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TMI Blog2023 (5) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... or families and live in Islam Nagar, Hojai, Assam, and are not well-educated youth. In support of their plea, the Petitioners No. 1 and 3 have filed an income certificate dated 13.12.2021 issued by the Office of the Circle Officer, Hojai, Assam, showing an annual income of Rs. 1,00,000/- (Rupees One Lakh). The Petitioners further stated that they are earning their livelihood through agriculture and by selling small quantities of Agarwood. The Petitioners have submitted in the Petition that the goods seized by the Customs Authorities were purchased by them, and the bills were attached to the Reply to the Show Cause Notice. The Petitioners have also stated that the goods seized were wrongly assessed at very high market value, and the penalty has been levied based on an incorrect assessment of the goods. The Petitioners have further submitted that their right of Appeal under Section 129E of the Act cannot be exercised as they are not financially sound and hence, unable to pay the mandatory pre-deposit as required to challenge this levy. Background: 2. The undisputed facts for the purpose of this Petition are as follows: 2.1 The Petitioners were travelling from Assam to Delhi, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2021 before Respondent No. 1 along with an application for exemption/stay qua deposit of the mandatory condition of the pre-deposit of 7.5% of the penalty for filing an Appeal. One such Appeal (of Petitioner No. 2) has been placed before this Court. 2.6 The Superintendent (Appeals) by its letter dated 08.11.2021, returned all three Appeals to the Petitioners, as the mandatory payment of 7.5% of the penalty imposed under Section 129E of the Act was not made. 2.7 This has led to the filing of the present Petition. Submissions of the Petitioners: 3. The Petitioners raised a challenge to the constitutional validity of Section 129E of the Act. As has already been noted in Order dated 27.04.2022 passed by this Court, the Supreme Court, by its Judgment dated 28.02.2022, in the matter titled as Chandra Sekhar Jha V. Union of India & Anr. 2022 SCC OnLine SC 269 has sustained the wholesomeness of this provision. As a matter of fact except for the prayer, no submissions were advanced on the purported unconstitutionality of Section 129E of the Act. Hence, we do not need to advert to this any further. 4. The Petitioners have stated that the export of cultivated variety of Agarwood Chips a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which states that on examination of the baggage belonging to the Petitioners, "it was found to contain wooden Chips in assorted sizes and shapes/different grades, of Agar wood (aquilaria malaccensis), 120 kg (Nt. Wt.) and 4.5 kg Agarwood Oil". This report further states that the confiscated species is included in Appendix II of CITES and the export of this species of Agarwood is prohibited for exportation vide DGFT Notification No. 2 (RE-98)/1997-2002 dated 13.04.1998. However, the copy of this notification has not been filed by the Respondents. Case Laws cited: 6. The Counsel for the Petitioners had submitted that the Petitioners are poor, daily wagers, and the impugned provision prevents them from exercising their statutory right to Appeal. The Petitioners have filed submissions/compilations of judgments wherein the Coordinate Benches of this Court have, in rare and deserving circumstances, allowed a waiver of this pre-deposit provision. In this regard, the following judgments have been relied upon: (i) Pioneer Corporation Vs. Union of India 2016 SCC OnLine Del 6758; (ii) Narender Yadav Vs. Joint Commissioner of Custom (Exports) W.P. (Civil) 195/2019-[Delhi High Court]; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) Only. He is a daily wage earner. 3) Ikbal Hussain, S/o Moin Uddin is a resident of Vill- Islampur, Mouza- Hojai, Dist.- Hojai (Assam). There is no land in his or his father's name. He is a daily wage earner......." [Emphasis is ours] 7.2 The gist of the aforesaid report is that all the three Petitioners, i.e., Mohammed Akmam Uddin Ahmed, Bahar Uddin, and Ikbal Hussain, are residents of villages in District Hojai, and are daily wage earners with little or no means. Therefore, the poor financial condition of the Petitioners stood confirmed by the aforesaid report. The Statute : 8. For ready reference, Section 129E of the Act is reproduced hereunder: "Section 129-E. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.