JUDGMENT R.K. Agrawal and Sanjay Misra, JJ.
1. By means of the present writ petition filed under Article 226 of the Constitution of India the petitioner, M/s Adhunik Food Products (Pvt.)Ltd. Dehradun through its Director Sh. Deepak Garg seeks the following reliefs:
A. to issue a suitable writ, order or direction in the nature of mandamus directing the Central Excise & Service Tax Appellate Tribunal i.e the respondent No. 2 to hear the Appeal No. E/708-11/06 filed by the petitioner (Annexure 13 to the writ petition) on merits without insisting on the condition of any pre-deposit.
B. to issue a writ, order or direction in the nature of mandamus directing the Central Excise & Service Tax Appellate Tribunal i.e. the respondent No. 2 to allow the petitioner to dispense with the requirement of pre-deposit of Rs. 1,91,10,579.
C. to issue a writ, order or direction in the nature of certiorari quashing the Interim Stay Order No. S/347-50/2006 dated 10.4.2006 (Annexure 1 to the writ petition) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi i.e. respondent No. 2.
D. to issue any other suitable writ, order or direction which this Hon'ble Court may deem fit in the facts and circumstances of the case.
E. to award the costs of the petition to the petitioner.
2. Briefly stated the facts giving rise to the present writ petition are as follows:
3. According to the petitioner it is engaged in the manufacture of puffed wheat and puffed soya nuts in its factory which are basically food preparations meant for infant use and it is claimed that they are classifiable under Chapter 21 of the First Schedule of the Central Excise Tariff Act, 1985. Pursuant to the certain investigations adjudication proceedings were commenced which culminated in the order in original dated 20th November, 1997 passed by the Commissioner of Central Excise. The appeal preferred by the petitioner before the Central Excise & Service Tax Appellate Tribunal (hereinafter referred to as the Tribunal) which disposed of the appeal vide order dated 9th November, 2001 and misc. order dated 10th June, 2002 by holding that the goods, namely, puffed wheat and puffed soya nuts are classifiable under heading 19.04 and 21.07/21.08 respectively of the Schedule of the Central Excise Transit Act, 1985. The Tribunal, however, remanded the matter back to the adjudicating authority to consider the claims on account of cum-duty, SSI exemption, freight paid and sales tax paid by the petitioner against which according to the petitioner an appeal has been filed before the Hon'ble Supreme Court which has been admitted on 4th February, 2002. In the remand proceedings, after taking into consideration the explanation given by the petitioner, the Commissioner of Central Excise, Meerut had passed an order dated 30th November, 2005 wherein he has allowed certain deductions but has confirmed the demand of duty amounting to Rs. 2,06,10,579/- along with interest with an equivalent amount of penalty as also some amount of penalty was imposed on the Directors personally. The petitioner has preferred an appeal against the order dated 30th November, 2005 before the Tribunal. Along with the appeal the petitioner has also filed an application for waiving the requirement of pre-deposit of the amount of duty and the penalty as also for stay of realizing the entire amount. The Tribunal vide order dated 10th April, 2006 had rejected the application, in so far as the deposit of the duty is concerned. However, it has waived the requirement of the deposit of the amount of penalty and directed the petitioner to deposit the entire amount of duty. The order dated 10th April, 2006 passed by the Tribunal is under challenge in the present writ petition.
4. We have heard Sri Madhao Rao, learned Counsel assisted by Sri Nishant Misra, Advocate on behalf of the petitioner and Sri Ajay Bhanot, learned standing counsel appearing for the respondents.
5. Learned Counsel for the petitioner submitted that under Section 35F of the Central Excise Act, 1944, (hereinafter referred to as the Act) the Tribunal ought to have considered the undue hardship to be faced by the appellant while considering the application made for waiving the requirement of pre-deposit and for stay of the realizing of the amount of duty. According to him, in the present case the Tribunal has not at all considered the question of undue hardship which may be faced by the petitioner and instead it has gone on the issue that the matter has already been adjudicated upon by the Tribunal in the earlier proceedings and the Hon'ble Supreme Court has not granted any stay.
