INDU NISSAN OXO CHEMICALS IND. LTD. v. UNION OF INDIA AND ORS

Citation: [2007] 13 S.C.R. 173

Court: Supreme Court of India

Bench: ARIJIT PASAYAT, AFTAB ALAM

Case summary

INDU NISSAN OXO CHEMICALS IND. LTD. v. UNION OF INDIA AND ORS.pdf

Judgment text

\ I INDU NISSAN OXO CHEMICALS IND. LTD. ~ v. UNION OF INDIA AND ORS. DECEMBER 11, 2007 (DR. ARIJIT PASAYAT AND AFTAB ALAM, JJ. ) Customs Act, 1962 -s. J29E -Stay/dispensation ofpre-deposit - Consideration of"undue hardship" aspect- Imposition ofpenalty ofRs. I 0 crores by Commissioner ofCustoms - Appeal - Tribunal directingpre-deposit ofRs. 2 crores as conditionprecedentfor hearing appeal - Plea ofassesseefor dispensation ofpre-deposit on ground offinancial sickness -- Tenability of- Held: Not tenable - Mere assertion about financial I undue hardship not sufficient. Words and Phrases - "undue" and "undue hardship"- Meaning of- Jn context to s. l 29E of Customs Act, 1962. ' A dispute arose relating to classification of the product imported by assessee-company and the consequential benefits claimed by it under various Notifications issued by the Director General ofForeign Trade. The customs authorities did not accept the stand of the asses~ee about its classification.

Subsequently, the Commissioner of Customs imposed penalty of Rs. I0 crores. Assessee challenged the levy of penalty by filing appeal before the CESTAT which directed pre-deposit of Rupees 2 crores as condition precedent for hearing the appeal. Assessee filed writ petition thereagainst which was dismissed. In the instant appeal, the assessee-company contended that it was financially sick and, therefore, insistence on pre-deposit, would deprive it of the statutory right of appeal. Disposing of the appeal, the Court ~ HELD: 1. 1. In matters relating to grant of stay pending disposal of the appeal, though discretion is available, the same '-'! 173 has to be exercised judicially. [Para 10] [179-C] 1. 2. 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 ofthe 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 ofpublic administration, interim re,ief can be given. [Para 12] [179 E-G] Metal Box fl:zdia Ltd,. v. Commissioner of Central Excise, . Mumbai (2003) lSS EtT '13{S. C. ); Silliguri Municipality and Ors. v. Amalendu Das and Ors. AIR (1984) SC 653; Mis 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 - relied on. 2. Two significant expressions used in Section 129E of the Customs Act, 1962 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 ofundue hardship aspect and imposition ofconditions to safeguard the interest of Revenue have to be kept in view. [Para 14] [180-E]] 3. Undue hardship 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. ~, Under Indian conditions expression "undue hardship" is normally -j related to economic hardship. "Undue" 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 perform the requirement, is out ofproportion to the nature ofthe requirement itself, and the benefit which the applicant would derive from compliance with it. [Paras 15, 16] [180 F-H; 181-A] S. Vasudeva v. State ofKarnataka and Ors. AIR (1994) SC 923 and Mis Benara Valves Ltd. and Ors. v. Commissioner ofCentral Excise and Anr. (2006) 12 SCALE 303 - relied on. 4. Ther. e is no infirmity in the order directing deposit of Rupees two crores as affirmed by the High Court. The appellant is granted three months time to deposit the amount fixed by the CESTAT. [Para 18] [181-C] ~ CIVILAPPELLATE JURISDICTION : CivilAppeal No. 5795 of2007 From the Judgment and Order dated 10. 07. 2006 and 6. 2. 2007,of the High Court of Gujarat atAhmedabad in Special Civil Application No. 5540 of2006 and Civil Misc. Application for Review No. 2772 of 2006 in Special Civil Application No. 5540 of2006 respectively. Shyam Divan, S.

