Jayashree Insulators Limited vs Collector Of Central Excise on 31/12/1986

ORDER
P.C. Jain, Member (T)
1. Short question involved in this stay application is whether in considering
dispensation of prior deposit of duty and/or penalty in terms of Section 35F of
the Central Excise and Salt Act, 1944 (hereinafter referred to as the Act)
question of financial hardship alone is to be considered by the Tribunal, while
dispensing with the prior deposit or other factors such as prima facie strength
of the case are also to be looked into.

2. Leanred Counsel for the applicant has stated that the financial position
of the applicant in the instant case is very sound. However, the demand raised
against the applicant by the impugned order is totally untenable in law and
prima facie unjustifiable. Although there may not be any financial hardship if
the duty demanded is deposited before the appeal is heard, yet it would cause
undue hardship inasmuch as the demand made is illegal and not tenable at all in
the facts and circumstances of the case. He relies for this proposition on
Calcutta High Court’s judgement reported in 1986 (23) ELT 74−Cal. in the case of
American Refrigeration Co. Ltd. The learned Judge of the Calcutta High Court has
observed therein that "the Tribunal in granting exemption is bound to take into
consideration the prima facie case made out by the petitioner as also the
interest of the Revenue..". He also relies on an order of the Tribunal of
Special Bench−B, reported in 1986 (23) ELT 234 (Tribunal) in the case of Bata
India Ltd. v. Collector of Central Excise, Calcutta. In this order, Tribunal
after considering the prima facie case as well as other factors, fixed the
amount of prior deposit.
3. Shri P.K. Ajwani, learned SDR, opposing the application has submitted that
admittedly financial position being very sound, there is no question of
dispensing with the prior deposit of duty. Ambit of the appellate authority’s
power is governed by the provisions of Section 35F of the Act. This ambit is
narrower than the power for granting ’stay’ within the scope of inherent
incidental and ancillary powers of an appellate authority. The provisions in
Section 35F make it incumbent that before the appeal is heard, the amount of
duty or penalty determined in the order under appeal has to be deposited unless
the appellate authority dispenses with the same considering that such a deposit
would "cause undue hardship to such person". Learned SDR has further stressed
that the expression ’undue hardship’ has been interpreted by the Tribunal in a
number of decisions as "financial hardship" only. He relies for this proposition
upon 1985 (21) ELT 558 (Tribunal) in the case of Modi Gas & Chemicals Ltd. and
also on 1985 (22) ELT 582 in the case of Sonodyne Television Company. He has
also placed reliance on Tribunal’s Order No. 59/1986−A dated 31−1−1986 in
TELCO’s case and Order No. 365 to 368/1986A dated 17−3−1986 in Indo Asahi Glass
Co.’s case. If the prima facie nature of the case is to be considered, then
every order under appeal can be considered to be a hardship to the appellant,
otherwise he would not have appealed against the order.
4. Learned SDR has further submitted that the Supreme Court in its judgement
in the case of Asstt. Collector of Central Excise, Chandernagar v. Dunlop India
Ltd. 1985 (19) ELT 22 has also stressed that prima−facie nature of case alone is
not sufficient to call for an interim stay to a petitioner; other factors should
also be looked into. The Hon’ble Court has gone to the extent of saying that no
Government can run on bank guarantees. When the Supreme Court in its extra−
ordinary power i.e. writ power has observed in the foregoing manner regarding
stay/interim orders, Appellate Tribunal should be more restrictive in its
approach because it is to be guided by Section 35F of the Act alone. Learned SDR
has also cited Supreme Court’s observation in the case of Empire Industries 1985
(20) ELT 1979 to the effect that interim orders should not be passed if
incidence of taxation has been passed on to the customer. On a query from the
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 Bench, Shri Ajwani could not, however, satisfy that incidence of taxation has
been passed on to the customer in the instant case.
5. Replying to the points raised by the respondent’s representative, learned
counsel has submitted that Supreme Court itself has observed (in para 5) in
Dunlop India’s aforementioned case that interim order would be justified where
there has been "gross violation of law". Instant case, he pointed out, comes
within the aforesaid observation of the Supreme Court inasmuch as duty is
purported to be charged on the value of an article which is purchased from the
market and which is not an integral part of the product manufactured by him. The
impugned order is against the well−settled law of excise levy. He has also
relied upon Allahabad High Court’s observation in 1985 (20) ELT 243 (Allahabad)
Para 5.
6. We have carefully considered the pleas advanced on both sides. Firstly, we
observe that the expression ’undue hardship’ occurring in Section 35F cannot be
taken to mean ’financial hardship’ alone. Had that been the intention, nothing
prevented the legislature to use that expression. ’Undue hardship’ can be
considered in contrast with ’due hardship’ or legal hardship. This expression in
Section 35F should, therefore, embrance hardship caused by a prima−facie illegal
or untenable order as well. This construction flows from the meanings,
interalia, "not lawful" in New Webster’s Dictionary Deluxe Encyclopaedia
Edition) or "illegal" in the Shorter Oxford English dictionary (Third Edition)
for the word ’undue’.

7. Having regard to the citations relied upon by both sides, we observe that
in coming to the conclusion whether ’undue hardship’ would be caused by prior
deposit of the duty or penalty demanded in the .impugned order, appellate
authority would be guided by not one individual factor but a number of factors
such as financial hardship, prima−facie strength of an appellant’s case, amount
of demand, balance of convenience or non−dispensation of prior deposit may lead
to grave irreparable injury, or shake a citizen’s faith .in the partiality of
the administration as narrated in Supreme Court’s judgement in Dunlop India’s
case mentioned supra Tribunal has observed in TELCO’s case that the "present
matter is an arguable one". Similarly, the Tribunal has gone into totality of
circumstances in Indo Asahi Glass Co.’s case. To say that liquidity position
alone of an appellant would be the only relevant factor for consideration under
Section 35F of the Act would be going not only against the observation of
Hon’ble Supreme Court in Dunlop India’s case but also their observation in the
case of Spencer & Co. Ltd. v. Collector of Central Excise vide Application No.
332/84 in Appeal Nol 693/84 :

"We are in agreement with the contention of the counsel for the petitioner
that the expression ’undue hardship’ occurring in the proviso to Section 35F of
the Central Excises & Salt Act, 1944, would include consideration, inter alia of
the aspect of liquidity possessed by the assessee. We are not inclined to take
the view that the impugned order gives any indication that aspect has been
completely ignored as was contended by counsel. With these observations, the
special leave petition is dismissed".
8. It is to be noted here that the Hon’ble Supreme Court has used the
expression "inter alia" while agreeing with the petitioner’s counsel that
liquidity position of an assessee has also to be looked into. This is a direct
authority of the Supreme Court on the scope of Section 35F of the Act and a
plain meaning has to be given to these observations.
9. Even otherwise looked at from purely rational and logical point of view,
it does not appeal to common sense that while various factors are to be taken
into consideration for deciding the question of ’stay’ of an order under appeal
within the scope of inherent incidental and ancillary powers of an appellate
authority, it has to consider the factor of only financial hardship in respect
of dispensing prior deposit vis−a−vis maintainability of the appeal under the
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 Act. Repercussions of not granting a "stay" are not as far−reaching as that of
not dispensing with the prior deposit in an appropriate case. In the former
event, an appeal would be heard and decided on merits and the appellant has a
chance of vindicating his stand; in the latter case he is debarred at the
threshold and the very appellate remedy gets extinguished.
10. Accordingly, we consider that all relevant factors have to be taken into
consideration in coming to a conclusion of "undue hardship’ in terms of the
proviso to Section 35F.

