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CASE NO.: Appeal (civil)  4340 of 2007

PETITIONER: Bhavya Apparels Private Limited & Anr

RESPONDENT: Union of India & Anr

DATE OF JUDGMENT: 18/09/2007

BENCH: S.B. Sinha & Harjit Singh Bedi

JUDGMENT: J U D G M E N T  

CIVIL APPEAL NO.   4340               OF 2007 [Arising out of  SLP (Civil) No. 7225 of 2007]

S.B. SINHA, J :          1.      Leave granted.   2.      Interpretation of the provisions of Section 129E of the Customs Act,  1962 (for short "the Act") is in question in this appeal which arises out of a  judgment and order dated 4.10.2004 passed by a Division Bench of the High  Court of Gujarat at Ahmedabad in Special Civil Application No. 9569 of  2004.

3.      An adjudication proceeding was initiated against the appellant.   Assessment of Custom Duty was made.  An appeal was preferred  thereagainst.  The said appeal was dismissed for failure to pre-deposit a sum  of Rs. 3,30,00000/- as directed by the Court of Appeal.   

4.      We may notice that in the earlier round of litigation when a statement  was made before the High Court that the Tribunal may hear the appeal on  merit without asking the appellant to make any pre-deposit, it was asked to  make that prayer before the Tribunal.  Pursuant thereto an application was  filed.  The Tribunal in terms of its order dated 14.01.2004 opined:

"We accordingly order that the appellant company  deposit Rs. 3 crores out of the total duty demand  upon such deposit further deposit of duty and  penalty imposed on the company is waived and  recovery thereof stayed.  We further order that the  director of the company Shri R.C. Agarwal deposit  Rs. 20 lakhs and the power of attorney holder of  the Company Shri H.R. Agarwal deposit Rs. 10  lakhs within 12 weeks of the date of the order.   Compliance on 26.4.2004.  Appeal is liable to be  rejected for non-compliance without further  notice."

5.      A writ application filed by the appellants questioning the correctness  of the said order has been dismissed by reason of the impugned judgment.

6.      Mr. C.N. Sreekumar, learned counsel appearing on behalf of the  appellants, in support of this appeal, inter alia would submit:

(i)     The High Court committed a manifest error insofar as it failed to  take into consideration the ingredients of Section 129E of the Act. (ii)    Section 129E, if construed properly, would not give rise to a

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conclusion that in absence of any provision made in that behalf,  non-compliance of the order of pre-deposit itself would lead to  automatic dismissal of the appeal. (iii)   A right of appeal conferred upon a suitor having been provided for  in a statute, the provision for pre-deposit must receive strict  interpretation. (iv)    Provisions for payment of court fee and power to grant stay having  been conferred in the Tribunal, the impugned judgment could not  have been passed particularly when Section 129E of the Act does  not provide for any consequence arising out of non-compliance of  the order of pre-deposit.

7.      Mr. Vikas Singh, learned Additional Solicitor General appearing on  behalf of Union of India, on the other hand, would submit that interpretation  of Section 129E of the Act is concluded by a decision of this Court in Vijay  Prakash D. Mehta and Another v. Collector of Customs (Preventive),  Bombay [(1988) 4 SCC 402].

8.      The Act was enacted to consolidate and amend the law relating to  customs.  It provides for assessing an order of custom duty.  It also provides  for seizure of goods.  Penalty may also be levied by the adjudicating  authorities.  Chapter XV of the Act provides for appeals to the  Commissioner from any decision passed by an officer of custom lower in  rank than the said authority.  Section 128A provides for the procedure  therefor.  Section 129 provides for the constitution of the appellate tribunal  wherefor procedures have also been laid down.  Proviso appended to Section  129A enumerates the cases in respect whereof jurisdiction of the appellate  tribunal is barred.  Sub-section (6) of Section 129A envisages payment of  court fee.  Sub-section (2A) of Section 129B specifies a period of three years  during which the appeal may be disposed of.  A Tribunal is also empowered  to grant stay.  Section 129E, however, mandates pre-deposit of any duty and  interest in appeal which is preferred in respect of the goods which are not  under the control of the custom authorities or any penalty levied under the  Act.  Proviso appended thereto, however, empowers the Commissioner of  Appeal or the appellate tribunal to dispense with such deposit if it comes to  the conclusion that the deposit of duty and interest would cause undue  hardship to the appellant.

