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

Headnote:Customs Act, 1962 – Section 112(a),129-E - Dispute relating to classification of product imported by appellant and consequential benefits claimed by it under various notifications issued by Director General of Foreign Trade – Non acceptance of stand of appellant about its classification by custom authorities – Imposition of a total amount of Rs. 10,00,00,000\- as penalty – Appeal – Order passed by CESTAT directing deposit of rupees two crores as a condition precedent for entertaining appeal – Appeal thereagainst - Contention of appellant that company had become a sick company and hence insistence on pre-deposit even a part of which in this case was a huge sum of rupees two Crores would deprive appellants of statutory right of Appeal - It is true 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 demand raised has no leg to stand, it would be undesirable to require assessee to pay full or substantive part of demand - Petitions for stay should not be disposed of in a routine matter unmindful of consequences flowing from order requiring assessee to deposit full or part of demand - There can be no rule of universal application in such matters and order has to be passed keeping in view factual scenario involved - Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens’ faith in the impartiality of public administration, interim relief can be given - There are two important expressions in Section 129-E - One is undue hardship - This is a matter within special knowledge of applicant for waiver and has to be established by him - A mere assertion about undue hardship would not be sufficient – Relying upon decision in case of S. Vasudeva v. State of Karnataka and Ors. held that under Indian conditions expression “Undue hardship” is normally related to economic hardship - “Undue” which means something which is not merited by conduct of claimant, or is very much disproportionate to it - Undue hardship is caused when the hardship is not warranted by circumstances - For a hardship to be ‘undue’ it must be shown that particular burden to have to observe or perform the is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it – No infirmity found in order directing deposit of Rupees two crores as affirmed by High Court - Appellant was granted three months time to deposit amount fixed by CESTAT. (Paras 12,15,16,18,19)
       Words and phrases - “Undue hardship” – Meaning of - “Undue hardship” is normally related to economic hardship - “Undue” which means something which is not merited by conduct of claimant, or is very much disproportionate to it - Undue hardship is caused when the hardship is not warranted by circumstances - For a hardship to be ‘undue’ it must be shown that particular burden to have to observe or perform the is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. (Paras 15)
       Facts of the case :
       Dispute was related herein in the instant case to classification of product imported by appellant and consequential benefits claimed by it under various notifications issued by Director General of Foreign Trade. Stand of appellant about its classification was found not acceptable by custom authorities. Total amount of Rs. 10,00,00,000\- was imposed as penalty. On Appeal, an order was passed by CESTAT directing deposit of rupees two crores as a condition precedent for entertaining appeal.
       Present appeal has been filed by appellant contented that company had become a sick company and hence insistence on pre-deposit even a part of which in this case was a huge sum of rupees two Crores would deprive appellants of statutory right of Appeal.
       Finding of the court:
       The Court held that it is true 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 demand raised has no leg to stand, it would be undesirable to require assessee to pay full or substantive part of demand. Petitions for stay should not be disposed of in a routine matter unmindful of consequences flowing from order requiring assessee to deposit full or part of demand. There can be no rule of universal application in such matters and order has to be passed keeping in view factual scenario involved. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens’ faith in the impartiality of public administration, interim relief can be given. There are two important expressions in Section 129-E. One is undue hardship. This is a matter within special knowledge of applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. Relying upon decision in case of S. Vasudeva v. State of Karnataka and Ors. held that under Indian conditions expression “Undue hardship” is normally related to economic hardship. No infirmity found in order directing deposit of Rupees two crores as affirmed by High Court - Appellant was granted three months time to deposit amount fixed by CESTAT.

JUDGMENT

Dr. ARIJIT PASAYAT, J.—

1.Leave granted.

2.Challenge in this appeal is to the order passed by the High Court of Gujarat dismissing the writ petitions filed by the appellant.