11. Applying the above general observations to the facts and circumstances of
this case including its prima−facie strength and the liquidity position of the
appellant, (and without commenting in particular on any single fact since the
matter is sub−judice before us) we dispense with the prior deposit of duty
demanded subject to furnishing of bank guarantee for the full amount to the
satisfaction of the departmental authorities within six weeks of the date of
receipt of this order.
M. Gouri Shankar Murthy, Member (J)
I regret that I have, perforce, to dissent from the order of our learned
brother, much against my will, in view of several decisions of the Tribunal
itself in −
(a) the Stay Petition in Appeal No. 133/83 − Tribhuvandas Bhimji Zaveri v.
Collector of Customs & Central Excise − a decision of a Bench of two Members;
(b) 1985 (20) ELT 384 (Brima Sugar Ltd. v. Collector of Central Excises − a
decision by a bench of three Members);
(c) 1985 (21) ELT 558 (Modi Gas and Chemicals v. Collector of Central
Excise, Meerut − a decision by a bench of three Members);
(d) 1985 (21) ELT 704 (Parasmal Solanki v. Collector of Customs, Bombay −
again a decision by a bench of three Members);

(e) 1986 (24) ELT 400 (R.K. Containers & Steel Fabricators v. Collector of
Central Excise & Customs, Baroda − a decision by a bench of three Members);

(f) decisions of our brother Harishchandra in a third Member reference on a

difference between me and brother Bhatnagar in :

(i) Exquisite Impex Pvt. Ltd. v. Collector of Customs, Calcutta [Stay

Petition No. 15/85−Cal. in Appeal No. 26 of 1985 (Cal.)] and

(ii) Siemens India Ltd. v. Collector of Central Excise, Calcutta (Stay

Petition No. 45/85−Cal. in Appeal No. E/72/85−Cal.).

2. We are bound by all the aforesaid decisions as well as the decision of the
Hon’ble Supreme Court in an S.L.P. filed by Spencer Sc. Co. Ltd. [S.L.P. (Civil)
No. 7762 of 1984] against our order refusing to dispose with the deposit,
notwithstanding that it was. contended before us that the applicant therein had
a good case, prima facie, in the appeal.

3. It will be unnecessary to recapitulate all the reasons set forth in the

aforesaid decisions. Suffice it to say, however, at the risk of repetition that
−
(a) the essential distinction between an ordinary stay petition ) in an
appeal otherwise maintainable and an application for dispensing with a deposit
as a condition precedant for maintainability of the appeal itself in terms of
S.35F of the Central Excises and Salt Act, 1944 (= Section 129E of the Customs
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 Act, 1962) − [An appeal could even be rejected for failure to make the deposit,
where it is not dispensed with AIR 1971 S.C. 2280−− Navin Chandra Chotey−lal v.
the Central Board of Excise and Customs];

(b) the different criteria that have to be adopted in the grant of stay
ordinarily and dispensation of the mandatory prerequisite of a dep9sit, in
consequence of the distinction between the two;
(c) the intent of the legislature in providing for a deposit mandatorily
and dispensing with such requirement for "undue hardship";
(d) the consequences of construing "undue hardship" to mean and imply all
such criteria as are applicable to the grant of stay ordinarily. A legislative
provision cannot be a mere supererogation and no construction is to be adopted
that may render it so. There need be no provision for a mere stay which could,
even otherwise, be ordered on such considerations as may be germane, like e.g.
existence of prima facie case, in exercise of the incidental or ancillary powers
of the Tribunal. Is the expression "undue hardship" to be construed to mean and
imply all those criteria which may be germane for the grant of stay?
(e) the necessity to interpret the order of the Hon’ble Supreme Court in
the Spencer case aforesaid in the context of the pleadings facts on record in
that case. If it were the intent of the Supreme Court, by the use of the
expression "inter alia" that the existence of a prima facie case was a relevant
factor, the. S.L.P. should have been allowed, seeing that we refused to take it
into consideration and that was made a grievance of in the S.L.P,;
(f) the irrelevance of our notions of propriety in the construction of a
statutory provision which has to be given effect to, cannot be overlooked.
4. Nor am I clear in my mind what prima facie case the appellant has. We need
not restrain ourselves from discussing if a prima facie case exists merely
because the ultimate decision in the appeal is still be rendered or subjudice.
Indeed, we have to spell out what exactly, is the case, prima facie, in favour
of the applicant.

5. That the question of furnishing a security to safeguard the interests of

the Revenue by way of a Bank guarantee, I presume, will arise only if we decide
the issue in favour of the applicant and hold that the deposit, if insisted
upon, will cause "undue hardship1’.
6. In view of the difference between the two of us, the papers may be placed
before the Hon’ble President for resolving the difference and deciding the
issue.

S. Venkatesan, President

1. This order has reference to an application by Messrs. Jayashree Insulators

Ltd., arising out of an order−in−appeal dated 30−9−85 passed by the Collector of
Central Excise (Appeals), Calcutta. Six show−cause−cum−demand notices had been
issued to the applicants, calling on them to show cause why Central Excise duty
alleged to have been short−levied as a result of the wrong determination of the
value of electrical insulators manufactured by them should not be demanded from
them. After considering their submissions, the Assistant Collector set aside the
six demand notices. An application in terms of Section 35F, Central Excises and
Salt Act was filed to the Collector (Appeals), that authority set aside the
order−in−original of the Assistant Collector and confirmed the demands for duty
under the six show−cause notices. The total duty demanded from the appellants is
Rs. 6,61,385.26.

2. The applicants came up in appeal to the Tribunal against the order of the
Collector (Appeals). They also filed what they termed an "application for stay
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 from the operation of the
order−in−appeal...passed by the Collector of Central Excise (Appeals),
Calcutta". The "prayer" at the end of the appeal read as follows :−
"Since the amount is not payable, it is prayed that the recovery may kindly
be stayed and the appeal is posted for hearing very early as recurring demands
are being issued".
3. It may be mentioned that no specific reference has been made in the
application to Section 35F, Central Excises and Salt Act, or to waiver of the
pre−deposit required in terms of that Section. Nevertheless, before the Special
Bench (consisting of learned Brothers S/Shri M. Gouri Shankar Murthy and P.C.
Jain) which heard the application, the question of waiver of pre−deposit not
only appears to have been mentioned but also to have been given predominance.
This would be seen from the first para in the order of Member, Shri P.C. Jain,
which reads as under :−
"Short question involved in this stay application is whether in considering
dispensation of prior deposit of duty and/or penalty in terms of Section 35F of
the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act)
question of financial hardship alone is to be considered by the Tribunal, while
dispensing with the prior deposit or other factors such as prima facie strength
of the case are also to be looked into."

In framing the points of difference of opinion, the two learned Members have
specifically referred to the provisions of Section 35F, and the arguments before
me also were with reference to the interpretation of that Section.
4. Since the two learned Members differed in their opinions, the case was
referred to me as President, in accordance with the provisions of Section
129C(5) of the Customs Act, 1962 (as amended), also applicable to Central Excise
matters, which reads as follows :−
"If the Members of a Bench differ in opinion on any point, the point shall
be decided according to the opinion of the majority, if there is a majority but
if the Members are equally divided, they shall state the point or points on
which they differ and the case shall be referred by the President for hearing on
such point or points by one or more of the other Members of the Appellate
Tribunal, and such point or points shall be decided according to the opinion of
the majority of the Members of the Appellate Tribunal who have heard the case
including those who first heard it:
Provided that where the Members of a Special Bench are equally divided, the
point or points on which they differ shall be decided by the President."
5. The formulations of the points of difference by the two Members were
slightly different. Since they could not agree upon the formulations, notice was
issued to the parties of the hearing by the President for deciding the following
question, which appeared to represent the basic point of difference :−

"Whether the expression ’undue hardship’ in the proviso to Section 35F,

Central Excises and Salt Act, 1944, should be taken as referring only to
financial hardship, or as covering also other factors such as the existence of a
prima facie case in favour of the applicant."
6. When the matter came up for hearing before the two parties, on the 3rd
December, 1986, Shri P.K. Ajwani, SDR, representing the respondent, raised a
number of preliminary issues.

7. His first submission was that under Section 129C(5), Customs Act, where
the Members of a Bench differed in opinion, they were required to state the
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 points of difference. In the present case, it was not clear whether the question
as communicated to the parties represented the point of difference as framed by
the two Members. If this was not so, and it was proposed to have the hearing on
the basis of a point or points different from those formulated by the two
Members, the two parties should be apprised of the points as formulated by the
Members and given an opportunity to make their submissions thereon.

