Asian Natural Resources (India) Ltd. vs Commissioner of Customs

Harsha Devani, J.—By this appeal under Section 130 of the Customs Act, 1962 (hereinafter referred to as "the Act"), the appellant-assessee has called in question the order dated 23rd June, 2014 passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (hereinafter referred to as "the Tribunal") 2014 (309) E.L.T. 306 (Tri.-Ahmd.) , whereby the Tribunal has directed the assessee to deposit an amount of Rs. 20,00,000/- by way of pre-deposit as a condition for hearing and disposing the appeal preferred by the appellant before the Tribunal by proposing the following questions stated to be substantial questions of law:

"(A) Whether, in the facts of the case, and especially, in the light of the decision in the matter of Tamil Nadu Newsprints & Papers Ltd. (supra), the appellant could justifiably be subjected to any pre-deposit, for having its appeal heard on merits?

(B) Whether the impugned order of the Hon''ble Tribunal is not liable to be set aside additionally for the reason that it is totally bereft of any findings, even, prima facie, on the merits of the case?"

By an order-in-original dated 27-3-2014, the Commissioner of Customs (hereinafter referred to as "the Adjudicating Authority") held that the coal imported by the appellant was "bituminous coal" classifiable under SHN 2701 12 00 of the Customs Tariff Act, 1975 and not "Steam Coal" as claimed by them and consequently attracted duty under serial No. 124 of Notification No. 12/2012-Cus., and was not entitled to the benefit of serial No. 123 thereof. The Adjudicating Authority accordingly, rejected the classification of the coal imported by the appellant under CTH 2701 19 20 and had ordered re-classification of the same under CTH 2701 12 00 of the Customs Tariff Act and denied the appellant the benefit of Notification No. 12/2012 as amended under Sl. No. 123 in respect of coal imported under the cover of bills of entry as mentioned at Annexure-A to the show cause notice. The Adjudicating Authority determined the differential Customs Duty payable by the appellant at Rs. 2,09,40,075/- and also ordered recovery of interest at the applicable rate on such amount and imposed penalty of Rs. 31,00,000/- under Section 112(a) of the Customs Act, 1962. Being aggrieved by the order-in-original dated 27th March, 2014, the appellant went in appeal before the Tribunal. Along with appeal, the appellant also preferred a stay application. By the impugned order, the stay application has been partly allowed by directing the appellant to deposit a sum of Rs. 20,00,000/- as a condition for hearing and disposing of the appeal on merits and granting waiver of pre-deposit of the balance amount involved and staying the recovery thereof.

Mr. C. Harishankar, learned senior advocate with Mr. Hardik Modh, learned advocate for the appellant, assailed the impugned order by submitting that an identical issue had arisen for consideration before the Tribunal in the case of Tamil Nadu Newsprint & Papers Ltd. v. Commissioner of Customs, Tuticorin, 2010 (253) E.L.T. 153 (Tri.-Chennai) , which came to be decided in favour of the assessee and applies on all fours to the present case and hence, a clear case had been made out for total waiver of the pre-deposit. Such decision was also brought to the notice of the Tribunal on the occasion of the personal hearing, despite which the Tribunal had directed the appellant to pre-deposit a sum of Rs. 20,00,000/- for hearing the appeal. It was urged that having regard to the fact that the issue involved in the present case stands covered by a decision of the Tribunal in favour of the appellant, the Tribunal was not justified in directing the appellant to make any pre-deposit for hearing the appeal on merits.

2.1 Next it was submitted that the impugned order is completely unreasoned and non-speaking in nature, inasmuch as, after recording the submissions of the appellant, the Tribunal has merely proceeded to state that it felt that all the appellants before it should be put to terms and that the submissions advanced could be decided only at the stage of final hearing. According to the learned counsel, while an extensive deliberation on the merits of the submissions advanced may not be necessary in every case at the stage of pre-deposit, however, a prima facie examination of the said submissions on the merits of the case is mandatory before directing any pre-deposit. In support of such submission, reliance was placed upon the decision of the Supreme Court in the case of Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, . Referring to the impugned order, it was pointed out that though the Tribunal has recorded that the appellant had placed reliance on the above decision in the case of Tamil Nadu Newsprint & Papers Ltd., it has not dealt with the same nor has it recorded as to why despite the decision being squarely applicable to the facts of the present case, payment of pre-deposit was necessitated. Thus, the impugned order does not conform to the requirements laid down in the above decision inasmuch as there is no discussion whatsoever, on the merits of the case, even prima facie. Reliance was also placed upon the decision of the Kerala High Court in the case of Binani Zinc Ltd. Vs. Asstt. Collector of Central Excise, wherein the appellate authority had followed an earlier decision of the Madras Bench of the Tribunal in the matter of levy of duty. The court observed that the contrary decision of the Bombay Tribunal was not binding on the Madras Bench of the Tribunal and the appellate authority at Madras. Nevertheless, when two Benches of the Tribunal, exercising jurisdiction under the same Act in respect of the same subject matter, had rendered two different and conflicting decisions on the same question, the correctness of the decision of one of the Benches cannot be free from doubt. The court was of the opinion that in view of two contradictory decisions of two Benches, the matter disclosed an arguable case as against a frivolous one and accordingly, found that there was a prima facie case for the petitioner. It was, accordingly, held that in exercising the discretion under the proviso to Section 35F of the Central Excise Act, the Appellate Tribunal ought to have considered the same. The decision of the Delhi High Court in the case of Sri Krishna Vs. Union of India (UOI), was also cited wherein the court had held that the if the appellant had such a prima facie strong case and it was likely to be exonerated from payment, insistence of deposit of the amount would amount to undue hardship. The learned counsel submitted that in the light of the principles enunciated in the above decisions, there was no justification for the Tribunal to impose any pre-deposit as a condition precedent for hearing the appeal on merits and, as such, the impugned order passed by the Tribunal does give rise to substantial questions of law as proposed or as may be deemed fit by the court.