- The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal,- (i) under sub-section (1) of Section 128, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of customs lower in rank than the Principal C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v case (supra) and Shubh Impex case (supra) to canvas the argument that the Court has in special circumstances, waived the payment of mandatory pre-deposit amount as envisaged in Section 129E of the Act. 9.2 A Coordinate Bench of this Court in Pioneer Corporation case (supra), where the Court, while discussing the amendment made to Section 35F of the Central Excise Act, 1944 [hereinafter referred to as "the CE Act"] (which Section is pari materia to Section 129E of the Act and also requires a pre-deposit in the case of an Appeal), held that prior to the amendment of Section 35F of the CE Act, a discretion was available to the Central Excise and Service Tax Appellate Tribunal [hereinafter referred to as "CESTAT"] to consider financial hardship and accordingly determine the pre-deposit amount post the amendment, a direction of waiver of the pre-deposit would be contrary to the express legislative intent of the amendment. However, it further held that the jurisdiction of the High Court under Article 226 cannot be taken away and that such power should be used only in rare and deserving cases where a clear justification is made out for such interference as follows: "9. ....A directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Emphasis is ours] 9.5 In Shubh Impex case (supra), a direction to make a pre-deposit of Rs. 1.27 crores, being 7.5% of the duty imposed, under Section 129E of the Act was challenged by the Appellant. While discussing the judgment in Pioneer Corporation case (supra), a Coordinate Bench of this Court recognized the existence of the power available to the Court under Article 226 of the Constitution albeit under rare and compelling circumstances. The Court thus directed that a pre-deposit be made in the sum of Rs. 5 Lakhs in addition to the token pre-deposit already made by the Appellant therein. The relevant extract is below: "10. Given the aforesaid facts, while we are inclined to accept the preliminary objection of the respondents on the alternative remedy, we are also inclined to interfere and relax the condition of pre-deposit. We would direct that on the petitioner making a pre-deposit of Rs. 5,00,000/- in addition to Rs. 3,70,008/-, the appeal which would be filed by the petitioner would be entertained by the first appellate authority. The pre-deposit would abide by the result of the appeal. First Appeal, if preferred within 21 days, would not be rejected on the ground of lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement cannot be regarded or held as being arbitrary or as violative of Article 14. Above all, as the Supreme Court held in Shyam Kishore (supra) the High Court under Article 226 of the Constitution is vested with the jurisdiction in an appropriate case to dispense with the requirement of pre-deposit and the power of the Court under Article 226 is not taken away. This was also held by the Supreme Court in P. Laxmi Devi (supra) in which the Supreme Court observed that recourse to the writ jurisdiction would not be ousted in an appropriate case....." [Emphasis is ours] 10. The Respondent No. 2, in addition to placing reliance on Chander Shekhar Jha case (supra), has also relied on the judgment of a Coordinate Bench of this Court in Dish TV India Ltd. case (supra) as well as a Coordinate Bench of the Bombay High Court in Nimbus Communications case (supra). 10.1 A Coordinate Bench of this Court in Dish TV India Limited case (supra), in a matter concerning the import of satellite/viewing cards by the Petitioner Company, upheld the mandatory pre-deposit in view of the amendment to the Act. The aforesaid judgment while discussing the amendment of Section 129E of the Act noted the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CESTAT without complying with the conditions of the mandatory pre-deposit did not, in fact, rule out that in exercise of its inherent powers under Article 226 of the Constitution of India. It was held that the Appellant may be allowed to prosecute its appeal without the payment of the pre-deposit amount. Reliance is placed on Paragraph 11 of this judgment which reads as follows: "11. Thought it may be argued that, this Writ Court, in exercise of the inherent powers conferred on it by Article 226 of the Constitution of India in appropriate cases, may allow the appellant to prosecute its appeal before the CESTAT, without requiring to pay the mandatory pre-deposit..." [Emphasis is ours] 10.5 In Nimbus Communications case (supra), a Coordinate Bench of the Bombay High Court has upheld the requirement of mandatory pre-deposit in the case of an Appeal filed after 06.08.2014, while discussing Section 35F of the CE Act. The issue that arose before the Court was whether the law as applicable on the date of commencement of the lis or on the date of filing of the appeal would govern the dispute. The case was disposed of by consent of the parties holding that the amended provisions would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to a part deposit or security. The power, albeit, has been exercised only in rare and exceptional cases. 12.2 It was held by the Allahabad High Court, speaking through Dr. D.Y. Chandrachud, Chief Justice (as his Lordship then was) in the Ganesh Yadav case (supra) that: "8. .... Whether the writ jurisdiction under Article 226 should be exercised, having due regard to the discipline which has been laid down under Section 35F of the Act, is a separate matter altogether but it is important to note that the power under Section 226 [sic : Article 226] has not been, as it cannot be, abridged." [Emphasis is ours] 12.3 The question that, therefore, arises is whether the present case is an appropriate case for this Court to exercise its jurisdiction under Article 226 of the Constitution of India to dispense with the requirement of a pre- deposit. Agarwood : Species and Export: 13. To better understand the contention of the parties with respect to the goods, i.e., Agarwood Chips and Agarwood Oil and the valuation thereof in the present case, it is also necessary to advert to the 'The Assam Agarwood Promotion Policy 2020' of the Assam Government [hereinafter referred to as "the Agar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of the baggage of the Petitioners at IGI Airport, Delhi at the time of seizure of the goods on 20.09.2019. The report does not set forth any price/value or grade of the goods seized but identifies the seized goods as "Agarwood assorted size and shape/different grades of aquilaria malaccensis". The OIO does not refer to any "Final Report" or further examination of the seized goods after 20.09.2019. 