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PETITIONER: UNION OF INDIA & ANR.

       Vs.

RESPONDENT: M/S. JESUS SALES CORPORATION

DATE OF JUDGMENT:       26/03/1996

BENCH: SINGH N.P. (J) BENCH: SINGH N.P. (J) VENKATASWAMI K. (J)

CITATION:  1996 AIR 1509            1996 SCC  (4)  69  JT 1996 (3)   597        1996 SCALE  (3)103

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T N.P. SINGH J.      This appeal  has been  filed on  behalf of the Union of India against  the judgment  of a  Full Bench  of Delhi High Court holding  that an  oral hearing  had to be given to the respondent  by  the  Appellate  authority  before  taking  a decision under  third proviso  to sub-section (1) of Section 4-M  of   the  Imports   and  Exports  (Control)  Act,  1947 (hereinafter referred to as the ’Act’). On the aforesaid finding the  writ petition filed on behalf of the respondent was allowed  and the order passed by the Appellate authority was quashed.  A direction was given to afford an opportunity to the  said respondent  to be  heard on  the question as to whether the  appeal filed on behalf of the respondent should be entertained without deposit of the penalty imposed.      The respondent  obtained an advanced licence for import of  brass  scrap  on  certain  conditions,  under  the  Duty Exemption Scheme.  The said  licence was  issued subject  to the  respondent’s   exporting  78   MT  Brass   Artware  for approximate FOB  value of  Rs.  14,00,420/-.  A  show  cause notice was issued to the respondent under Section 4-M of the said Act on basis of the report of investigation. Ultimately a penalty  of  Rs.6  lakhs  was  imposed  against  the  said respondent. An  appeal was filed on behalf of the respondent along with  an application  for  dispensing  with  the  pre- deposit. By a communication dated 18.2.1993 issued on behalf of the  Appellate authority,  the respondent was directed to deposit 25%  of the penalty amount or bank guarantee for the same  amount.   The  validity   of  this  communication  was questioned  before   the  High   Court  saying  that  before rejecting the  prayer made  on behalf  of the  respondent to dispense with  the whole  amount of  penalty an  opportunity should have been given to the said respondent of being heard in terms  of the  proviso to Section 4-M of the Act. Section 4-M of the Act provides:

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    "(1) Any  person aggrieved  by  any      decision or  order made  under this      Act may prefer an appeal,-      (a) where the decision or order has      been made  by the  Chief Controller      or Additional  Chief Controller, to      the Central Government;      (b) where the decision or order has      been made  by any officer below the      rank  of   the   Additional   Chief      Controller, to the Chief Controller      or where  he  so  directs,  to  the      Additional Chief Controller,      within a  period of forty-five days      from the date on which the order is      served on such person:           Provided  that  the  Appellate      authority may,  if it  is satisfied      that the appellant was prevented by      sufficient  cause  from  preferring      the  appeal  within  the  aforesaid      period of  forty-five  days,  allow      such appeal  to be preferred within      a  further   period  of  forty-five      days:           Provided further  that in  the      case of  an appeal against an order      imposing a  penalty, no such appeal      shall  be  entertained  unless  the      amount  of  the  penalty  has  been      deposited by the appellant:           Provided also  that, where the      Appellate authority  is of  opinion      that the  deposit to  be made  will      cause   undue   hardship   to   the      appellant,   it    may,   at    its      discretion,  dispense   with   such      deposit either  unconditionally  or      subject to  such conditions  as  it      may impose.      (2) The  Appellate  authority  may,      after giving  to  the  appellant  a      reasonable  opportunity   of  being      heard, if  he so desires, and after      making such  further inquiries,  if      any, as  it may consider necessary,      pass such  orders as it thinks fit,      confirming, modifying  or reversing      the  decision   or  order  appealed      against, or may send back the case,      with  such  directions  as  it  may      think fit, for a fresh adjudication      or decision,  as the  case may  be,      after taking  additional  evidence,      if necessary:           Provided   that    an    order      enhancing or  imposing a penalty or      confiscating goods  or materials of      a greater  value shall  not be made      under  this   section  unless   the      appellant has had an opportunity of      making a representation, and, if he      so desires,  of being  heard in his      defence." In view of the aforesaid Section any person aggrieved by any