8. Shri Ajwani was informed that it had become necessary for the President to
formulate the point of difference because the two learned Members could not
agree on a common formulation. At the instance of the Bench, Shri R.P. Sharma,
JDR, read out the views of the two learned Members as to what the points of
difference were. Shri Ajwani then accepted that the question as framed by the
President and communicated to the two parties covered the basic point of
difference between the two learned Members as expressed by them.
9. Shri Ajwani then made a further submission that the two learned Members
should have included another point of difference which according to him would
run somewhat as follows :−

"Whether decisions of other Benches would not be binding on another Bench

having concurrent and identical jurisdiction."

10. On being invited for his views, Shri Agarwal submitted that the question
whether waiver of pre−deposit should be granted was not a legal question but
depended on the facts of the case, as held by the Hon’ble Supreme Court in the
Dunlop India case (referred to later). Therefore, the question of binding
precedents would not arise. He has of the view that inclusion of this further
point would not be "worthwhile".
11. Shri Ajwani was informed that no new point which has not been included by
the learned Members themselves could be added at the stage of hearing by a third
Member or by the President. The reasons for so holding were not spelt out at the
hearing. Briefly, they are as follows :−
(a) Basically, it is the learned Members who have to decide a case as a
Bench. Therefore, it is they who can say what are the points on which they
differ;
(b) It rests entirely in the judicial discretion of each Member how he
should word his order and what points of fact or law he should refer to. What
can be termed as "points of difference" would not be however every observation
of one Member with which the other Member does not see eye to eye; rather they
would be in the nature of the ratio decidendi on which the ultimate decision
would turn;

(c) In the somewhat similar case of references to the High Courts or to the
Supreme Court, the Supreme Court itself has held that even that Hon’ble Court
has no jurisdiction to give its opinion on a question not referred to it but
which could have been, or on a different question. (See "Datta on the Incometax
Law, First Edition, p. 1091 and the references at footnote 9 thereunder). Even
if the above rulings do not apply, their analogy would certainly do so.
12. On a practical plane, it is quite unnecessary to seek the inclusion of
any additional points, because these would be material only in so far as they
would affect the decision or decisions on the main question actually posed. On
that basis, these points could be raised and argued by either side. In fact, the
particular point which Shri Ajwani wished to be added would be relevant to the
question before the Bench, and both sides did address the Bench with reference
to this point.

13. Thereafter, Shri Ajwani submitted that certain of the orders of the
Tribunal referred to by the two Members had not been published and were not
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 available for reference. Order dated 25−10−84 of the Hon’ble Supreme Court in
the case of Messrs. Spencer & Co. Ltd., amended on 30−10−84 on SLP No. 7762 of
1984 had similarly not been reported. He was informed that with this point in
mind the Registry had been directed to make a compilation of copies of− such
unreported judgements/orders, of which there were six. Copies of the compilation
were given by the Court Master to learned representatives of both sides. Shri
Ajwani filed copies of the Tribunal’s order No. 368/1984A dated 29−5−84 in the
case of Messrs. Spencer & Co. Ltd., leading to the abovementioned order of the
Hon’ble Supreme Court. These were also taken on record. The hearing of the
application was then proceeded with.
14. At the outset, it may be made clear that the present Bench is not
required to reach any decision with reference to the facts of the particular
case. As regards financial hardship, the applicants have frankly admitted (and
this was confirmed by Shri Agarwal) that they are not taking this plea. As to
whether the applicants deserved relief on the basis of a prima facie case,
balance of convenience, etc., no specific finding has been given by Member, Shri
Murthy, having regard to his view that such considerations are not relevant. Nor
have the two learned Members included this as a point of difference.
Accordingly, both parties were informed that this aspect would have to be
considered by the original Bench if the occasion arose, and that the present
Bench would go only into the general question as communicated to them.
15. Addressing the Bench on this question, the learned advocate for the
applicants supported the view expressed by Member, Shri P.C. Jain. He addressed
his arguments under the following heads :−
(i) meaning of the term "hardship";
(ii) relevance of a prima facie case in favour of the applicants, in the
light of decisions of the Courts and the Tribunal; and
(iii) the right of appeal being a statutory right, it should not be
fettered by enforcing the onerous condition of pre−deposit.
16. In support of his first argument, Shri Agarwal cited a number of
pronouncements of the Hon’ble Supreme Court to the effect that where a term is
not defined in the statute it must be construed in its popular sense meaning
"that sense which people conversant with the subject matter with which the
statute is dealing would attribute to it." He relied on the following judicial
decisions :−

(1) AIR 1961 SC 1325 (Ramavtar Budhaiprasad v. Assistant Sales Tax

Officer);

(2) AIR 1967 SC 1454 (Commissioner of Sales Tax, Madhya Pradesh v. Messrs.
Jaswant Singh Charan Singh);

(3) 1985 (22) ELT 402 (P&H) Lavkursh Hosiery v. State of Punjab.

These are all cases relating to sales tax, dealing respectively with the
meanings to be attributed to the terms "vegetables", "coal" and "cotton
fabrics"/"woollen fabrics".

17. Shri Agarwal referred to "Maxwell on the Interpretation of Statutes",

Twelfth Edition (p. 141) wherein it has been observed that "the language used is
not to be stretched in favour of the Crown or narrowed in favour of the tax−
payer". Shri Agarwal submitted that in the light of the above definitions of
"hardship" and "undue hardship", and the principle enunciated in Maxwell,
consideration of the question of waiver of pre−deposit should not be confined to
the financial aspect only, but should include any other aspects placed before
the Bench.
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 18. Shri Agarwal went on to quote a number of legal dictionaries for
interpretation of the term "hardship". He cited "Words and Phrases Legally
Defined" edited by John B. Saunders, 2nd Edition (Vol.11, p.347). Therein there
is reference to a judgment of an overseas court to the effect that "The word
’hardship’ is capable of being descriptive of adverse repercussions of every
kind.... It may be physical or mental...". He also cited AIR 1975 SC 415
(Sterling General Insurance Co. Ltd. v. Planters Airways Pvt. Ltd.) wherein it
was held, in interpreting the expression "undue hardship", that "undue" must
mean something which is not merited by the conduct of the claimant, or is very
much disproportionate to it". This had reference to the question of extension of
time to refer a, matter to arbitration. Shri Agarwal also referred to Law
Lexicon by T.P. Mukherjee, wherein a similar definition has been given. He also
referred to Stroud’s Judicial−.Dictionary (4th Edition, p.1210) and Law Lexicon
by Venkataramaiya (2nd Edition, p.994), wherein it has been stated that the term
"hardship" includes any matter of appreciable detriment, whether
financial,−personal or otherwise.
19. Shri Agarwal thereafter took up certain judicial and other decisions
relating to the question of stay or waiver of pre−deposit. The Calcutta High
Court, in 1986 (23) ELT 74 (Cal.), relating to American Refrigeration Co. Ltd.,
had set aside an order of the Tribunal refusing to waive pre−deposit of the duty
amount. The learned Single Judge had observed" that the Tribunal in granting
exemption (sic) was bound to take into consideration the prima facie case made
out by the petitioner as also the interests of the revenue.
20. The Andhra Pradesh High Court also had occasion to deal with the question
of stay of enforcement of the lower authority’s order pending consideration of
the assessee’s revision petition, in 1983 ECR 2100 (AP) in the case of Messrs.
Srinivasa Cement Works. The Hon’ble High Court had observed that substantial
questions of law and fact had been raised by the petitioners, that the amount
demanded was heavy, and that the revisional authority, which had not passed any
orders on the assessee’s stay application, should have exercised its
jurisdiction one way or the other. The High Court stayed the proceedings for
recovery of duty and penalty pending disposal of the revision petition. (This
was a case before the provisions relating to the Tribunal came into operation,
and had reference to the grant of stay and not the operation of Section 35F as
stated in the report of the case).

