TMI Blog1999 (8) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... eemingly taken the view that while considering 'undue hardship' the authorities have to consider the existence of the financial hardship only. The facts leading to this controversy are: the petitioner is a Public Limited Company having its head office at Calcutta. It is engaged in the manufacture of cigarettes of many brands. It has factories in various places in India. The present Writ petitions are with reference to the factory situated at Bangalore. The controversy surrounding the interpretation of Section 4 of the central Excise and Salt Act, 1944, with reference to the post manufacturing expenses (PME) was set at rest by the Supreme Court of India in the case of UNION OF INDIA vs BOMBAY TYRE international LIMITED. Since' various Collectors of Central excise have jurisdiction over the petitioners, they were issuing show-cause notices on the proper method of determining assessable value, the Director General of Inspection (Customs and Central Excise) was named as the Authority for the purpose of adjudicating all such show cause notices issued from different Collectorates. Director general ultimately passed an order on 10. 4. 1986. In pursuance to the orders of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be worked backwards for determination of the duty levied. Reliance was placed on several pronouncements including the order passed by a special Bench consisting of three members of the Central Excise and Gold (Control)Appellate Tribunal (hereinafter referred to as !cegat') in Company's own case to which the Collectorate of Bangalore was a party and affirmed by the Supreme Court of India. Judgment of the Tribunal is reported in 1994 (72) E. L. T. 315. Against this order Civil Appeal No. 9286-9290/1995 was filed in the Supreme Court of India. Supreme court dismissed the Civil appeals in limine on 29th March 1996 by observing that the Civil appeals are dismissed on merits. Assessing Officer afforded a personal hearing on 28th January 1998. He did not agree with the contentions raised by the petitioner before him and confirmed the additional demand for differential duty of ₹ 27,57,93,086-93 ps with reference to Assessable value of cigarettes in stead of whole sale value. (4.) PETITIONER filed an appeal against the order of the Assessing Officer before the Commissioner of Central Excise (Appeals), bangalore, for short the appellate Authority along with an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in M/s;,wipro INFOTECH LTD vs CEGAT. In M/s. Auma India Limited supra it was held that prima facie merits of the dispute have to be examined by the Appellate Authority while determining the 'undue hardship' in exercise of the powers conferred under proviso to Section 35 of the Act. Whereas in M/s. Sunshine tube Pvt. Ltd., the view taken was: 15. It is now well established that the finding regarding 'undue hardship' has to be recorded by the Tribunal by attending to all the relevant materials placed on record and by applying itself to the said materials through a speaking order which should reflect application of objective and judicious mind. The occasion to impose conditions under the proviso to safeguard the interest of the revenue can arise only if the Tribunal comes to a conclusion of 'undue hardship' on the party of the appellant. To my reading no balance need to be struck between the undue hardship' requirement and the interest of revenue for exercise of the discretion under the interest of revenue for exercise of the discretion under the proviso. The Tribunal has to form its opinion on undue hardship' aspect solely by assessing the hard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is that the assessee expose himself to coercive process for recovery of the duty and penalty. ' 25. I have serious reservations regarding enunciation of law declared in the above paragraph by the Kerala High Court. A plain reading of Section 35f shows that the disputed amount of duty or penalty should be paid during the pendency of the appeal. It cannot be said to be a condition precedent to the entertainment of the appeal. The appeal can very well be entertained even if the amounts are not depo'sited. But if the Appellate Authority, directs for the pre-deposit, the non-compliance thereof may result in dismissal of the appeal. Secondly, if no order is passed under section 35f, then in such a situation the Excise authorities will be competent to proceed with recovery proceedings of the disputed amounts in accordance with the statutory proceedings in this regard. But if an order is passed by the Appellate Authority dispensing with the requirement of the pre-deposit either in part or whole, then as per the instructions of the Board, the Excise authorities are restrained from going ahead with recovery proceedings since the Board has directed to treat such orders as stay orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in addition to strong prima facie case the assessee would suffer a financial hardship as well. To substantiate the plea strong reliance was placed upon the following judgments of the High Courts of Calcutta, Bombay, Delhi, Karnataka and Kerala. Reference was also made to certain Supreme Court judgments as well: 1. J. N. CHEMICAL (PVT)LTD. vs CEGAT4 2. BONGAIGAON REFINERY and PETROCHEM. LTD vs COLLR. OF C. EX (A)3. HOOGHLY MILLS COMPANY LIMITED vs union OF INDIA 4. METAL PRESS INDIA AND ANOTHER vs union OF INDIA and OTHERS 5. SRI KRISHNA vs UNION OF INDIA 6. ASHA