9.      A right of appeal is not a fundamental right.  It is a statutory right.  As  a right of appeal is a statutory right, it may also be hedged by conditions.  It  is, however, trite that conditions imposed may not be such which may for all  intent and purport take away a vested right of appeal.  [See Dilip S.  Dahanukar v. Kotak Mahindra Co. Ltd. & Anr. 2007 (5) SCALE 452]

10.     We, however, having regard to the facts and circumstances of this  case are of the opinion that the larger question, viz., interpretation of Section  129E of the Act need not be gone into.   

       Section 129E of the Act would be attracted where the goods in  question are not in the custody of the Revenue.  The said provision,  therefore, would be attracted only when the ingredients thereof exist.   

       The learned Additional Solicitor General very fairly submits that a  part of the goods is in custody of the respondents.  If that be so, in our  opinion, it was obligatory on the part of the Tribunal to take that factor into  consideration in making the order of pre-deposit.  Furthermore, while  exercising its jurisdiction, the Tribunal was also required to apply its mind in  regard to the question of undue hardship on the part of the appellants upon  considering existence of a prima facie case.  Merit of the case ordinarily  should not otherwise be gone into unless the question on the face of it  appears to be concluded.

11.     The Tribunal while imposing the condition of pre-deposit was  required to apply its mind in regard to the existence or otherwise of the  conditions laid down in the statute.

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12.     In Vijay Prakash D. Mehta (supra), applicability or interpretation of  Section 129E of the Act came up for consideration before this Court wherein  it was held:

"9. Right to appeal is neither an absolute right nor  an ingredient of natural justice the principles of  which must be followed in all judicial and quasi- judicial adjudications. The right to appeal is a  statutory right and it can be circumscribed by the  conditions in the grant. ***                     ***                             *** 11. These observations cannot be applied to the  facts of this case. Here we are concerned with the  right given under Section 129A of the Act as  controlled by Section 129E of the Act, and that  right is with a condition and thus a conditional  right. The petitioner in this case has no absolute  right of stay. He could obtain stay of realisation of  tax levied or penalty imposed in an appeal subject  to the limitations of Section 129E. The proviso  gives a discretion to the authority to dispense with  the obligation to deposit in case of "undue  hardships". That discretion must be exercised on  relevant materials, honestly, bona fide and  objectively. Once that position is established it  cannot be contended that there was any improper  exercise of the jurisdiction by the Appellate  Authority. In this case it is manifest that the order  of the Tribunal was passed honestly, bona fide and  having regard to the plea of ’undue hardship’ as  canvassed by the appellant. There was no error of  jurisdiction or misdirection.

***                     ***                             ***

13. It is not the law that adjudication by itself  following the rules of natural justice would be  violative of any right-constitutional or statutory,  without any right of appeal, as such, if the statute  gives a right to appeal upon certain conditions, it is  upon fulfilment of those conditions that the right  becomes vested and exercisable to the appellant.  The proviso to Section 129E of the Act gives a  discretion to the Tribunal in cases of undue  hardships to condone the obligation to deposit or to  reduce. It is a discretion vested in an obligation to  act judicially and properly."

13.     Mr. Sree Kumar, however, submits that inter alia having regard to the  decision of the Madhya Pradesh High Court in Kishori Pujari Granite Pvt.  Ltd. v. Union of India [184 ELT 225] and the decision of the Kerala High  Court in Ashoka Rubber Products v. Collector of C.Ex. [1989 (43) ELT  605], the matter requires reconsideration.  As at present advised, we are not  inclined to do so.   14.     We are satisfied that in a case of this nature, where a part of the goods  which is the subject matter of the proceedings under the Act is in possession  of the Revenue, proviso appended to Section 129E of the Act should have  been invoked.   

15.     Justification for enacting such a provision has been considered by a  Constitution Bench of this Court in Mardia Chemicals Ltd. and Others v.  Union of India and Others [(2004) 4 SCC 311] wherein it was held:

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"56. The contention of the petitioners is that in the  first place such an oppressive provision should not  have been made at all. It works as a deterrent or as  a disabling provision impeding access to a forum  which is meant for redressal of the grievance of a  borrower. It is submitted where the possession of  the secured assets has already been taken over or  the management of the secured assets of the  borrower including the right to transfer the same,  in that event it would not at all be necessary to  burden the borrower doubly with deposit of 75%  of the demand amount. In a situation where the  possession of the secured assets have already been  taken over or its management, it is highly  unreasonable further to ask for 75% of the amount  claimed before entertaining the grievance of the  borrower.  57. Secondly, it is submitted that, it would not be  possible for a borrower to raise funds to make  deposit of the huge amount of 75% of the demand,  once he is deprived of the possession/management  of the property namely, the secured assets.  Therefore, the condition of deposit is a condition  of impossibility which renders the remedy made  available before the DRT as nugatory and illusory.  The learned Attorney General refutes the aforesaid  contention. It is further submitted that such a  condition of pre-deposit has been held to be valid  by this Court earlier and a reference has been made  to SCC at p. 202 in Anant Mills Co.Ltd. Vs. State  of Gujarat to submit that such a provision is made  to regulate the exercise of the right of an appeal  conferred upon a person. The purpose is that right  of appeal may not be abused by any recalcitrant  party and there may not be any difficulty in  enforcing the order appealed against if ultimately it  is dismissed and there may be speedy recovery of  the amount of tax due to the corporation.  

***                     ***                             *** 64. The condition of pre-deposit in the present case  is bad rendering the remedy illusory on the  grounds that (i) it is imposed while approaching  the adjudicating authority of the first instance, not  in appeal, (ii)there is no determination of the  amount due as yet (iii) the secured assets or its  management with transferable interest is already  taken over and under control of the secured  creditor (iv) no special reason for double security  in respect of an amount yet to be determined and  settled (v) 75% of the amount claimed by no  means would be a meager amount (vi) it will leave  the borrower in a position where it would not be  possible for him to raise any funds to make deposit  of 75% of the undetermined demand. Such  conditions are not alone onerous and oppressive  but also unreasonable and arbitrary. Therefore, in  our view, sub-section (2) of Section 17 of the Act  is unreasonable, arbitrary and violative of Article  14 of the Constitution."

16.     The Constitution Bench, therefore, was of the opinion that such a  condition would be onerous and, thus, arbitrary if a suitor is required to  deposit such an amount at the initial stage and not at the appellate stage.

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17.     We are not oblivious that the taxing statute must be strictly construed.    [See Manish Maheshwari v. Asstt. Commissioner of Income Tax and Anr.  2007 (3) SCALE 627 and Southern Petrochemical Industries Co. Ltd.  v. Electricity Inspector and E.T.I.O. and Ors., 2007 (7) SCALE 392]

       We are also not oblivious of the fact that only because the word  "shall" is used, the same may not be construed to be  imperative in character.

       In Management, Pandiyan Roadways Corp. Ltd.  v. N. Balakrishnan [2007 (7) SCALE 758], this Court observed: "12. On a plain reading of the said provision and  particularly in view of the fact that the word  "shall" has been used, prima facie it would be  construed to be imperative in character. It may,  however, be held to be directory in certain  situation. While construing a statute of this nature,  the context plays an important role. Interpretation  of a statute would also depend upon the fact  situation obtaining in the case. There are, however,  certain exceptions to the said rule. The question  came up for consideration before this Court in U.P.  State Electricity Board v. Shiv Mohan Singh and  Anr. wherein it was, inter-alia, noticed: 96. Ordinarily, although the word shall is  considered to be imperative in nature but it has to  be interpreted as directory if the context or the  intention otherwise demands. (See Sainik Motors  v. State of Rajasthan AIR para)  97. It is important to note that in Crawford on  Statutory Construction at p. 539, it is stated: 271. Miscellaneous implied exceptions from the  requirements of mandatory statutes, in general.  Even where a statute is clearly mandatory or  prohibitory, yet, in many instances, the courts will  regard certain conduct beyond the prohibition of  the statute through the use of various devices or  principles. Most, if not all of these devices find  their justification in considerations of justice. It is  a well-known fact that often to enforce the law to  its letter produces manifest injustice, for frequently  equitable and humane considerations, and other  considerations of a closely related nature, would  seem to be of a sufficient calibre to excuse or  justify a technical violation of the law."

18.     In view of our findings aforementioned, the matter, in our opinion,  requires reconsideration at the hands of the Tribunal.  The Tribunal failed to  take into consideration the limitation of its jurisdiction under Section 129E  which emanates from the custody of the goods and as a part of the goods is  in the custody of the Revenue and furthermore in view of the fact that the  High Court instead of considering the question as to whether direction to  deposit the amount would cause undue hardship or not has gone into the  merit of the matter, the interest of justice would be subserved if the  impugned judgments are set aside and the matter is remitted to the Tribunal  for consideration of the matter afresh.  We direct accordingly.  We would  request the Tribunal to consider the desirability of disposing of the matter as  early as possible.

20.     The appeal is allowed to the aforementioned extent.  No costs.