21. The West Regional Bench of the Tribunal, in the case of Atic Industries
Ltd., reported in 1983 ELT 620, had granted stay of the order of the lower
authority directing repayment of excise duty alleged to have been erroneously
refunded to them. The Bench expressed the view that Section 35F, Central Excises
and Salt Act, did not cover refund of duty erroneously paid, and granted the
interim stay sought.
22. Shri Agarwal then referred to the order of the Hon’ble Supreme Court in
the case of Assistant Collector of Central Excise v. Dunlop India Ltd., reported
in 1985 (19) ELT 22 (SC), in which the Supreme Court had at length examined the
criteria to be followed by the High Courts in the making of stay orders. In para
7 of that order, the Hon’ble Supreme Court had observed as follows :−
"All this is not to say that interim orders may never be made against
public authorities. There are, of course, cases which demand that interim orders
should be made in the interests of justice. Where gross violations of the law
and injustices are perpetrated or are about to be perpetrated, it is the bounden
duty of the court to intervene and give appropriate interim relief. In cases
where denial of interim relief may lead to public mischief, grave irreparable
private injury or shake a citizen’s faith in the impartiality of public
administration, a Court may well be justified in granting interim relief against
public authority."

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 It followed from this that each and every fact of the case before the Bench
had to be gone into. Further, unlawful deprivation of money was by itself a
hardship. Therefore, whenever a prima facie .case was shown to exist, stay
should be granted without going into the financial position of the applicant.
23. Shri Agarwal also cited the decision of the Allahabad High Court in the
case of U.P. Lamination, reported in 1985 (20) ELT 243 (All.), where the
decision of the Hon’ble Supreme Court in the case of Dunlop India Ltd., had been
referred to. In para 5 of its order, the Hon’ble High Court had observed that
"the only declaration of law [arising from the Dunlop India case] which can be
said to be binding in respect of interim order is that it is not only the prima
facie case on which an interim order should be granted in taxation matters but
the Court must further consider if there was balance of convenience in favour of
petitioner."
24. Shri Agarwal referred to para 9 of the order of Member, Shri Jain,
wherein reference has been made to the far−reaching repercussions of not
dispensing with prior deposit in an appropriate case. He submitted that the
right of appeal was a statutory right, as held by the Hon’ble Supreme Court in
the case of Hoosein Kasam Dada (AIR 1953 SC 221). This right should not be
fettered by the condition of requiring an appellant to deposit an amount not due
from him.
25. Referring to the proviso to Section 35F, which requires the appellate
authority to impose conditions to safeguard the interests of revenue, Shri
Agarwal submitted that "revenue" in this context could only mean the amount of
revenue actually due from the appellant.

26. Shri Agarwal concluded his arguments by saying that there was no
judgement of the Supreme Court or a High Court against the view advanced by him.
There were judgements of the Tribunal itself in his favour. Accordingly, the
present application should be decided taking into account that the applicants
had a prima facie case in their favour.
27. Two questions were put to Shri Agarwal from the Bench, namely :−
(i) In the various orders passed by Member, Shri Murthy (e.g. at p.18 of
his order in the case of Messrs. Exquisite Impex Pvt. Ltd. (Order in Stay
Petition No. 15/85−Cal: relating to Customs. Appeal No. 26 of 1985/Cal.), he had
a drawn a distinction between the grant of stay of operation of the order under
appeal and waiver of pre−deposit. In his abovementioned order he had observed as
follows :−
"While, therefore, the existence of a prima facie case is relevant for the
grant of stay of operation of the order under appeal, it is not so for the
purposes of S.35F of the Central Excises and Salt Act, 1944 (= Section 128E of
the Act)".

Shri Agarwal was asked whether he would subscribe to this distinction;

(ii) It was also pointed out to Shri Agarwal that according to the view
advanced by him, namely that each and every fact of a case should be gone into
on an application for waiver of pre−deposit, the hearing and disposal of such
application’ would practically become a full−dress rehearsal for the hearing and
disposal of the main appeal. Would he say that this was the intention behind the
proviso to Section 35F?

28. On the first question, Shri Agarwal stated that he agreed with the view
of Member, Shri Murthy, but went on to say that in most cases there were
parallel applications for stay and waiver of pre−deposit, and the same criteria
should apply to both. (He had already referred to similar observations in para 9
of the order of Member, Shri Jain).
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 29. As regards the second question, Shri Agarwal replied that in the
interests of justice such detailed examination should be made even while
disposing of applications for waiver of pre−deposit.
30. Replying on behalf of the Collector, Shri P.K. Ajwani raised a number of
preliminary issues. He submitted that there were a number of decisions of
Benches of the Tribunal, including Special Bench A, to the −effect that only the
financial position should be considered for purposes of Section 35F. He
submitted that the decision of other Benches having concurrent or identical
jurisdiction would be binding on the present Bench. In the present case, the
President should be considered as being a Member of a three−Member Special
Bench. In this view he, as well as the entire Bench, would be bound by the
decisions of previous three−Member Benches.
31. It was pointed out to Shri Ajwani that there were also decisions to the
contrary, such as the decision of a three−Member Special Bench in the case of
Bata India 1986 (23) ELT 234. Shri Ajwani submitted that in that case the proper
course would be to set up a Larger Bench which could prevail over the decisions
of three−Member Special Benches.
32. It was then pointed out to Shri Ajwani that the provisions of Section
129C(5) (as amended) were very clear. The proviso contained the direction that
where the Members of a Special Bench were equally divided "the point or points
on which they differ shall be decided by the President". This appeared to make
it obligatory for the President to decide such points, and did not leave any
scope for reference to a Larger Bench. Shri Ajwani reiterated his submission. He
was then asked to proceed with his arguments on the point for decision.
33. Shri Ajwani referred to the order of the Supreme Court in the case of
Spencer & Co. Ltd. (vide para 13 supra). In that case, the Hon’ble Supreme Court
had observed as follows :−
"We are in agreement with the contention of the Counsel for the petitioner
that the expression ’undue hardship’ occurring in the proviso to Section 35−F of
the Central Excises Salt Act, 1944 would include consideration, inter alia, of
the aspect of liquidity possessed by the assessee".
This order did not specifically indicate the arguments advanced before the
Supreme Court. However, it could be safely presumed that before the Supreme
Court, the applicants must have urged the points regarding a prima facie case
and their readiness to execute a bank guarantee. Despite this the Supreme Court
in its order and referred only to the aspect of liquidity. This would show that
liquidity or financial position was the only relevant consideration. The
judgement of the Supreme Court was binding on the Tribunal.
34. It was pointed out by the Bench that the Supreme Court in its order had
used the words "include" and "inter alia". This would indicate that other
considerations were also relevant. Shri Ajwani submitted that since there was no
specific inclusion of "prima facie case", it could not be said to be relevant.

35. Shri Ajwani submitted that there was no other judgement of the Supreme
Court on the interpretation of Section 35−F. In fairness, he wished to state
that in the case of Tata Engineering & Locomotive Co. Ltd., (TELCO), where the
Tribunal had rejected a stay application (sic), on the basis of a satisfactory
liquidity position, the Supreme Court had subsequently given a direction to the
Tribunal’ to decide the appeal within a specified time limit, without prior
deposit of the duty demanded.
36. He submitted however that the Hon’ble Supreme Court in its order did not
mention a "prima facie case", or interpret the expression "undue hardship".

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 37. Referring to the wording of Section 35F Shri Ajwani pointed out that the
requirement was of deposit of duty or penalty. In other words, the burden on the
appellant was financial in nature. The expression "undue hardship" should be
read in its context, to mean that the grounds for waiver of the deposit should
also be financial in nature. Shri Ajwani then referred to the Tribunal’s order
in the case of R.K. Containers & Steel Fabricators, reported in 1986 (24) ELT
400. In that case a three−Member Special Branch had held that the expression
"undue hardship" has to be related to the pecuniary difficulties in making the
deposit, and that the existence of a prima facie case would not be a
consideration. In reaching this decision, the Bench had taken into account the
decision of the Hon’ble Supreme Court in the case of Dunlop India Ltd., and of
the Hon’ble Allahabad High Court in the case of U.P. Lamination (paras 22 and 23
supra).
38. Again, in the case of Messrs. Exquisite Impex Pvt. Ltd. (para 27 supra),
there was disagreement between two Members. The third Member, to whom the matter
was referred, had taken the view which the Department was urging now.
39. In the case of Gonterman Peipers (India) Limited 1986 (26) ELT 471
(Cal.), the Hon’ble Calcutta High Court had observed that the Tribunal was not a
court and therefore its earlier decisions could not be res judicata. However, an
earlier decision was an important factor to be seriously taken into
consideration. Only if fresh facts came to light would the Tribunal be justified
in corning to a conclusion different from the one previously reached.
Accordingly, the Tribunal should not now depart from the view which had been
followed by it in a number of previous cases.
40. The Bench pointed out to Shri Ajwani that he was proceeding on the basis
that the Tribunal had consistently taken the view that only the financial
position or liquidity was the determining factor. However, the Tribunal had
taken a different view in a number of cases, such as the case of Bata India. He
was asked why the decision of the three−Member Bench in the Bata India case
could not equally be considered as binding. Shri Ajwani replied that the other
decisions were subsequent to that in the case of Bata India.
41. Shri Ajwani referred to the order of the Calcutta High Court in the case
of American Refrigeration Co. Ltd. (vide para 19 supra), which had been cited by
Shri Agarwal. He submitted that the order clearly showed that this was a case of
evident financial hardship. It was in the light of this that the High Court set
aside the Tribunal’s order.
42. Shri Ajwani then referred to the judgement of the Allahabad High Court in
the case of Hari Fertilizers, reported in 1985 (22) ELT 301 (All.), which was
with reference to Section 35F. The entire judgement reads as under :−

