JUDGMENT M.C. Agarwal, J.
1. This writ petition under Article 226 of the Constitution of India is directed against the order of the Collector, Central Excise dated 23rd May, 1984 and the orders dated 1st January, 1985, 17th June, 1986, 23rd October, 1986, 29th January, 1987 and 14th April, 1987 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as the Tribunal). It is also prayed that the respondents be directed not to realise the demand made by the Collector, Central Excise.
2. Although, the copy of the writ petition was served on the Standing Counsel for Union of India on 18th August, 1987, no counter affidavit has so far been filed. The petition was listed for hearing and in spite of the service of an individual notice dated 25th July, 1994 on the Senior Standing Counsel, no one appeared for the respondents when the case was taken up for hearing on 27th July, 1994.
3. I have heard the learned counsel for the petitioner.
4. The petitioner's case is that it was carrying on business of manufacturing goods on job charges as well as on its own account at the unit situated at Khatauli in the District of Muzaffarnagar. The petitioner has been paying excise duty at certain rates. A notice dated 8th September, 1981 was issued to the petitioner in which it was alleged that it had evaded excise duty to the extent of Rs. 2,99,510.12 paise for the period 1-4-1975 to 31-7-1981. The said notice further required the petitioner to show cause why the penalty be not imposed under Rule 173Q of the Rules framed under the Act. Ultimately by an order dated 23rd May, 1984 the Collector confirmed a demand for Rs. 2,90,010.12 paise and also levied a penalty of Rs. 1,00,000/-. Against this order the. petitioner filed an appeal before the Tribunal. Under Section 35F of the Central Excises and Salt Act, the appellant has to deposit the duty demanded or penalty levied before the appeal can be heard. Under the Proviso to Section 35F the Tribunal has the power to dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the interests of revenue. The petitioner, therefore, moved an application before the Tribunal to dispense with the penalty and duty. According to the petitioner, in the application for dispensing with the aforesaid pre-conditions, it was pleaded that the order under appeal was not sustainable and even the entire assets of the petitioner were not worth Rs. 4,00,000/- and the petitioner, therefore cannot deposit the amount and if the condition is not dispensed with, it is likely to suffer great hardship. The Tribunal disposed of the said application by an order dated 1st January, 1985 directing the petitioner to furnish a bank guarantee for a sum of Rs. 2,25,000/- to the satisfaction of the Collector, Central Excise within six weeks. The petitioner contends that in spite of its best efforts it could not arrange a bank guarantee. On 6th June, 1986, he moved another application before the Tribunal for modifying the earlier order dated 1st January, 1985. The Tribunal passed an order dated 17th June, 1986 dismissing the said application for default. The petitioner then moved another application dated 21st July, 1986 for rectification. The Tribunal disposed of the application by an order dated 23rd October, 1986 whereby it declined to relax the requirement of furnishing of a bank guarantee but allowed the petitioner three months' further time for furnishing the same. The petitioner could not furnish the bank guarantee and, therefore, the Tribunal dismissed the appeal by an order dated 29th January, 1987. The petitioner again moved an application dated 29th January, 1987 praying for the hearing of the appeal on merits and relaxing the condition of furnishing of the bank guarantee. That application was dismissed by an order dated 14th April, 1987. The petitioner has filed the present writ petition challenging all the aforesaid orders.
5. As regards the order passed by the Collector, I am of the opinion that no relief can be granted in this writ petition because the petitioner had the alternative remedy of filing an appeal to the Tribunal which it actually availed. I have, therefore, only to see whether the Tribunal was right in not dispensing with the condition of pre-deposit of the duty and penalty demanded and whether the appeal was rightly dismissed.
6. A perusal of the order dated 1st January, 1985 passed by the Tribunal on the petitioner's application under Section 35F of the Act would show that it was contended before it that the appellant was suffering losses for the last two years and that it was a very small scale factory having a total investment of Rs. 3,00,000/- only and was not in a position to pre-deposit this amount. These averments have not been found to be untrue by the Tribunal. The order states that the petitioner's representative submitted that the appellant was willing to furnish bank guarantee for the amount of the duty i.e. Rs. 2,25,000/- after reducing therefrom a sum of Rs. 80,000/- which according to the petitioner was in excess because of a calculation mistake. The Tribunal observed that having carefully considered the matter it was of the opinion that the insistence on pre-deposit of the demand would cause undue hardship to the appellant. It, therefore, ordered the appellant to furnish a bank guarantee for a sum of Rs. 2,25,000/-.