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decision or  order made  under the  said Act  may prefer  an appeal before  the authority  prescribed therein  and within the time fixed. The first proviso to sub-section (1) of Section 4-M vests power in the Appellate authority if it is satisfied that appellant was prevented by sufficient cause from preferring  the appeal  within the period prescribed to allow such appeal to be preferred within a further period of forty-five days.  The second  proviso prescribes a condition that an appeal against an order imposing a penalty shall not be entertained  unless the  amount of  the-penalty has  been deposited by  the  appellant.  Having  said  so,  the  third proviso says  that where  the Appellate  authority is of the opinion that  the  deposit  to  be  made  will  cause  undue hardship to the appellant, it may at its discretion dispense with such  deposit either unconditionally or subject to such conditions as it may impose. Neither the first proviso which vests power  in the  Appellate authority  for condonation of delay in filing the appeal nor the third proviso which vests power in  the  Appellate  authority  to  dispense  with  the deposit of  the amount  of the penalty unconditionally or on some conditions say specifically that such orders have to be passed  only   after  hearing  the  parties  concerned.  The Appellate authority  in its discretion may condone the delay in filing  the appeal.  Same is  the  position  so  far  the question  of   pre-deposit  of  the  amount  of  penalty  is concerned. The Appellate authority may dispense with such deposit in  its discretion.  The  proviso  relating  to  the condonation for  delay in  filing the appeal is more or less on the-pattern of Section 5 of the Limitation Act. Some how, a practice  has grown  throughout the  country  that  before rejecting the  prayer for condonation of delay in filing the appeal  or  application,  opportunities  are  given  to  the appellants or  petitioners, as  the case may be, to be heard on  the   question   whether   such   delay   be   condoned. Opportunities  to   be  heard   are  also   the   contesting respondents in  such appeals.  In different  statutes  where power has  been vested in the Appellate authority to condone the delay  in filing such appeals or applications, there are no specific  provisions in those statutes saying that before such delays  are condoned  the appellants  or the applicants shall be  heard, but  on basis  of practice  which has grown during the  years the  courts and quasi-judicial authorities have been  hearing  the  appellants  and  applicants  before dismissing  such   appeals  or  applications  as  barred  by limitations. It  can be  said  that  courts  have  read  the requirements of  hearing the  appellants or  the  applicants before dismissing their appeals or applications filed beyond time on principle of natural justice, although the concerned statute does not prescribe such requirement specifically.      Now the  question is as to whether the same requirement has to be read as an implicit condition while construing the scope of  third proviso  to sub-section  (1) to Section 4-M, i.e. the Appellate authority before refusing to entertain an appeal on  the ground  that no  deposit  of  the  amount  of penalty imposed  had been made, should hear the appellant on the question of dispensing with such deposit unconditionally or subject  to conditions. It may be mentioned at the outset that the  provisions requiring  predispose of  the amount of penalty or  tax imposed  before the appeals are heard are of two  types.   There  are  some  statutory  provisions  which specifically prescribe  and provide  that before the appeals are heard,  the amount  of tax or penalty imposed have to be deposited. No  discretion has  been left  by the  statute in question in  the Appellate  authority to  waive such deposit taking into  consideration the  hardships of  the appellants

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concerned. One  such provision  was considered by this Court in the  case  of  Shyam  Kishore  and  Others  v.  Municipal Corporation of  Delhi and  Another, (1993)  l SCC  22  under Delhi Municipal  Corporation Act,  1957. In  that Act,  pre- deposit is  a must before an appeal can be heard. This Court held that  the Appellate  authority has  no jurisdiction  to waive the  condition  or  stay  collection  of  tax  pending disposal  of   the  appeal.  The  grievance  that  the  said provision in  that event  shall be deemed to be violative of Article 14  of the  Constitution being  harsh in  nature was rejected. But  there are  statutes which  vest power  in the Appellate authorities  to waive  deposit unconditionally  or with conditions.  So far  the present case with which we are concerned, as  already pointed  out above, the third proviso vests power  in the Appellate authority to dispense with the amount  of   the  penalty   unconditionally  or  subject  to conditions. As such it is different from the provision under the Delhi  Municipal Corporation Act referred to above. Here the discretion has been vested specifically in the Appellate authority   to    dispense   with    such   deposit   either unconditionally or  subject to  such conditions  as  it  may impose taking  into consideration  the undue  hardship which such deposit may cause to the appellant.      The learned counsel appearing on behalf of the Union of India took  a stand that when aforesaid proviso requires the Appellate  authority  to  exercise  discretion  taking  into consideration the  facts and  circumstances at each case, it does not flow from the said provision that before exercising such discretion,  the Appellate  authority should  hear  the appellant; this discretion can be exercised by the Appellate authority as  the said  authority may deem think proper. Now it is  too late to urge that when a statute vests discretion in an authority to exercise a statutory power such authority can exercise  the same  in an unfettered manner. Whenever an unfettered  discretion   has  been  exercised,  courts  have refused to  countenance the  same. That  is why from time to time courts have ’woven a network of restrictive principles’ which  the   statutory  authorities  have  to  follow  while exercising the discretion vested in them. This principle has been extended  even when  the authorities  have to  exercise administrative discretions under certain situations. Another well settled  principle which  has emerged  during the years that where  a statute  vests discretion  in the authority to exercise  a   particular  power,   there  is   an   implicit requirement that  it shall  be exercised in a reasonable and rational manner free from whims, vagaries and arbitrariness.      The High Court has primarily considered the question as to whether  denying an  opportunity to  the appellant  to be heard before  his prayer to dispense with the deposit of the penalty is rejected, violates and contravenes the principles of natural justice. In that connection, several judgments of this Court  have been  referred. It  need not be pointed out that  under   different  situations   and   conditions   the requirement of  the compliance  of the  principle of natural justice vary.  The  courts  cannot  insist  that  under  all circumstances  and   under  different  statutory  provisions personal  hearings  have  to  be  afforded  to  the  persons concerned. If  this principle  of affording personal hearing is extended  whenever statutory  authorities are vested with the  power   to  exercise   discretion  in  connection  with statutory appeals, it shall lead to chaotic conditions. Many statutory appeals  and applications  are disposed  of by the competent authorities  who have  been vested  with powers to dispose of  the same. Such authorities which shall be deemed to be quasi-judicial authorities are expected to apply their