"This writ petition has been filed against the order of the Collector,
Central Excise (Appeals). Four appeals are pending against the orders of the
Assistant Collector, Central Excise, Varanasi in which stay applications Were
filed. The Collector rejected all the stay applications except one which has
been allowed in part. Under the proviso to Section 35F, the appellate authority
may grant stay if the demand levied would cause undue hardship to the person
appealing. The Collector should pass a speaking order taking into account this
aspect of the matter. He may also consider whether any part of the demand is
prima facie barred by time before passing appropriate orders. With these
observations the writ petition is dismissed.
Shri Ajwani submitted that this was a very brief order. The High Court had
only said that a prima facie case may also be considered, but there was no
direction to the Collector to this effect.

43. Shri Ajwani then referred to the order of the Andhra Pradesh High Court
in the case of Srinivasa Cement Works (para 20 supra). He submitted that the
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 question there was of grant of a stay and not waiver of pre−deposit under
Section 35F. That decision would, therefore, not be relevant to the present
question.

44. Referring to the order of the Tribunal in the case of Bata India (para 31
supra), Shri Ajwani submitted that the order there was dated 22−2−1985. Since
there were later decisions of the Tribunal to the contrary, those decisions
should be taken to prevail over the earlier decision. Alternatively, a Larger
Bench should be asked to consider the question, as already submitted by him.

45. With reference to the case Bata India itself, Shri Ajwani submitted that
in that case a prima facie case had actually been made out, and this had also
been conceded by Shri Lakshmikumaran, appearing for the Department/Accordingly,
that case was. distinguishable from the present case.
46. Shri Ajwani also referred to the order of the Tribunal in the case of
Atic Industries Ltd., reported in 1983 ELT 620. The Bench had held that the
provisions of Section 35F did not apply to the circumstances of that case,
however, the question of grant of stay did arise and the Bench had granted the
stay. Shri Ajwani submitted that this decision was not relevant to the present
question since it did not relate to the waiver of pre−deposit under Section 33F.

47. Shri Ajwani was asked whether he accepted the distinction made by Member,
Shri Murthy in his order in the case of Exquisite Impex Pvt. Ltd. [para 27(i)
supra]. Shri Ajwani replied that he accepted the distinction.
48. Shri Ajwani then referred to the observations of the Supreme Court in the
case of Assistant Collector of Central Excise v. Dunlop India Ltd. (para 22
supra). He submitted that the observations of the Hon’ble Supreme Court had
reference to the pwoer of stay exercisable by Courts. They did not refer to the
question of waiver of pre−deposit under Section 35F. Accordingly, the
observations of the Supreme Court in that order were not at all applicable to
the present question. In support of his contention he pointed out that the
Supreme Court had referred to "interim orders". An order passed under the
proviso to Section 35F would not be an interim order but an order under a
specific statutory position. Shri Ajwani submitted that the judgement in the
Dunlop India case was a whole in favour of the Department’s stand, since its
thrust was to discourage the making of interim orders.

49. Shri Ajwani then referred to the judgement of the Allahabad High Court in
the case of U.P. Lamination (para 23 supra). In that case the Tribunal had
passed an order under 35F granting some relief. However, the appellant went back
to the Tribunal seeking further indulgence, which was refused. It was against
this background that the High Court passed its order staying the Tribunals’s
earlier order. The judgement contained an interpretation of the observations of
the Supreme Court in the Dunlop India case, relating to the making of interim
orders. There was no question of a prima facie case being taken into
consideration.
50. Dealing with the argument of Shri Agarwal that the right of appeal was a
statutory right, Shri Ajwani stated that he had no quarrel with this
proposition. However, that statutory right was circumscribed by the provisions
of Section 35F. He cited the decision of the Supreme Court in the case of Navin
Chandra Chhotelal, reported in AIR 1971 SC 2280. In that case the Supreme Court
had held that where the pre−deposit was not made the appeal could be dismissed.
51. As regards the interpretation of the expression "undue hardship", Shri
Agarwal had referred to various dictionaries, etc., with special reference to
the meaning of "hardship". Shri Ajwani submitted that he had no quarrel with the
proposition that the expression "undue hardship" should be understood in the
popular sense, however, what was to be understood was not just the one word
"hardship". The entire provision should be interpreted, wherein the "undue
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 hardship" was linked to the making of a deposit.
52. As regards the definitions of "hardship" relied upon by Shri Agarwal,
Shri Ajwani submitted that the context in which the interpretations had been
made was not clear. As regards "undue hardship", Shri Agarwal had quoted T.P.
Mukherjee’s Law Lexicon. It had been observed that ""undue" must mean something
which is not merited by the conduct of the claimant, or is very much
disproportionate to it." Those observations had reference to a different
provision of law and a different situation, namely a question of lamitation. In
the present case there had been orders by two lower authorities, and the conduct
of the claimant had been fully taken into consideration in arriving at a
decision.

53. Summing up his stand, Shri Ajwani submitted that "at worst", the prima
facie case should be considered only when financial hardship had been
established. When it was pointed out to Shri Ajwani that this amounted to
begging the question, he returned to his basic submission that only financial
hardship was relevant.

54. Shri Ajwani was asked whether he would maintain this proposition even in
a case where the applicant had an overwhelmingly strong case, which was obvious
at sight. An example would be where there was clearly an arithmetical error in
calculation, as a result of which the duty due on the basis of the Department’s
stand had been wrongly shown as 10 times the correct amount. Was it Shri
Ajwani’s contention that even in such a case waiver of pre−deposit should be
only on the basis of the appellant’s financial position?
55. Shri Ajwani replied that where the case was overwhelmingly strong and
obvious, and this was conceded by the Department, there would be justification
for applying the proviso to Section 35F without going by the financial position.
This would not, however, apply where the applicant had only an arguable case,
say 50 − 50, or 60 − 40.
56. Shri Ajwani wished to submit that in this case the appellants did not in
fact have a prima facie case. However, the Bench clarified that it would not go
into the question whether the appellants in fact had a prima facie case. That
would be left to the original Bench to decide, if the occasion arose.
57. In reply, Shri Agarwal stated that he had not advanced his arguments on
the basis of distinguishing one case from another. He relied on the authorities
cited by him.

58. On Shri Ajwani’s argument that orders passed by the same Bench should be
the same, Shri Agarwal referred to the judgement of the Supreme Court in the
case of Empire Industries Ltd., reported in 1985 (20) ELT 179. He read from para
53 of that judgement wherein the Supreme Court had observed as follows :−
"Every Bench hearing a matter on the facts and circumstances of each case
should have the right to grant interim orders on such terms as it considers fit
and proper and if it had granted interim order at one stage, it should have
right to vary or alter such interim orders." (Shri Ajwani intervened to say that
the Supreme Court was referring to interim orders and not orders under Section
35F).