7. The petitioner could not comply with the condition and he moved another application before the Tribunal for modification of the aforesaid order. This application was moved on 6th June, 1986 i.e. after about l1/2 years. It was contended that in spite of best efforts the petitioner could not arrange a bank guarantee. It was stated in the application that due to non-payment of the electricity dues its electricity supply was stopped and on 6th July, 1985, the petitioner declared lay off in its unit. It was also stated that the appellant met with an accident and two ribs of the appellant were fractured and he remained confined to bed for a long time. The petitioner is a limited company and the facts relating to the accident seem to refer to its Managing Director etc. It was also stated that the unit was ultimately closed on 26th October, 1985. This application was dismissed on 17th June, 1986. The petitioner then moved an application dated 21st July, 1986 for rectification of the aforesaid order. By an order dated 3rd October, 1986 the Tribunal extended the time for furnishing bank guarantee by three months. It observed that it noticed that the appellant had met with an accident and was confined to bed for a long time. Since the petitioner failed to furnish the bank guarantee even in the extended period of three months the Tribunal rejected the appeal vide order dated 29th January, 1987. The petitioner then moved another application for the restoration of the appeal which was rejected vide order dated 14th April, 1987.
8. A perusal of the chequered history of this case would show that it is not in dispute that the petitioner was not in a good financial state to be able to furnish a bank guarantee for Rs. 2,25,000/-. It is not in dispute that the entire investment in the petitioner's unit was to the tune of Rs. 3,00,000/-. The banks do not issue bank guarantee without requiring the party concerned to deposit an equivalent amount in Fixed Deposit Receipt which are pledged as a security for the issuance of the bank guarantee. Therefore, the Tribunal's order directing the petitioner to furnish the bank guarantee of Rs. 2,25,000/- meant that the petitioner should deposit Rs. 2,25,000/- in a bank so that the bank could issue a bank guarantee in favour of the excise authority. The Tribunal had recorded a finding that pre-deposit of the demand would cause undue hardship to the appellant and the order requiring it to furnish a bank guarantee was not in consonance with the finding. No doubt the petitioner's counsel had submitted that the appellant was ready to furnish a bank guarantee for the amount of the duty after adjusting therefrom a sum of Rs. 80,000/- i.e. for Rs. 1,35,000/- but it appears that this statement was made in ignorance of the fact that for the issue of the bank guarantee an equivalent amount of cash will have to be deposited with the bank. The petitioner could not arrange a bank guarantee in spite of its best efforts and it was then that it moved an application for modification of the order. The Tribunal has not given due consideration to the petitioner's financial position resulting from continuous losses and closure of the factory. The application was dismissed and on an another application only the period for furnishing of the bank guarantee was extended by three months. The petitioner could not comply with the order and ultimately the appeal was dismissed.
9. From the facts narrated above, it is clear that the petitioner has not been fairly dealt with in so far as its prayer for dispensing with the pre-deposit under Section 35F was concerned. The circumstances narrated above, clearly show that the petitioner's financial position was bad to be able to furnish the bank guarantee for Rs. 2,25,000/- and ultimately his appeal was dismissed. In my view instead of extending the period for compliance with the onerous condition of furnishing the bank guarantee by three months, the Tribunal should have dispensed with the conditions of the pre-deposit so that the petitioner who was in a bad financial position and was unable to comply with the terms of Section 35F could avail the right of appeal. In a hard case like this the insistence of pre-deposit of the duty and penalty demanded may frustrate the very right of appeal as has happened in this case, the petitioner's appeal having been ultimately dismissed on the ground that he has not been able to furnish the bank guarantee as aforesaid.
10. Though the petitioner's conduct is not free from laches yet in the circumstances mentioned above, I am of the view that the petitioner's right to appeal should not be allowed to be frustrated because of his financial constraints. This writ petition was filed in the year 1987 and the department should have been able to recover the duty and penalty because no stay was granted. If it has not been able to recover the amount, that further shows that the petitioner is really too poor to make any deposit in terms of Section 35F.
11. For the above reasons, this writ petition is partly allowed. The Tribunal's Order dated 29th January, 1987 dismissing the petitioner's Appeal No. 1639/84-B1 is quashed. The pre-deposit of the duty and penalty which is the subject matter of the said appeal is dispensed with and the Tribunal is directed to dispose of the said appeal on merits in accordance with law. No order as to costs.