned Additional  Solicitor General for the respondents submitted that demands  have been raised after detection of large scale manipulations  and evasions and no relief should be extended to such  dishonest manufacturers.  According to him, neither any  prima facie case has been established, nor any case of  irreparable loss or balance of convenience has been made out.  

Principles relating to grant of stay pending disposal of the  matters before the concerned forums have been considered in  several cases. It is to be noted that in such matters though  discretion is available, the same has to be exercised judicially.

The applicable principles have been set out succinctly in  Silliguri Municipality and Ors. v. Amalendu Das and Ors. (AIR  1984 SC 653) and M/s Samarias Trading Co. Pvt. Ltd. v. S.  Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of  Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330).

It is true that on merely establishing a prima facie case,  interim order of protection should not be passed.  But if on a  cursory glance it appears that the demand raised has no leg to  stand, it would be undesirable to require the assessee to pay  full or substantive part of the demand.  Petitions for stay  should not be disposed of in a routine matter unmindful of the  consequences flowing from the order requiring the assessee to  deposit full or part of the demand.  There can be no rule of  universal application in such matters and the order has to be  passed keeping in view the factual scenario involved.  Merely  because this Court has indicated the principles that does not  give a license to the forum/authority to pass an order which  cannot be sustained on the touchstone of fairness, legality and  public interest. Where denial of interim relief may lead to  public mischief, grave irreparable private injury or shake a  citizens’ faith in the impartiality of public administration,  interim relief can be given.

It has become an unfortunate trend to casually dispose of  stay applications by referring to decisions in Siliguri

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Municipality and Dunlop India cases (supra) without analysing  factual scenario involved in a particular case.             

Section 35-F of the Act reads as follows:

"35F. Deposit, pending appeal, of duty  demanded or penalty levied.-- Where in any appeal under this Chapter, the  decision or order appealed against relates to  any duty demanded in respect of goods which  are not under the control of Central Excise  authorities or any penalty levied under this  Act, the person desirous of appealing against  such decision or order shall, pending the  appeal, deposit with the adjudicating authority  the duty demanded or the penalty levied: Provided that where in any particular case the  Commissioner (Appeals) or the Appellate  Tribunal is of opinion that the deposit of duty  demanded or penalty levied would cause  undue hardship to such person, the  Commissioner (Appeals) or, as the case may  be, the Appellate Tribunal, may dispense with  such deposit subject to such conditions as he  or it may deem fit to impose so as to safeguard  the interest of revenue : Provided further that where an  application is filed before the Commissioner  (Appeals) for dispensing with the deposit of  duty demanded or penalty levied under the  first proviso, the Commissioner (Appeals) shall,  where it is possible to do so, decide such  application within thirty days from the date of  its filing."

Two significant expressions used in the provisions are  "undue hardship to such person" and "safeguard the interests  of revenue".  Therefore, while dealing with the application twin  requirements of considerations i.e. consideration of undue  hardship aspect and imposition of conditions to safeguard the  interest of Revenue have to be kept in view.

As noted above there are two important expressions in  Section 35(F).  One is undue hardship. This is a matter within  the special knowledge of the applicant for waiver and has to be  established by him.  A mere assertion about undue hardship  would not be sufficient.  It was noted by this Court in S.  Vasudeva v. State of Karnataka and Ors. (AIR 1994 SC 923)  that under Indian conditions expression "Undue hardship" is  normally related to economic hardship.  "Undue" which means  something which is not merited by the conduct of the  claimant, or is very much disproportionate to it. Undue  hardship is caused when the hardship is not warranted by the  circumstances.

       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.

       The word "undue" adds something more than just  hardship.  It means an excessive hardship or a hardship

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greater than the circumstances warrant.           The other aspect relates to imposition of condition to  safeguard the interest of revenue.  This is an aspect which the  Tribunal has to bring into focus.  It is for the Tribunal to  impose such conditions as are deemed proper to safeguard the  interest of revenue.  Therefore, the Tribunal while dealing with  the application has to consider materials to be placed by the  assessee relating to undue hardship and also to stipulate  condition as required to safeguard the interest of revenue.

       In the instant case Tribunal has rightly observed that the  rival stands have to be examined in detail with reference to  material on record.                   The only other question that needs to be examined is  whether any reduction of the amounts to be deposited as  directed by the Tribunal  is called for.

       It appears that pursuant to the direction given by this  Court on 18.8.2006, the appellants have paid Rs.4 lakhs and  Rs.30 lakhs within the time stipulated. Considering the nature  of the dispute and the difficulties highlighted by the appellants  seeking dispensation of deposit, we direct that the appeals  shall now be heard without requiring further deposit, if the  appeals are free from other defects in accordance with law.  However, for the balance of the amount demanded, with a view  to safeguard interest of the Revenue, the appellants shall  furnish such security as may be stipulated by the Tribunal.  

       The appeals are accordingly disposed of. No costs.