6. Sri Ajay Bhanot, learned standing counsel submitted that as the issue had already been adjudicated by the Tribunal regarding the classification of the goods and the matter was remanded by it only for the purposes of considering the claim of various exemptions/set off which may be available to the petitioner, and before the Tribunal only the limited question of exemption/set off was to be gone into, and in the appeal filed by the petitioner before the Apex Court no stay had been granted in their favour the Tribunal was perfectly justified in declining to waive the pre-deposit of duty.
7. It is not necessary to call for the counter affidavit as the petition can be finally decided on the basis of the rival submissions.
8. Having given our anxious consideration to the various pleas raised by the learned Counsel for the parties we find that the facts are not in dispute. Section 35F of the Act empowers the appellate Authority to waive/relax either in full or in part the requirement of pre deposit of duty or other amount if it causes undue hardship. It is well settled that if the Statute confers a discretion to do or not to do a certain thing, then the discretion has to be exercised in accordance with law. The Apex Court in the case of L. Hriday Narain v. I.T.O. has held as follows:
The High Court observed that under Section 35 of the Indian Income-tax Act, 1922, the jurisdiction of the Income-tax Officer is discretionary. If thereby it is intended that the Income-tax Officer has discretion to exercise or not to exercise the power to rectify, that view is in our judgment erroneous. Section 35 enacts that the Commissioner or Appellate Assistant Commissioner or the Income-tax Officer may rectify any mistake apparent from the record. If a statute invests a public Officer with authority to do an act in a specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when a party interested and having a right to apply moves in that behalf and circumstances for exercise of authority are shown to exist. Even if the words used in the statute are prima facie enabling, the Courts will readily infer a duty to exercise power which is invested in aid of enforcement of a right-public or private - of a citizen.
9. This Court in Writ Petition No. 1219 of 2003, I.T.C. Ltd. v. Commissioner (Appeals), Customs & Central Excise and Ors. , decided on 23.10.2003 while considering the provisions of 35-F and its proviso of the Central Excise Act, 1944 has held as follows:
In view of the above, the aforesaid authorities make it clear that the Court should not grant interim relief/stay of the recovery merely by asking of a party. It has to maintain a balance between the rights of an individual and, the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition. The arguments that appellant is in a position to deposit or if he succeeds in appeal, he will he entitled to get the refund, are not the considerations for deciding the application. The order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with the law. The expression "undue hardship" has a wider connotation as it takes within its ambit the case where the assessee is asked to deposit the amount even if he is likely to exonerate from the total liability on disposal of his appeal. Dispensation of deposit should also be allowed where two view are possible. While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority to stay/waive the pre-deposit condition, would be reduced to nugatory/illusory. Undoubtedly, the interest of the Revenue cannot be jeopardized but that does not mean that in order to protect the interest of the Revenue, the Court or authority should exercise its duty under the law to take into consideration the rights and interest of an individual. It is also clear that before any good could be subjected to duty, it has to be established that it has been manufactured and it is marketable and to prove that it is marketable, the burden is on the Revenue and not on the manufacturer.
In view of the above, we are of the considered opinion that as the Appellate Authority has not addressed to itself any of the issues involved in the appeal rather has gone to the issue of financial hardship which was unwarranted and uncalled for in the fact situation of this case. The order impugned cannot be sustained in the eyes of law and we have no option but to allow this petition and set aside the order impugned.
10. In the aforesaid case, this Court has held that the expression "undue hardship" has a wider connotation. While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority, to stay/waive the pre-deposit condition, would be reduced to nugatory/illusory.
11. In our considered opinion the approach of the Tribunal is wholly incorrect inasmuch as it has not addressed itself on the question of undue hardship, if any, being faced by the petitioner if the deposit of duty or any part of it is not waived.
12. As the Tribunal has not considered the question of undue hardship which may be faced by the petitioner while disposing of the application under Section 35F of the Central Excise Act, 1944 we are unable to sustain the order passed by the Tribunal. Accordingly, the order dated 10th April, 2006 passed by the Tribunal, filed as Annexure 1 to the writ petition is set aside and the Tribunal is directed to decide the matter afresh in accordance with law in the light of the observations made above, after affording an opportunity of hearing to the petitioner and the respondents.
13. The writ petition succeeds and is allowed. However, there shall be no order