3.Challenge before the High Court was to the order dated 10.1.2006 passed by the Customs, Excise & Service Tax Appellate Tribunal (in short ‘CESTAT’) directing deposit of rupees two crores as a condition precedent for entertaining the appeal. It is to be noted that the total amount of penalty imposed was Rs.10,00,00,000/-. The dispute relates to classification of the product imported by the appellant and consequential benefits claimed by it under various Notifications issued by the Director General of Foreign Trade. The customs authorities did not accept the stand of the appellant about its classification. The levy of penalty was challenged by way of appeal before the CESTAT. It was accompanied by an application seeking waiver of the penalty imposed by the Commissioner of Customs (in short the ‘Commissioner’).

4.After hearing the parties, the CESTAT inter alia noted as follows :

“The learned Advocate for the applicants contends in one hand that a letter of Ms. Indian Oil Corporation Ltd. written by its Assistant Manager, was on the record of the Commissioner in these proceedings and was not considered in spite of the directions in remand to consider all materials. It was also submitted that the directions of the DGFT dated 17.12.1997 have not been complied, with even though certificates showing the use of the return stream were on record in parallel proceedings before the department. It was also submitted by the learned advocate that if these certificates were considered, then they should be granted the benefit of DGFT waiver of condition of the resale of the return stream, vide their letter dated 17.12.1997 and they were not so liable to any penalty. The Learned advocate took us through the Balance Sheet of the applicant company which discloses that as on 31.3.2005, they have a loss of Rs.12.20 crores and in the earlier year the said loss was Rs.17.74 crores. He submits that they are a BIFR company and pleads for full waiver of the pre-deposit requirement under Section 129E of the Customs Act to hear this appeal. The Learned SDR on the other hand takes us through the letter dated 17.12.1997 of DGFT and submits that this letter exempts and is applicable only to import of naphtha and return stream of such naphtha. He submits that the letter relied upon by the advocate of Indian Oil Corporation, which he is making a grievance about, it stating that heptene is not known and understood as naphtha. The certificates of consumption of the return stream are also certifying the utilization and the return stream of nonene and heptene and not to naphtha.

Considering the submission in this matter, prima facie we are of the view that the waiver granted of the condition by the DGFT is not applicable to the subject imports in this case. The other issues raised will have to be gone into in detail at the regular hearing. At this prima facie stage considering the merits and the financial position as also the fact that this is the second round, we would consider this case to be appropriate to direct the applicants to terms of pre-deposit requirement to be effected under Section 129E of the Customs Act, 1962. We would, therefore, direct the applicants to deposit Rs.2,00,00,000/- (rupees two crores only) and report compliance thereof within 12 (twelve) weeks i.e. on 17.4.2006. On such compliance, being reported, the matter would be listed for regular hearing. Failure to deposit and meet the requirement of Section 129E calls for dismissal of the appeal without any further notice.”

5.The penalty, it is to be noted, has been imposed under Section 112 (a) of the Customs Act, 1962 (in short the ‘Act’). A specific finding was recorded by the Commissioner that in respect of the goods the assessee was required to obtain a licence for clearance. However, the value of the goods which

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2007 Supreme(SC) 1580

2007(8) Supreme 451Supreme Court of indiaDr. Arijit Pasayat & Aftab Alam, JJ.Indu Nissan Oxo Chemicals Ind. Ltd. — AppellantversusCommissioner of Central Excise, Jamshedpur and Ors. – RespondentsAppeal (civil) 5795 of 2007(Arising out of SLP (C) No. 8041 of 2007)Decided on : 11-12-2007

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

Cases Referred (6)

2007(8) Supreme 451
Supreme Court of india
Dr. Arijit Pasayat & Aftab Alam, JJ.
Indu Nissan Oxo Chemicals Ind. Ltd. — Appellant
versus
Commissioner of Central Excise, Jamshedpur and Ors. – Respondents
Appeal (civil) 5795 of 2007
(Arising out of SLP (C) No. 8041 of 2007)
Decided on : 11-12-2007

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