14.1 The penalty imposed on the Petitioners has been based on the price and valuation by the Respondents No.1 and 2 of the goods seized. The Petitioners have stated that they had purchased the goods seized from the local market of Hojai, Assam. The Petitioners have submitted that the international market value of Agarwood Chips and Agarwood Oil as per the Agarwood Policy is high, however the goods seized were of the lowest grade purchased from the local market. It is submitted by the Petitioners that the market value of Agarwood Chips and Agarwood Oil ranges from Rs. 140/- to Rs. 1,200/- per Kg and that the invoices for the seized material showing such purchase have been placed before the adjudicating authorities along with their Reply to the SCN. 14.2 The Petitioners have also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memos. No clue is provided in the SCN as to the basis of valuation assigned to Agarwood Chips and Agarwood Oil. 16. Although the OIO references the report of the Wildlife Inspector, which sets out that chips of different grades were recovered, there is no reference to the prices assigned to each different grade of Agarwood in the OIO. The same value has been assigned to the entire 120 Kgs seized. The SCN sets forth the valuation of the seized goods and the penalty imposed on each of the Petitioners, based on this "provisional international market value". The OIO only reproduces the valuation as set forth in the SCN, the Panchnama and Seizure Memos and reiterates that the value of the Agarwood Chips is at the rate of Rs. 5,00,000/- per Kg, while the Agarwood Oil is valued at the rate of Rs. 8,00,000/- per Kg. 16.1 The OIO further clarifies that the quantum of penalty has been imposed keeping in consideration "the mens rea", i.e., intent of smuggling and the specific roles of all the three Petitioners in the whole act of attempt to smuggling. 16.2 However, as can be seen from the table below, the penalty imposed on each Petitioner appears to be a different percentage value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aries hugely depending on its grade and variety. 18.1 The prices relied upon by the Petitioners are not the same as those stated in the Agarwood Policy. These are also very different from the valuation relied upon by Respondent No. 1 and 2 to impose the penalty under the Act. 18.2 As discussed above, the "provisional" valuation appears to be taken verbatim from the Panchnama and the seizure memos dated 20.09.2019. The SCN adopts the same valuation for the goods seized and the OIO only reproduces this valuation. 18.3 The Respondents have not placed on record any document in support of the value/price of the Agarwood Chips and Agarwood Oil which was "provisionally" valued at Rs. 5,00,000/- per Kg and Rs. 8,00,000/- per Kg respectively, to levy the penalty on the Petitioners. The OIO arrives at this valuation without any discussion on the price. The OIO also relies on the report of the Wildlife Inspector which also does not mention any price, but clearly mentions that there were different grades in the Agarwood Chips seized. No final report on the value/price of the variety of Agarwood Chips and Agarwood Oil seized is placed on record or even relied upon by Respondents. 18.4 The v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislature to do so, is that the condition which is prescribed should not be so onerous so as to restrict or abrogate the right of appeal altogether. A condition which is unduly onerous will render the right of appeal illusory and would hence run the risk of being held to be arbitrary and of being violative of the fundamental right conferred by Article 14 of Constitution." [Emphasis is ours] 20.2 Therefore, given the financial position and the wherewithal of the Petitioners, an opportunity needs to be given to them to contest the valuation so imposed by the Respondents, which, otherwise cannot be contested by them. Thus, we consider the case of the Petitioners to be an appropriate case to exercise our discretion in the matter concerning waiver of pre-deposit of penalty. 21. The Writ Petition is allowed. Respondent No. 1 is directed to decide the Appeals preferred by the Petitioners on merits, without insisting on the requirement of pre-deposit. 21.1 In case the Petitioners, or any one of them, file their respective Appeal's within 6 weeks of receipt of a copy of the Judgment, the same shall be considered on its merits without insisting on pre-deposit and shall not be dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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