This court has considered the submissions advanced by the learned counsel for the appellant and has perused the impugned order passed by the Tribunal as well as the record of the case as produced before the court. As can be seen from the impugned order, the Tribunal has considered the submissions made by the learned Counsel for the respective parties at length and has, thereafter, found that the entire issue before it was an arguable and contentious one which needs to be gone in detail, inasmuch as, the interpretation of the headings under which the goods in question would fall, has to be considered in its proper perspective. The Tribunal was, therefore, of the considered view that all the arguments could be considered at length at the time of final disposal of the appeals and in order to hear and dispose the appeals on merits, all the appellants need to be put to some condition. Accordingly, the Tribunal has directed the appellant herein to deposit Rs. 20,00,000/- as a condition for hearing and disposing the appeal on merits. Thus, while directing pre-deposit of Rs. 20,00,000/- the Tribunal has duly assigned reasons for doing so. Under the circumstances, the contention that the impugned order is a non-speaking one stands repelled.

A perusal of the impugned order further reveals that the Tribunal has recorded that on behalf of one of the assessees, reliance had been placed upon the decision of the Tribunal in the case of Tamil Nadu Newsprint & Papers Ltd. (supra) wherein identical issue was decided by the Tribunal in the case of the said assessee holding that without a chemical test, the department has no basis to classify the goods under Heading No. 2701.12 and charge the same to higher rate. In the opinion of this court, while it is true that in the reasoning part of the order, the Tribunal has not referred to the above decision, the fact that the same finds reference in the body of the order along with the fact that the Tribunal has directed payment of only a small fraction of the amount that the appellant is liable to pay under the order-in-original, does give reason to believe that the Tribunal while passing the impugned order had kept the same in mind. Besides, having regard to the reasons assigned by the Tribunal while directing the appellant to pre-deposit an amount of Rs. 20,00,000/-, it cannot be said that there was no justification for the Tribunal in making such order. Merely because there is an earlier order of the Tribunal on the same issue, the same does not mean that the Tribunal is not justified in making an order of pre-deposit. Besides, as noticed above, having regard to the liability under the order-in-original, the amount directed to be paid by way of pre-deposit is only a small fraction thereof.

It is by now well settled that the three aspects to be focused while dealing with an application under Section 129E of the Act are: (a) prima facie case, (b) balance of convenience, and (c) irreparable loss. The Tribunal in the impugned order has expressed the view that the appellant has an arguable case and also that in order to hear and dispose of the appeal, the appellant needs to be put to some condition. A perusal of the stay application made by the appellant reveals that insofar as financial hardship is concerned all that is stated is "The Applicant is pleading undue financial hardship in making pre-deposit of any amount in view of excellent prima facie case on merits". Thus, the only ground of financial hardship pleaded is not actual financial hardship but that the appellant has an excellent prima facie case on merits. In Benara Valves Ltd. v. CCE (supra) the Supreme Court has held that while exercising powers under Section 35F of the Central Excise Act, 1944 (which is in pari materia with Section 129E of the Act) though discretion is available, the same has to be exercised judicially. It is further held that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand has no legs to stand on, it would be undesirable to require the assessee to pay full or substantive part of the demand. The court has further held thus:

"11. Two significant expressions used in the provisions are "undue hardship to such person" and "safeguard the interests of the Revenue". Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interests of the Revenue have to be kept in view.

As noted above there are two important expressions in Section 35F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka that under Indian conditions expression "undue hardship" is normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

For a hardship to be "undue" it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it.

The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.

The other aspect relates to imposition of condition to safeguard the interests of the Revenue. This is an aspect which the Tribunal has to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the interests of the Revenue. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate conditions as required to safeguard the interests of the Revenue."

Having regard to the overall facts of this case, it is not possible to state that the impugned order does not conform to the principles enunciated in the above decision. As regards the decision of the Kerala High Court in Binani Zinc Ltd. v. Asst. Collector of Central Excise (supra) on which reliance has been placed on behalf of the appellant, the same turns upon the facts of the said case wherein though there was an arguable case, the Tribunal has directed pre-deposit of a huge amount as a condition precedent for the hearing of the appeal. In the present case, as noted hereinabove, the Tribunal had directed the appellant to pre-deposit a small fraction of the entire liability under the order-in-original and hence, the said decision would not be applicable to the facts of the present case. The decision of the Delhi High Court in the case of Sri Krishna v. Union of India (supra) also does not carry the case of the appellant any further inasmuch as in the facts of the said case, the petitioners therein were poor persons and were not in a position to deposit the amount as directed by the Tribunal and consequently would have been denied of the valuable right of their appeal being heard and decided on merits, whereas in the facts of the present case, it is not the case of the appellant that is not in a position to deposit the amount as directed by the Tribunal. For the reasons recorded hereinabove, this court is of the view that the Tribunal, while considering the appellant''s application under Section 129E of the Act, has exercised its discretion judicially. Under the circumstances, it is not possible to state that there is any legal infirmity in the impugned order so as to give rise to any question of law, much less a substantial question of law, so as to warrant interference. The appeal, therefore, fails and is, accordingly, dismissed.