UdayaKumar Sagar, Bina Madhavan and Hema! ... K. Sheth (for Mis. Lawyers's Knit & Co. ) for the Appellant. Vikas Singh, ASG. L. N. Shukla, Rashmi Malhotra, RC. Kathia and B. Krishna Prasad for the Respondents. The Judgment ofthe Court was delivered by Dr. ARIJIT PASAYAT, J. 1. Leave granted. 2. Challenge in this appeal is to the order passed by the High Court ofGujarat dismissing the writ petitions filed by the appellant. 3. Challenge before the High Court was to the order dated r 10. 1. 2006 passed by the Customs, Excise & Service Tax Appellate Tribunal (in short 'CESTAT') directing deposit ofrupees two crores as a condition precedent for entertaining the appeal. It is to be noted that the total amount ofpenalty imposed was Rs. I0,00,00,000/-. The dispute relates to classification ofthe product imported by the appellant and consequential benefits claimed by it under various Notifications issued by the Director General ofForeign Trade.

The customs authorities did not accept the stand ofthe appellant about its classification. The levy of penalty was challenged by way ofappeal before the CESTAT. It was acc secondly, Section 22 ofthe Sick Industries Act provides reliefin regard to the proceedings which relate to (a) winding up ofthe ~ industrial company; (b) execution distress or the like against any ofthe properties ofthe industrial company; (c) the appointment of a receiver in respect thereof, and (d) proceeding in regard to suit for recovery of money or for the enforcement of any security against the industrial company or ofany guarantee in respect of any loans or advance granted to the industrial company. Payment ofpre-deposit covered under Section 3SF ofthe Central Excise -~ Tax Act, 1944 does not fall under any ofthe above-mentioned categories in Section 22 ofthe Sick Industries Act. " 10.

Principles relating to grant of stay pending disposal ofthe 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. 11. The applicable principleshave been set out succinctly inSilliguri Municipality and Ors. v.. Amalendu Das and Ors. (AIR 1984 SC 653), Mis 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). 12. It is true that on merely establishing a prima facie case, interim order ofprotection s_hould not be passed. But ifon 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 ofthe demand.

Petitions for stay should not be disposed ofin a routine matter unmindful ofthe consequences flowing from the order requiring the assessee to deposit full or part ofthe 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 licenseto the forum/authority to pass an order which cannot be sustained on the touchstone offairness, legality and public interest. Where denial ofinterim reliefmay lead to ,J public mischief, grave irreparable private iajury or shake a citizens' faith in the impartiality ofpublic administration, interim reliefcan be given. ,.. 13. Section 129-E ofthe Act reads as follows: ,T 180 SUPREMECOURTREPORTS [2007] 13(Addl. )S. C. R. "129E. DEPOSIT, PENDING APPEAL, OF DUTY AND INTEREST DEMANDED OR PENALTY LEVIED.

- Where in any appeal under this Chapter, the decision or order appealed against relates to any duty and interest demanded in respect of goods which are not under the control ofthe customs 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 proper officerthe duty and interest demanded or the penalty levied. Provided that where in any particularcase, the Commissioner (Appeals) or the Appellate Tribunal is ofopinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, theAppellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests ofrevenue. " 14. Two significantexpressions 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. considerationofundue hardship aspect and imposition ofconditions to safeguard the interest ofRevenue have to be kept in _view. 15. As noted above there are two important expressions in Section 129-E. One is undue hardship. This is a matter within the special knowledge ofthe applicant for waiver and has to be established by him. mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State ofKarnataka 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 ofthe claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances. ~ 16. Forahardship to be 'undue' it must be shown that the particular INDUNISSAN OXO CHEMICALS IND. LTD. v.

181 burden to have to observe or perfonn the requirement is out ofproportion to the nature ofthe requirement itself, and the benefit which the applicant would derive from compliance with it. 17. The above position has been highlighted in Mis Benara Valves Ltd. and Ors. v. Commissioner of Central Excise and Anr. (2006 (12) SCALE 303). Though the said case related to dispute under the Customs Excise Act, 1944 (in short the 'Excise Act') the parameters are the same. 18. We do not find any infirmity in the order directing deposit of Rupees two crores as affirmed by the High Court. The appellant is granted three months time to deposit the amount fixed by the CESTAT. Ifit is not deposited within the aforesaid time, the appeal before the CESTAT shall stand dismissed. 19. The appeal is disposed of accordingly with no order as to costs. B. B. B. Appeal disposed of.