TMI Blog2023 (5) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Coordinate Benches of this Court in Narender Yadav case [ 2019 (1) TMI 1542 - DELHI HIGH COURT ] and Shubh Impex case [ 2019 (6) TMI 29 - DELHI HIGH COURT ], both of which, while dealing with the amended provision of Section 129E of the Act, have permitted waiver of the mandatory pre-deposit as is envisaged in the said provision but, in exceptional circumstances. In Nimbus Communications case [ 2016 (8) TMI 451 - BOMBAY HIGH COURT ], 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 not apply to those appeals and applications which were pending prior to 06.08.2014, regardless of the date of commencement of the lis. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on merits, without insisting on the requirement of pre-deposit - Petition allowed. - W.P.(C) 1242/2022 & CM APPL. 3625/2022 - - - Dated:- 28-4-2023 - HON'BLE MR JUSTICE RAJIV SHAKDHER AND HON'BLE MS JUSTICE TARA VITASTA GANJU Advocates who appeared in this case: For the Petitioners : Ms Riya Soni, Advocate. For the Respondents : Mr Akshay Amritanshu, Sr. Standing Counsel with Mr Ashutosh Jain, Advocates for Respondents No. 1 2. Mr Bhagvan Swaroop Shukla, CGSC, Mr Jitendra Kumar Tripathi and Mr Sarvan Kumar, Advocates for Respondent No. 3/Union of India. [PHYSICAL COURT HEARING/ HYBRID HEARING (AS PER REQUEST)] JUDGMENT TARA VITASTA GANJU, J.: Preface: 1. The present Petition has been filed by the Petitioners, inter-alia, challenging the constitutional vires of Section 129E of the Customs Act, 1962 [hereinafter referred to as the Act ] and seeking a direction to Respondents to admit the Appeal filed by the Petitioners without pre-deposit of the mandatory duty as stipulated in Section 129E of the Act. 1.1 The Petitioners have submitted that they belong to poor families and live in Islam Nagar, Hojai, Assam, and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-Original dated 13.07.2021 [hereinafter referred to as the OIO ] reproduces the Reply. As per the OIO, the Petitioners were represented before the Respondent No. 1 and 2 through Counsel and were accorded a personal hearing on 01.03.2021 as well. 2.4 After hearing the contentions of all the parties, the Respondent No. 2 by its OIO held that the Petitioners do not possess valid documents for the export of the Agarwood Chips and Agarwood Oil and have thus contravened the provisions of the Act. The OIO held that the goods are liable for absolute confiscation and imposed a penalty on each of the Petitioners as under: (i) Absolute confiscation of the seized goods collectively amounting to Rs. 6,36,00,000/-. (ii) Penalty of Rs. 15,00,000/- on Petitioner No. 1 under Section 114 of the Customs Act, 1962. (iii) Penalty of Rs. 75,00,000/- on Petitioner No. 2 under Section 114 of the Customs Act, 1962. (iv) Penalty of Rs. 25,00,000/- on Petitioner No. 3 under Section 114 of the Customs Act, 1962. (v) Absolute confiscation of the bags used to conceal the seized goods. 2.5 Aggrieved by the OIO, the Petitioners filed three Appeals on 27.10.2021 before Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are of the lowest grade valued between Rs. 140/- to Rs. 1,200/- per Kg and thus Respondent No. 2 has wrongly valued the seized goods. Submissions of the Respondents: 5. On the other hand, it is contended by Respondent No.2 that Agarwood is an endangered species and is covered under Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flaura [hereinafter referred to as CITES ]. CITES is an international multilateral treaty to protect endangered plants and animals from the threats of international trade, a treaty to which India is a signatory. The export of Agarwood is also restricted in terms of the Foreign Trade Policy 2015-2020 and the same can be exported only after the submission of permission/license from the competent authority. Since, the Petitioners failed to produce any valid documents for the export of the Agarwood Chips and Agarwood Oil, the goods were seized on 20.09.2019 and confiscated. 5.1 The Respondent No. 2 has also relied on the preliminary examination report dated 20.09.2019, which has been given by the Wildlife Inspector, Wildlife Crime Control Bureau (NR), New Delhi [hereinafter referred to as the Wildlif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners belong from poor families in Islam Nagar, Hojai, Assam, by Order dated 27.04.2022, this Court had directed the District Magistrate, District Hojai in the State of Assam to place a report before this Court as regards the income and assets of all three Petitioners. 7.1 Pursuant to the said Order, the office of the Deputy Commissioner, Hojai, Government of Assam, has given a report dated 16.06.2022. The relevant extract of the report has been reproduced below: With reference to the subject cited above, I have the honour to inform regarding income and assets report of the petitioners in connection with W.P.(C) 1242/2022 CM APPL.3625/2022 as mentioned below: 1) Mohammed Akmam Uddin Ahmed, S/o Mohammed Abdul Mannan is a resident of Vill- Islampur, Mouza- Hojai, Dist.- Hojai (Assam). There is 1.33 Hectare Land in his father's name at Vill.- Fatehpur and Islampur, the present govt. value of the land is Rs. 51,50,000/- (Fifty One Lakhs Fifty Thousand Rupees) Only. He is a daily wage earner . 