59. As regards the definition of "undue hardship", Shri Agarwal stated that
no doubt this was with reference to the making of a deposit. He had however
tried to explain what was meant by "undue hardship", and he relied on the
authorities which he had cited.
60. I have carefully considered the orders recorded by the two learned
Members of the original Bench, the submissions made before me by the
representatives of the two parties, and the various authorities cited by the
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 learned Members and the representatives. In the first instance, I shall deal
with the preliminary submissions made by Shri Ajwani. One of these was that the
two learned Members should have included another point of difference. This
submission has been dealt with in paras 9 to 11 supra.
61. Shri Ajwani had also made other preliminary submissions, all to the
effect that the President on hearing the reference from the two learned Members
should not .independently decide the points of difference. He wished that, in
view of a number of earlier decisions of the Tribunal to the effect that
financial hardship was the only relevant consideration, I should consider myself
as sitting in a three−Member Bench, and follow the earlier decisions.
Alternatively, he wished that the matter should be referred to a Larger Bench.

62. As pointed out to Shri Ajwani during the hearing, the reference to the
President in this case is under a specific provision of law. This is the proviso
to Sub−section (5) of Section 129C, which has been reproduced at para 4 supra.
This proviso was inserted by the Customs (Amendment) Act, 1985. By the same Act,
the words "three Members" originally occurring in Sub−section (3) ibid had been
replaced by the words "two Members". In other words, instead of the previous
requirement that a Special Bench for dealing with Customs appeals should consist
of not less than three Members, the requirement was reduced to two Members. A
similar amendment to Section 35D of the Central Excises and Salt Act was made
through the Central Excises and Salt (Amendment) Act, 1985. Before these
amendments, the likelihood of an equal division of Members of a Special Bench
was very small, since a Special Bench would ordinarily consist of three Members.
If a Larger Bench was set up, it .would in practice always have an odd number of
Members. However, as a result of the amendments, Special Bench cases could be
heard by a Bench of two Members, leading to the possibility of an equal
division. In those circumstances Parliament had provided that the points of
difference "shall be decided by the President". This is a special provision to
deal with a special situation. Its effect is quite clear. The reference has to
be to the President and the points of difference have to be decided by him. In
view of this clear wording there would be no scope for the President to refer
the matter to a Larger Bench.
63. Again, it may be noted that the phraseology used in the proviso is
different from that in the main clause. The main clause states that the point or
points of difference shall be decided according to the opinion of the majority
of the Members including those who first heard it. In other words, the Members
who make the reference and the Member or Members who hear it form a single
Bench. However, the wording of the proviso is significantly different. It states
that the points of difference shall be decided by the President. It is clear
from this that the President has been entrusted with a specific responsibility
to reach a decision on the points of difference. No doubt, in doing so he would
have regard to all relevant aspects, including the precedents which may have
been cited. The wording would not, however, −in any way support the Argument of
Shri Ajwani that the President should act as if the matter had been heard in the
first instance by a three−Member Special Bench of which he happened to be one of
the Members. Whereas the proviso as framed by the Legislature emphasizes the
identity and responsibility of the President, Shri Ajwani has sought to argue
that this should be effaced or diluted. Since the wisdom of the Legislature has
to prevail over the wishes of the learned SDR, I would prefer to go by the plain
meaning of the proviso, namely that the President should decide according to law
the points referred to him.
64. In any event, as pointed out to Shri Ajwani, it is not as if only one
view had been taken by the Tribunal, the contrary view, where weight was given
to factors other than the financial position has also been taken. A specific
case where this was done was the Bata India case (para 31 supra), which also was
decision of a three−Member Special Bench. I can also take notice of the fact
that a similar view has been taken in other cases as well although reference to
these may not be readily available. In view of this position, the above
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 submission of the learned SDR has very little force, apart from the fact that it
proceeds from a wrong view of the proviso to Section 129C(5).
65. A number of judgements of the Supreme Court and of High Courts have been
relied upon by the applicants, in this as well as in some of the previous cases.
Shri Ajwani argued that some of those judgements were concenred with the
question of stay of the orders of the lower authorities, as distinct from
.waiver of the requirement of pre−deposit of duty or penalty under Section 35F,
Central Excises and Salt Act or the corresponding Section 129E, Customs Act.
Emphasis has been placed on this distinction by Member, Shri Murthy in his order
as well as in some of his previous orders. A specific enunciation of his view in
this regard is to be found in Member, Shri Murthy’s order in the case of
Exquisite Impex Pvt. Ltd. [vide para 27(i) supra].
66. Since the applicability or otherwise of a number of judicial decisions
depends on whether or not such a distinction is accepted, it would be useful to
consider this question in the first instance. There can be no quarrel with the
proposition that in law the waiver of pre−deposit and the grant of stay are two
distinct matters. The former is in terms of the specific provisions of Section
35F− or Section 129E, as the case may be. The latter is in the exercise of the
incidental and ancillary powers of the appellate authority [vide the decision of
the Supreme Court in the Income−tax case of ITO v. Mohammed Kunhi, reported in
AIR 1969 SC 430, which has been followed by the Andhra Pradesh High Court in the
Central Excise case of K.V.N. Prasad and Ors. v. the C.B.E.C., reported in 1978
ELT (J 697).
67. based on the difference in law, Member, Shri Murthy has taken the view
that the considerations applicable to the two questions are not identical.
According to his observation in the Exquisite Impex case, the appellate
authority can take into account the existence of a prima facie case while
considering grant of stay, whereas for waiver of pre−deposit only the financial
position is relevant. Member, Shri Jain, in para 9 of his order under reference,
has disagreed with this approach.
68. With great respect to my learned Brother Murthy, I am unable to agree
with him that in the matter of the criteria for granting relief there could be
any appreciable difference between a stay application and an application for
waiver of pre−deposit. When this point was put to Shri Agarwal, he had submitted
(vide para 28 supra) that in most cases there were parallel applications for
stay and waiver’ of pre−deposit, and the same criteria should apply to both. It
is a matter of common knowledge, of which judicial notice can be taken, that in
the majority of "stay applications" both types of relief are sought − that is,
stay of enforcement as well as waiver of pre−deposit. (This is so even in the
present case. In fact, as set out in paras 2 and 3 supra, the specific prayer of
the applicants was for staying the recovery, although it was also implied that
pre−deposit might be waived).
69. It is also a matter of common knowledge that wherever the Tribunal grants
relief on a "stay application", the relief relates both to waiver of pre−deposit
and to stay of operation, subject of course to whatever conditions might be
imposed.
70. Such being the case, the concept of having significantly different
criteria for grant of stay and waiver of pre−deposit would lead to highly
anomalous situations. It is conceivable (though it would be very unusual) that
in a particular case the pre−deposit is waived but stay of operation is not
ordered. This could happen in a case where the applicant has established that he
has no assets at all from which he can make the pre−deposit; equally then, he
need have no fear of the order being enforced against him. However, let us
consider the contrary case where stay of operation is granted (taking into
account the existence of a prima facie case, etc.), but waiver of pre−deposit is
not granted (going by financial hardship alone). Such a case could arise, if the
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 view taken by Member, Shri Murthy is logically applied. In effect, then, we
would be telling the applicant that the lower authority will not compel him to
meet the demand, till the appeal is decided: but the appeal will not be decided
so long as he does not deposit the amount demanded. The grant of stay in such
circumstances’, on the consideration of a prima facie case for grant of stay,
would for all practical purposes lose its meaning.