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judicial mind  over the grievances made by the appellants or applicants concerned,  but it  cannot be  held  that  before dismissing such  appeals or  applications in  all events the quasi-judicial authorities  must hear  the appellants or the applicants, as  the case  may be. When principles of natural justice require an opportunity to be heard before an adverse order is passed on any appeal or application, it does not in all circumstances  mean a  personal hearing. The requirement is complied  with by  affording an opportunity to the person concerned to  present his  case before  such  quasi-judicial authority who  is expected to apply his judicial mind to the issues involved.  Of course,  if in his own discretion if he requires the  appellant or the applicant to be heard because of  special  facts  and  circumstances  of  the  case,  then certainly it  is always open to such authority to decide the appeal or  the application  only after  affording a personal hearing.  But   any   order   passed   after   taking   into consideration  the  points  raised  in  the  appeal  or  the application shall  not be  held to  be invalid merely on the ground that  no personal  hearing had been afforded. This is all the  more important  in  the  context  of  taxation  and revenue matters.  When an  authority has  determined  a  tax liability or  has imposed  a penalty,  then the  requirement that before  the appeal  is heard such tax or penalty should be deposited  cannot be  held to  be unreasonable as already pointed out above. In the case of Shyam Kishore v. Municipal Corporation of  Delhi (supra) it has been held by this Court that  such  requirement  cannot  be  held  to  be  harsh  or violative of Article 14 of the Constitution so as to declare the requirement  of pre-deposit  itself as unconstitutional. In this  background, it can be said that normal rule is that before filing  the appeal or before the appeal is heard, the person concerned should deposit the amount which he has been directed to  deposit as a tax or penalty. The non-deposit of such  amount   itself  is   an  exception   which  has  been incorporated in  different Statutes  including the  one with which are  concerned. Second  proviso to  sub-section (1) of Section 4-M  says in  clear and  unambiguous words  that  an appeal against  an order  imposing a  penalty shall  not  be entertained unless  the  amount  of  the  penalty  has  been deposited by  the appellant.  Thereafter the  third  proviso vests a  discretion in  such Appellate authority to dispense with  such   deposit  unconditionally  or  subject  to  such conditions as  it may  impose in  its discretion taking into consideration the undue hardship which it is likely to cause to the  appellant. As such it can be said that the statutory requirement is  that before  an appeal  is entertained,  the amount of  penalty has  to be deposited by the appellant; an order dispensing  with  such  deposit  shall  amount  to  an exception to  the  said  requirement  of  deposit.  In  this background, it  is difficult  to hold  that if the Appellate authority has  rejected  the  prayer  of  the  appellant  to dispense with  the deposit  unconditionally or has dispensed with such deposit subject to some conditions without hearing the appellant, on perusal of the petition filed on behalf of the appellant  for the  said purpose,  the order  itself  is vitiated  and  liable  to  be  quashed  being  violative  of principles of natural justice.      it shall not be out of place to mention that subsection (2) of  Section 4-M  provides  specifically  that  appellant shall be  given reasonable  opportunity of being heard if he so desires  before final order is passed on his appeal. That requirement according  to us  cannot be read impliedly as an implicit condition  in the  third proviso to sub-section (1) of Section  4-M. But  it need not be impressed that when the

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Appellate authority  has been  vested with the discretion to dispense with such deposit unconditionally or on conditions, then it has to apply its mind on that question like a quasi- judicial authority  taking into  consideration all the facts and circumstances  of the  case including the undue hardship which has  been pointed  out on  behalf of the appellant. In that proviso  the two expressions ’opinion’ and ’descretion’ both have  been used.  In view  of the settled position that whenever a  statutory authority  has to form an opinion on a question, it  does not  mean that  it has  to be formed in a subjective or  casual manner.  That opinion  must be  formed objectively on relevant considerations. Same is the position in respect of the exercise of discretion. The framers of the Act  require   such  Appellate  authority  to  exercise  its discretion in  a reasonable  and rational manner taking into consideration the  relevant facts  and  circumstances  of  a particular appeal  while  considering  the  question  as  to whether  the  deposit  of  the  amount  of  the  penalty  be dispensed with unconditionally or subject to the conditions.      In the  present case  on the  application filed  by the respondent, a direction was given to deposit only 25% of the amount of  the penalty  which had  been imposed  against the said respondent.  According to  us, the  Appellate authority passed a reasonable order which should not have been held to be invalid  by the  High Court  merely on  the ’ ground that before passing  the said  order the respondent was not given oral hearing,  which amounted to violation of the principles of natural justice.      The appeal  is accordingly  allowed. The impugned order is set  aside. In  the facts  and circumstances of the case, there shall be no orders as to cost.