2) Bahar Uddin, S/o- Murakib Ali is a resident of Vill- Matikhola, Mouza- Namati, Dist.-Hojai (Assam). There is 0.02 Hectare Land in his name at Vill.-Matikhola , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection state that the Tribunal or Commissioner (Appeals) shall not entertain an Appeal unless 7.5% of the penalty in dispute has been deposited. 8.2 A plain reading of the second proviso to the Section also makes it clear that the provisions of Section 129E of the Act shall not be applicable to stay applications and Appeals pending before 06.08.2014. 8.3 In the present case, to file an Appeal, the mandatory pre-deposit to be made by each of the Petitioners, would be as follows: (i) A pre-deposit of Rs. 1,12,500/- [7.5% of the penalty of Rs. 15,00,000/-] by Petitioner No. 1; (ii) A pre-deposit of Rs. 5,62,500/- [7.5% of the penalty of Rs. 75,00,000/-] by Petitioner No. 2; (iii) A pre-deposit of Rs. 1,75,000/- [7.5% of the penalty of Rs. 25,00,000/-] by Petitioner No. 3. Discussions on Case Law: 9. Both parties have cited judgments in support of their diametrically opposite contentions, while the Petitioners have relied on decisions of this Court in support of their plea that the mandatory pre-deposit of 7.5% of the penalty in dispute can be waived in certain circumstances. The Respondents have argued that no waiver can be permitted under the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted waiver of the mandatory pre-deposit as is envisaged in the said provision but, in exceptional circumstances. 9.4 In Narender Yadav case (supra), a Coordinate Bench of this Court, while recording that the Petitioner was a salaried employee drawing Rs. 14,500/- per month [i.e., Rs. 1,74,000/- per annum] and that the Order-in-Original did not give any reasons for the penalty imposed on the Petitioner, directed that the requirement of pre-deposit under Section 129E of the Act be waived. The relevant extract is below: . The petitioner s grievance is that as H-Card holder, imposition of over Rs. 3.8 crores penalty in the overall circumstances of the case, given that the Order-in-Original did not record any specific adverse finding against him, is unwarranted. The petitioner, therefore, seeks a direction that the requirement of pre-deposit as a condition for the hearing and disposal of the appeal before the Commissioner (Appeal), should be dispensed with. The Court has considered the submissions, and the fact that the Order-in-Original discloses no reason why penalty was imposed upon the petitioner - a salaried employee drawing Rs. 14,500/- per month. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph 3 of this judgment, which reads as follows: 3. To this Court, it appears that the petitioner is a man of limited means it is not clear whether any prosecution has been launched against the petitioner. In these circumstances, in view of the material on record which suggests that the petitioner has very limited means to deposit any amounts, this Court is of the opinion that the relief is warranted. The requirement of pre-depositing of any amount directed to be waived, however, the petitioner shall furnish a bond and also provide reasonable security having regard to the list of immovable properties produced before the Court. Subject to this, the requirement of pre-deposit is hereby waived. The petitioner s appeal shall be revived and now CESTAT shall proceed to hear the parties on its merits after issuing adequate notice to the counsel. [Emphasis is ours] 9.7 The Allahabad High Court in the Ganesh Yadav case (supra), while upholding the requirement of pre-deposit under Section 35F of the CE Act as mandatory and dismissing the constitutional challenge, held that the High Court under Article 226 of the Constitution of India is vested with the jurisdiction in an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of the second proviso to Section 129E of the Act were unambiguous and the amended provision would not apply to any appeals pending before the Appellate Authority which have been filed prior to 06.08.2014. Thus, amended provision would apply to all appeals filed on or after 06.08.2014 as follows : In any event, as far as the amended Section 129E of the Act is concerned, its wording is unambiguous. It opens with the words The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal.... unless the appellant deposits the percentage of the demanded duty as stipulated in clauses (i), (ii) or (iii) thereunder. The wording of the second proviso to the amended Section 129 E is also unambiguous. It makes it clear that the amended provision would not apply to appeals and stay applications already pending before the appellate authority prior to the commencement of the Finance (No. 2) Act, 2014 , i.e. 6th August 2014. In other words, it would apply to all appeals filed on or after the said date . Therefore, what is to be seen is the date of filing of the appeal. If the appeal is filed on or after 6th August 2014 then the condition stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant is to be governed by the provisions of the unamended Section 129E of the Act, since the incident in question related to the year 2013. While noting that the amendment has come into force on 06.08.2014, the Supreme Court held that applications and appeals, which were pending as on 06.08.2014 before the Appellate Authority, would be governed by the unamended provision, however, for all appeals filed thereafter, the amended provision of the Act would apply. The relevant extract is reproduced herein below: . The amended provision, as we have already noticed has come into force from 06.08.2014. Therefore, in regard to stay applications and appeals which were pending before any Appellate Authority prior to commencement of The Finance (No. 2) Act 2014, Section 129E as substituted would not apply. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision. [Emphasis is ours] 12. Thus an analysis of the conspectus of law as enunciated above gives a clear understanding that after passing of the Amendment Act on 06.08.2014, the amended Section 129E of the Act and also Section 35F of the CE Act shall be app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions which include production of a Certificate of Cultivation from the Regional Deputy Director (Wildlife), or Chief Conservator of Forests or Divisional Forest Officers of the State concerned; the requisite permit for export under CITES and/or other requisite formalities. 13.3 While both the Petitioners as well as the Respondent No.2 have agreed that the species Aquilaria Malaccensis is an endangered species, they differ on whether the goods seized belong to the high grade Aquilaria Malaccensis species of Agarwood or a lower grade different species. 13.4 The Petitioners have stated that they were carrying low grade Agarwood which is not restricted for export. 13.5 The Respondent No. 2, in the OIO places reliance on the report of the Wildlife Inspector dated 20.09.2019 [see Paragraph 5.1 supra] to contend that the goods seized are of the Aquilaria Malaccensis species. However, the OIO misses a crucial aspect of the report of the Wildlife Inspector, wherein it is stated that different grades of Agarwood were seized . Paragraph 20 of the OIO in fact concludes that the seized goods are prohibited/restricted goods without going into the species or grades of the Agarw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued at Rs. 5,00,000/- per Kg, while the market value of Agarwood Oil has been assessed at the rate of Rs. 8,00,000/- per Kg. The relevant extract is below: Therefore, the said wooden chips of Agar wood total weighing 120 kgs having, Market value of Rs. 6 crores approx (Provisional international Market value taken at the rate of Rs. 5 lakh per Kg) and Agarwood oil weighing 4.5 Kgs having, market value of Rs 36 lakh ( Provisional Market value taken at the rate of Rs. 8 lakh per Kg ) approx are seized [Emphasis is ours] 15.1 This provisional valuation appears to be taken verbatim from the Panchnama dated 20.09.2019 [hereinafter referred to as the Panchnama ]. The relevant extract of the Panchnama is below: Therefore, the said wooden chips of Agar wood total weighing 120 kgs having, Market value of Rs. 6 crores approx (Provisional international Market value taken at the rate of Rs.5 lakh per Kg) and Agar wood oil weighing 4.5 Kgs having, market value of Rs 36 lakh (Provisional Market value taken at the rate of Rs. 8 lakh per Kg) approx were seized by the customs officer under the provisions of section 110 of the Customs Act, 1962. [Empha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,05,00,000/- 4.5 36,00,000/- 1,41,00,000/- 15,00,000/- 9.4 times of value of recovered goods. 2. Agarwood Chips [Petitioner No. 2] 50 2,50,00,000/- - - 2,50,00,000/- 75,00,000/- 3.33 times of value of recovered goods. 3. Agarwood Chips [Petitioner No. 3] 49 2,45,00,000/- - - 2,45,00,000/- 25,00,000/- 9.8 times of value of recovered goods. Total 120 6,00,00,000/- 4.5 36,00,000/- 6,36,00,000/- 1,15,00,000/- 17. The Agarwood Policy also becomes relevant to put the prices of the Agarwood Chips and Agarwood Oil in perspective. Paragraph 4 of the Agarwood Policy sets forth that the market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents. 18.4 The valuation of the goods seized, is also not in terms of the prices as set forth in the Government of Assam s Agarwood Policy. No proper calculation has been made for the penalty levied. The penalty imposed on the Petitioners has been imposed based on a provisional valuation. The penalty imposed is therefore without any legal basis and cannot be sustained. 19. The principle enunciated in the judgments of Pioneer Corporation case (supra), Narender Yadav case (supra), Shubh Impex case (supra), Manoj Jha case (supra) and Ganesh Yadav case (supra) is that the Court has the power to exercise discretion to waive requirement of pre-deposit of penalty in rare and deserving cases where a clear justification is made out for interference. In Narendra Yadav case (supra), this Court had found that the Order-in-Original did not give any reasons for the penalty imposed on the Petitioners and hence was unwarranted. In Shubh Impex case (supra), the Court found that the condition of pre-deposit would completely disable and paralyse the business of the Appellant and given the financial condition and background of the Appellant would suffer financial breakdown and irreparable h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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