71. Thus, the adoption of a "softer" approach in regard to grant of stay than
in regard to waiver of pre−deposit would lead to an impasse, or what might be
called, a "Catch−22" situation. I do not think the line of reasoning that leads
to such a situation would be sustainable. Incidentally, in two of the earlier
orders recovered by Member, Shri Murthy and relied upon by him in his present
order, namely his orders in the case of Parasmal Solanki and Modi Gas and
Chemicals, the learned Member had adopted a somewhat similar approach (though
his final conclusion is the same, viz., that a prima facie case is not relevant
for the waiver of pre−deposit). Thus, in para 5(f) of his order in the case of
Parasmal Solanki 1985 (21) ELT 704, quoted in the case of Modi’ Gas and
Chemicals, he has recorded as follows :−

"the reasons for prescribing a deposit statutorily as a condition precedent

for the hearing of the Appeal − a deposit that could be dispensed with if it
would cause undue hardship − are, presumably, identical with those that prompted
the Hon’ble Supreme Court in 1985 (19) ELT 22 (SC) [Assistant Collector of
Central Excise v. Dunlop India Ltd.] to deprecate the indiscriminate grant of
stay, ostensibly in exercise of the jurisdiction under Article 226 of the
Constitution of India".
He had placed reliance on those observations to conclude that it is not
sufficient to show that a prima facie case exists.
72. For the reasons set out above, I am of the view that the criteria for
waiver of pre−deposit should be broadly the same as for grant of stay. In this
view, the various judgements relating to the criteria for grant of stay would
also be relevant for considering waiver of pre−deposit. I shall not take up
these judgements, starting with those which are specifically with reference to
waiver of pre−deposit.
73. The only judgement of the Supreme Court which specifically refers to
Section 35F or the parallel Section 129F appears to be that in the case of
Spencer 6c Co. Ltd. (vide paras 33−34 supra). As observed earlier, the words
"include" and "inter alia" clearly indicate that liquidity (or financial
hardship) would not be only_ consideration. Since, however, this is the only
criterion specifically mentioned by the Supreme Court, one would be justified in
concluding that it is a very important one.

74. In the TELCO case (vide para 35 supra) the Supreme Court had, according
to Shri Ajwani, directed the Tribunal (in effect) to decide the appeal without
prior deposit under Section 35F. From the Tribunal’s order (which is not
reported) it is seen that the duty demand was for about Rs. 80 lakhs. Messrs.
TELCO had not placed before the Tribunal their liquidity position, but had only
contended that they had stocks of unsold vehicles worth Rs. 80 crores. They had
also pleaded a prima facie case and offered 100% bank guarantee. In the absence
of the order of the Supreme Court, we cannot derive any guideline from this
particular judgement.
75. The judgement of the Calcutta High Court in the case of American
Refrigeration Co. Ltd., (vide para 19 supra) had dealt with a case relating to
waiver of pre−deposit. In this judgement, of an Hon’ble Single Judge, an
observation had been made that the Tribunal was bound to take into consideration
the prima facie case as also the interests of the revenue. There is however
force in Shri Ajwani’s submission that what had weighed with the High Court in
this case was the financial hardship to the applicants.
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 76. Shri Agarwal had cited the decision of the Andhra Pradesh High Court in
the case of Messrs. Srinivasa Cement Works (para 20 supra). Shri Ajwani had
submitted (vide para 43 supra) that the question there was of grant of a stay
and not waiver of pre−deposit. This by itself would not affect the relevance of
the judgement, for the reasons given above. However, the context there was that
the petitioners had filed a revision petition to the Central Government and also
applied for stay. The Central Government did not pass any orders on the stay
application. The Hon’ble High Court observed that the revisional authority ought
to have exercised its jurisdiction one way or the other. Instead of referring
the case back to the revisional authority, the High Court gave relief to the
extent it thought just and necessary. This decision would not be of much help in
considering the question before us.
77. Shri Ajwani had referred to the judgement of the Allahabad High Court in
the case of Hari Fertilizers (para 42 supra). In its brief order in this case,
the High Court had observed that the Collector "may also consider whether any
part of the demand is prima facie barred by time before passing appropriate
orders". Shri Ajwani had sought to argue from the use of the word "may" that
there was no direction to the Collector that the prima facie case should be
considered. This is a somewhat surprising argument. When a High Court in such a
context uses the word "may", it has to be presumed that it desired that aspect
to be considered. In fact, if it appeared that any part of the demand was time−
barred on the face of it, it is hardly to be thought that the High Court would
have still expected the Collector to ignore that fact.
78. We may now come to the judgement of the Hon’ble Supreme Court in the case
of Dunlop India Ltd. (para 22 supra). That case was no doubt with reference to
the question of grant of stay orders, and that also by the High Courts. I have
already taken the view that the considerations for grant of stay cannot be
substantially different from those for waiver of pre−deposit. Again, in the
Dunlop India case, the Supreme Court was dealing with the question of grant of
stay by the High Courts. However, since the stay order issued by the High Court
in that case was one where the application might also have been made to the
Tribunal or other appellate authority under the Central Excises and Salt Act,
the observations of the Hon’ble Supreme Court as to the criteria to be adopted
by the High Courts would also be relevant to the question of grant of stay or
waiver of pre−deposit by the appellate authority. The observations of the
Hon’ble Supreme Court, which would be relevant to the question before us, are
reproduced below :−
"7... All this is not to say that interim orders may never be made against
public authorities. There are, of course, cases which demand that interim orders
should be made in the interests of justice. Where gross violations of the law
and injustices are perpetrated or are about to be perpetrated, it is the bounden
duty of the court to intervene and give appropriate interim relief. In cases
where denial of interim relief may lead to public mischief, grave irreparable
private injury or shake a citizen’s faith in the impartiality of public
administration, a Court may .well be justified in granting interim relief
against public authority....There can be and there are no hard and fast rules.
But prudence, discretion and circumspection are called for. There are several
other vital considerations apart from the existence of a prima facie case. There
is the question of balance of convenience. There is the question of irreparable
injury. There is the question of the public interest. There are many such
factors worthy of consideration. We often wonder why in the case of indirect
taxation where the burden has already been passed on to the consumer, any
interim relief should at all be given to the manufacturer, dealer and the like".
"13... We consider that where matters of public revenue are concerned, it
is of utmost importance to realise that interim orders ought not to be granted
merely because a prima facie case has been shown. More is required. The balance
of convenience must be clearly in favour of the making of an interim order and
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 there should not be the slightest indication of a likelihood of prejudice to the
interest (sic)."
79. The above judgement of the Supreme Court has been referred to in the
judgement of the Allahabad High Court in the case of U.P. Lamination (para 23
supra), the Ailhabad High Court had observed that the only declaration of law
(arising from the Dunlop India case) was that in respect of interim orders in
taxation matters it is not only the prima facie case on which an interim order
should be granted but the Court must further consider if there was balance of
convenience in favour of the petitioner.
80. It would therefore appear that out of the various judgements cited, the
most important ones for deriving guidance on the present issues are those of the
Supreme Court in the cases of Spencer & Co. Ltd., and Dunlop India Ltd., and
that of the Allahabad High Court in the case of U.P. Lamination. From the
Spencer & Co. judgement the relevance of liquidity or financial position is
clear. The other two judgements refer to other factors, including the existence
of a prima facie case. It is to be noted, however, that neither judgement
proceeds on the basis that it is enough for the applicant to show that he has a
prima facie case in his favour.
81. Thus, in the Supreme Court’s judgement in the Dunlop India case, four
factors have been specifically mentioned. One is the prima facie case, it being
emphatically stated that this by itself is not enough. Others are the balance of
convenience, the possibility of irreparable injury, and safeguarding the public
interest. The Allahabad High Court has reduced the remaining criteria to one,
namely the balance of convenience. This expression, though in general use, has
not been defined in the Standard dictionaries of English or of legal terms. But
it can be broadly taken as denoting that arrangement which leads to "the
greatest good of the greatest number", or, in the present context, "the least
harm to the least number". With this broad meaning it would be found that the
expression "balance of convenience" would also cover the aspects of irreparable
injury and safeguarding of public interest. Thus, if by not granting relief
there would be irreparable injury to the applicant which cannot be undone even
if he ultimately wins the appeal, then the balance of convenience cannot be said
to be in favour of refusal. Similarly, if by granting the relief there is a
great likelihood of prejudice to the public interest, the balance of convenience
cannot be said to be in favour of grant of relief. However, the criterion of
safeguarding the public interest should not lead to rejecting an application
from a person who is demonstrably unable to pay, on the ground that waiver would
mean a risk to the revenue. If the financial position of the applicant is
precarious and it is not possible for him to make the pre−deposit, or if he can
do so only by suffering irreparable loss, it cannot be said that the balance of
convenience is against the grant of relief. Thus, the concept of balance of
convenience would cover most of the criteria relevant to the question.
82. A note of caution is necessary in interpreting the observations of the
Supreme Court or the High Courts made in a different context. In the Dunlop
India case the Supreme Court felt it necessary to give guidance to Courts in the
matter of making interim orders. In particular, the Supreme Court referred (vide
para 7 of the judgement) to various interim orders by Courts which had far−
reaching dimensions. It was in that context that the Supreme Court had stressed
the need for circumspection and examination of all relevant considerations.
Although, as I have observed earlier, the guidelines would be generally
applicable in the case of stay orders or orders for waiver of pre−deposit passed
by excise and customs authorities, this does not mean that in every case before
them the appellate authorities should embark on a very detailed and minute
examination of all the facts, circumstances and merits of the case. When this
was put to Shri Agarwal (vide paras 27 to 29 supra), his reply was that in the
interests of justice such a detailed examination should be made. In my view,
this does not flow from the judgements cited. If Shri Agarwal’s view were to be
accepted, then every hearing of an application for stay or waiver of pre−deposit
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 would become a kind of full−dress rehearsal of the main hearing itself and would
be practically indistinguishable from it. This could never be the intention of
the Legislature. In fact, if Section 35F is read closely, it would be seen that
the deposit is to be made by "the person desirous of appealing against such
decision or order". Literally construed, this would mean that even before filing
an appeal, a person who desires to do so should deposit the amounts demanded. In
practice, and taking into account the proviso, the question waiver of pre−
deposit is considered after the appeal has already been filed. Nevertheless, it
remains essentially a preliminary question and it would not be reasonable to
hold that this preliminary question should receive very extensive consideration
on a scale approaching that of the appeal itself.
83. In this context it would be useful to recall the observations made many
years ago by the Privy Council, in the case of Ford Motor Co. of India Ltd., v.
Secretary of State [ECR C 8 (PRIVY COUNCIL)]. In para 7 of their decision, their
Lordships made the following observation :−
"That the Legislature intended to exclude post−importation expenses need
not be doubted, but it had to do this in a practicable manner without undue
refinement, and it must be taken to have regarded the phrases which it employed
as sufficient for the purpose if taken in a reasonable sense."