RUBBER INDUSTRIES, BANGALORE. vs COLLECTOR OF CENTRAL EXCISE 7. M/s. WIPRO INFOTECH LIMITED vs CUSTOMS, EXCISE and GOLD (CONTROL) APPELLATE TRIBUNAL 8. VIT SEA FOODS vs COLLECTOR OF CUSTOMS 9. NAVIN CHANDRA CHHOTELAL vs central BOARD OF EXCISE and CUSTOMS and OTHERS 10. VIJAY PRAKASH D. MEHTA vs COLLECTOR OF CUSTOMS 11. SANGFROID REMEDIES LTD. , vs UNION OF INDIA counsel for the respondent could not cite any judgment taking a contrary view. (7.) IN VIT SEA FOODS' case supra, Kerala High Court while interpreting Section 129e of the Customs Act which is in paramateria to the proviso to Section 35f of the Act held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispense with the requirement of pre-deposit in as much as the case of the assessee was fully covered by a decision of the Special Bench of the Tribunal and still to insist upon the deposit of duty demanded and penalty levied would undoubtedly cause undue hardship to the assessee. In Hooghly Mills Company Limited's case again a Single Judge of the Calcutta High Court took the same view and held that where the assessee had a strong prima facie case then that by itself independent of other factors would come within the relevant consideration while determining whether the order of pre-deposit would cause undue hardship or not; that the assessee would suffer undue hardship if he is to pay the amount which is not legally due. (9.) THE point in issue was considered by a Division Bench of this Court in M/s. WIPRO INFOTECH LIMITED' s case. In that case the Company was engaged in manufacture of mini and micro computer systems for which purpose they had been importing diskettes and manuals from! outside the country. During the relevant period the appellant made 3 importations at Bangalore, Madras and bombay in respect of which duty has been demanded and penalty imposed came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following observations of the Supreme Court in the case of Vijayaprakash's case supra: in the facts and circumstances of the case and all the relevant factors, namely the probability of the prima facie case of the appellant, the conduct of the parties, have been taken into consideration by the Tribunal. The purpose of the Section is to act in terrarium to make the people comply with the provisions of law. Which clearly indicates that the Single Judge did not mean that prima facie merits of the dispute are not to be examined at all while considering undue hardship. It rather indicates that the Single Judge was of the view that prima facie merits of the dispute have to be seen while examining undue hardship. But this did not mean that in each and every case a condition of pre-deposit had to be waived on showing a prima facie case. That a strong prima facie case had to be made out and the discretion was to be exercised keeping in view the facts and circumstances of each cases. In paragraph 15 of the order (already extracted) the Judge says that the Tribunal has to judge 'undue hardship' by attending to all the relevant materials placed on record and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is complied with, the appellate authority cannot proceed to hear an ' appeal on merits. Therefore, the logical consequence of failer to comply with Section 129 (1) is the rejection of appeal on that ground. It is evident from the reading of the underlined portion of paragraph 25 of the judgment of the Single Judge and the above observations of the Supreme Court that the observations made by the Single judge run counter to the view taken by the Supreme Court. Supreme court has held that it is obligatory on the assesee to deposit the duty or penalty pending the appeal and if a party does not comply with the main sub-section or with any order that may be passed under the proviso the Appellate Authority would be competent and justified to reject the appeal for non-compliance of the provision. It is well established principle of law that 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 proceedings. Section 35f provides a conditional right of appeal on the deposit of (unless waived under the proviso to the Section) the duty demanded or penalty levied. Though the Section does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the appeal is heard on merits, can be dispensed with. In case two views are possible on interpretation, based on conflicting judgments of the tribunal or different High Courts in the absence of the judgment of the jurisdictional High Court then the authorities may pass the order under proviso to Section 35f of the Act keeping in view the facts of the case in hand. Coming to the facts of the present case it would be seen that the dispute is regarding the basis of calculation of differential duty on the additional consideration. According to the petitioner the additional consideration has to be added to the whole sale price and not to the assessable value as has been worked out by the assessing Officer. Special Bench of CEGAT in COLLECTOR OF central EXCISE vs VST INDUSTRIES has taken the view as under: a harmonious construction of Section 4 of the Act and Rule 5 can lead only to one conclusion that the extra accrual should be added to the wholesale price and the assessable value worked back after allowing admissible deductions. Addition of such extra accruals to the assessable value would distort the meaning, of section because there is no way in which abatement of exci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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