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CASE NO.: Appeal (civil)  5152 of 2007

PETITIONER: Union of India & Anr

RESPONDENT: Adani Exports Ltd. & Anr

DATE OF JUDGMENT: 12/11/2007

BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO.      5152             OF 2007  (Arising out of S.L.P. (C) No.21705 of 2006)

Dr. ARIJIT PASAYAT, J.

1.      Leave granted.

2.      Challenge in this appeal is to the order passed by a  learned Single Judge of the Gujarat High Court, setting aside  the order passed by the Appellate Tribunal for Foreign  Exchange (for short ’Tribunal’) dated 4th January, 2006 in  Appeal nos. 199, 500 and 501 of 2006 whereby the application  for dispensation of pre-deposit was rejected. 3.      Background facts in a nutshell are as follows:-

       On the basis of the alleged violation of certain provisions  of the Customs Act 1962 (in short the ’Act’) notices were  issued to certain noticees including the present respondents  primarily on the ground of mis-declaration as to the  description and narration of the goods imported and on the  ground of over-invoicing so far as valuation is concerned and  consequentially misusing foreign exchange. Show-cause  notices were issued by the adjudicating authority and on  consideration of the submissions and replies filed, the orders  in original were passed by the Commissioner of Customs  (hereinafter referred to as the ’Commissioner’). The orders  passed by the original authority were challenged by the  respondents before the Customs, Excise and Service Tax  Appellate Tribunal, Bangalore (in short ’CESTAT’).  Notices  were also issued under Foreign Exchange Management Act,  1999 (in short ’Management Act’).  The Additional Director  General passed orders in terms of the Foreign Exchange  Regulation Act, 1973 (in short ’the Regulation Act’) which has  been repealed along with the provisions of the Foreign  Exchange Management Act 1999 (in short the ’Management  Act’). The order was passed after considering the replies and  submissions in response to the show-cause notices. The  adjudicating authority found the noticees guilty of the charges  and in terms of the powers conferred under Section 50 of the  Regulation Act read with Section 49(3) and 49(4) of the  Management Act imposed the following penalties:                        A)      A penalty of Rs.7,50,00,000/- (Rupees  Seven Crores fifty lakhs only) on Shri

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Dharmesh P. Shah, Proprietor of M/s.  Vaishal Impex, (noticee No.1). B)      A penalty of Rs.4,00,000/- (Rupees Four  Crores only) on M/s. Adani Exports  Limited, (noticee No.2). C)      A penalty of Rs.2,00,00,000/- (Rupees  Two Crores only) on Shri Rajesh Adani,  Director of M/s. Adani Exports Limited.  (noticee No.3).

4.      Questioning correctness of the adjudication order,  appeals were preferred before the Tribunal. Along with the  appeals, application for dispensation of deposit of penalty  amount was filed. The same was rejected as noted above by  order dated 4.1.2006.     5.      The Tribunal was of the view that neither any prima facie  case was made out nor the financial stringency established to  warrant dispensation of pre-deposit. A writ petition was filed  before the Gujarat High Court primarily questioning the said  order and also incidentally questioning legality of the  proceedings. The High Court not only dealt with the impugned  order before it relating pre-deposit aspect but also the merits  of adjudication. It elaborately discussed the merits of the  adjudication proceedings, though it itself noted that the  Special Civil Applications were filed questioning correctness of  the order relating to pre-deposit. Not only the High Court held  that the order directing deposit was unsustainable but also  held that the order of adjudication was unsustainable,  overlooking the fact that the appeals were pending before the  Tribunal. The High Court set aside the order passed by the  adjudicating authority and remitted the matter to the  adjudicating authority i.e. the Additional Director General.

6.      In support of the appeal learned counsel for the appellant  submitted that the approach of the High Court is clearly  unsustainable. High Court itself noticed that the primary  challenge was to the order passed by the Tribunal relating to  pre-deposit. Though some grounds were taken relating to the  merits of the adjudication, the High Court should not have  dealt with them and should have left those matters to be  adjudicated by the Tribunal. Instead of doing that, the High  Court set aside the order referring to certain observations  made by CESTAT in other cases. It is further submitted that  the view taken by CESTAT in those cases has been questioned  before this Court and the appeal has been admitted. In that  view of the matter the order passed by the High Court is  clearly unsustainable.   

7.      Learned counsel for the respondent on the other hand  submitted that there was an earlier order passed by CESTAT  which was in favour of the respondents-noticees. Therefore,  the High Court was justified in remitting the matter to the  adjudicating authority.   

8.      It is not in dispute that the respondents have filed  appeals before the Tribunal. As noted by the High Court,  primary challenge in the writ petitions was to the order  relating to pre-deposit. While dealing with that the High Court  was not justified in going into the merits and expressing its  views and thereafter remitting the matter to the Tribunal.   Such a course was not available to be adopted.  

9.      The Tribunal has highlighted the relevant aspects while  rejecting the prayer for dispensation of pre-deposit. The three

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aspects to be focused while dealing with such applications are  (a) prima facie case (b) balance of convenience and (c)  irreparable loss. The Tribunal categorically found that these  factors were established by the respondents.  Even when  Tribunal decides to grant full or partial stay it has to impose  such conditions as may be necessary to safeguard the interest  of revenue.  This is an imperative requirement under Section  129E of the Act.  Normally, therefore, we would have asked the  respondent assessee to comply with the orders of Tribunal, by  setting aside the impugned order. But considering the fact  that the Tribunal already passed consequential order on the  basis of the High Court’s order on 18.8.2006, we dispose of the  appeal with following directions:   (a)     Impugned order passed by the High Court and the  consequential order passed by the Tribunal on 18.8.2006 are  set aside.   (b)     The parties are directed to appear before the Tribunal  without any further notice on 3.12.2007.  (c)     The Tribunal shall take up the appeal by hearing them  without insistence on pre-deposit.  (e)     The appeals shall be heard on day to day basis.  (f)     The respondent shall file an undertaking before the  adjudicating authority to liquidate the demands, if any,  sustained by the Tribunal subject of course, to the right of  appeal if any, within eight weeks from the date of receipt of  Tribunal’s order.  This of course would be subject to any order  of interim protection, passed in the appeal.    

12.     The appeal is accordingly disposed of without any order  as to costs.