This observation was made with reference to a different question. However, it

set out the very valid principle that when the Legislature made a provision it
had to be implemented "in a practicable manner without undue refinement". So
also, in considering "undue hardship", we should not be led into "undue
refinement", but should deal with each case in a practicable manner.

84. After very careful consideration it appears to me that a practicable

manner of applying the guidelines given by the Supreme Court and the High Courts
would be to consider that where financial hardship has been established, that
should suffice for (whole or partial) waiver of pre−deposit, subject to
.whatever conditions the appellate authority may deem fit to impose. Where
financial hardship is not established or not pleaded, it would still be open to
the applicant to justify waiver on other adequate grounds. These grounds would
be the existence of a prima facie case in his favour, plus balance of
convenience. This would normally happen where the applicant has shown that even
on the face of it he has a case which is not merely a prima facie case as
ordinarily understood, but something much stronger. One example, which was put
to Shri Ajwani (vide para 54 supra), would be where there has been an evident
error in calculation of the penalty amount. Another would be as in the case
which was before the Allahabad High Court in the case of Hari Fertilizers (para
42 supra), where the demand is obviously barred by limitation. (Where questions
arise as to whether there has been suppression, collusion, etc., and as to
whether the normal time limit or the extended time limit would apply, the time−
bar may not be accepted as "obvious"). Other cases would be where there is a
decision of the Courts, or of the Tribunal itself, clearly in favour of the
applicant. In all these cases it could be said that the balance of convenience
is clearly in granting waiver of pre−deposit. Where on the very face of it, it
is clear that an amount is not due from the applicant, the balance of
convenience would not appear to lie in requiring him to deposit that amount,
only so that it may be refunded to him a week or a month later. Therefore, where
the applicant’s case is so strong that it is apparent without laboured
exposition, it may well be a case where the balance of convenience, over and
above a mere prima facie case, calls for the waiver of pre−deposit,
notwithstanding that financial hardship is not established or has not been
pleaded.
85. When this point was put to Shri Ajwani (vide paras 54 and 55 supra), he
accepted it to the extent that where the applicant’s case was overwhelmingly
strong and obvious, and this was conceded by the Department, there would be
justification for applying the proviso to Section 35F without going by the
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 financial position. But on the question whether the applicant’s case is on the
face of it overwhelmingly strong and obvious, the Bench can certainly form its
opinion, after hearing the representative of the Department. The opinion of the
Bench in terms of the proviso to Section 35F should not have to depend on a
concession by the Department.
86. It would mw be apropriate to deal with a few other points which were
raised by one side or the other. One of these was the reference by Shri Ajwani
to the judgement of the Calcutta High Court in the case of Gonterman Peipers
(India) Limited (vide para 39 supra). Basing himself on this judgement, Shri
Ajwani sought to argue that’ an earlier decision should not be departed from
unless fresh facts came to light. Consequently, the President hearing a case
under the proviso to Section 129C (5) should not depart from the earlier
decisions of the Tribunal.
87. This argument in a slightly different form has already been dealt with in
paragraphs 61 to 64 above. It has been pointed out therein that there is a
conflict of decisions even within the Tribunal. It may be relevant to mention
here that in the Larger Bench decision in the case of Atma Steels 1984 (17) ELT
331, the Tribunal had held that where there were conflicting decisions of High
Courts it has the judicial freedom to adopt the one which it considers more
appropriate. In a case where the President is required to decide a particular
point, and where conficting decisions of the Tribunal itself are placed before
him, the same principle should apply.

88. Shri Agarwal had cited a number of judgements in connection with the
interpretation of the term "hardship". He contended that where a term is not
defined in the statute it must be construed in its popular sense, that is, that
sense which people conversant with the subject matter with which the statute is
dealing would attribute to it. He cited a number of cases where this principle
had been applied. These deal with the meanings to be attributed to such terms as
"vegetables", "coal" and "cotton fabrics". It need hardly be said that
interpretation of common nouns like the above is quite different from the
interpretation of abstract qualities like "hardship" "truth" or "democracy".
Widely varying meanings could be given to such abstract terms by equally
intelligent persons, with equal confidence and vehemence. However, even if the
principle of the above decisions is accepted, the question would be what class
of people would be conversant with the subject of "hardship". Possibly the class
of persons most conversant with this term would be the legal profession. We
would then have to refer to judicial interpretations.
89. As pointed out by Shri Ajwani, we are not concerned with the term
"hardship" in isolation. As regards the expression "undue hardship", I would
again agree with Shri Ajwani that the decisions cited by Shri Agarwal had
reference to other situations, such as the application of limitation, and do not
provide much guidance on the question before me. It is therefore better to go by
the interpretation which the provision in which this expression occurs has been
given by the Supreme Court and the High Courts. This is what has been attempted
above. The decisions of the Tribunal on this issue have not been discussed at
length, since the judicial decisions from which they would derive weight have
already been discussed.
90. A similar consideration applies to the point made in a number of the
Tribunal decisions that since the requirement of pre−deposit is financial in
nature, the considerations of waiving that requirement should also be
exclusively financial in nature. This proposition would have limited validity in
the light of the judicial decisions which have been considered above.
91. In the light of the above discussion, I would answer the point of
difference to the effect that the expression "undue hardship" in the proviso to
Section 35F, Central Excises and Salt Act, 1944, should not be taken as
referring only to financial hardship. It should be taken as covering other
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 factors also, such as the existence of a prima facie case in favour of the
appliant. This is subject to the considerations set out in paragraph 84 supra,
and the above answer should be read along with the contents of that paragraph.

92. The case should now go back to the original Bench for orders in the light
of the above decision.

[Order No. 62/87−A]. − In the light of Hon’ble President’s Order, request of

the applicant/appeallant for staying the recovery of duty made in the impugned
order has been considered. Taking into account all the relevant factors
including the prima facie, strength of the appellant’s case, liquidity position
of the applicant/appeallant, prior deposit of duty demanded in the impugned
order is waived subject to furnishing of Bank guarantee to the satisfaction of
the Asstt. Collector of Central Excise concerned for the full amount of duty
demanded. Recovery of duty by the local officers shall also stand stayed subject
to the above condition. Compliance of this direction should be reported within 8
weeks of this order.

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