1. This is an Application for Stay of the operation of the Order-in-Original No. 10/Collr/1984, dated 23-5-1984 and dispensing with the pre-deposit and penalty imposed under the said Order upon the Applicant in terras of S. 35F of the Central Excises and Salt Act, 1944 (hereinafter, the Act).
2. The question that arose for consideration by the Collector in the aforesaid Order was as to whether the value of the packing supplied by the buyer of the product manufactured by the Applicant (in this case, cylinders for nitrogen and hydrogen gas) is to be included in the computation of the assessable value in terms of S. 4 of the Act in its amended form. The Collector had apparently held that it has to be included and for the periods between January 1981 and 23-4-1982 in respect of nitrogen gas and January 1981 and 17-3-1982 in respect of hydrogen gas, assessed the differential duty in a sum of Rs. 4,89,000 and imposed a penalty of Rs. 10,000.
3. It was submitted before us by Shri Ravinder Narain, Advocate appearing for the Applicant, inter alia, that- (a) the order passed by the Collector was patently erroneous as it is contrary to the decision of the Bombay High Court in 1984 Maharashtra Law Journal 114 (Govind Poy Oxygen Ltd. v. H.K. Maingi, Assistant Collector of Central Excise) and the decision of the Government of India in 1982 E.L.T. 472 (In re : Gujarat State Fertilizer Co. Ltd., Baroda); (b) the notice to show cause, prior to adjudication, issued on 27-12-1982 in respect of the demand aforesaid is demonstrably barred by time; (c) accordingly, for both the aforesaid reasons, the Applicant has got, prima facie, a very good case in appeal; (d) the Applicant had, between 1-4-1984 and 30-9-1984, made only a marginal profit of Rs. 7.12 lakhs and as such the total amount demanded approximating to Rs. 5 lakhs if required to be deposited will cause undue hardship; (e) the Applicant is compelled, in the course of his business, to offer credit facility to its buyers and such facility would also serve to highlight that the liquidity position of the Applicant is fairly tight. In fact, the Applicant's unit has cash and bank balance of only Rs. 2.68 lakhs as on 30-9-1984.
For all the aforesaid reasons, it was submitted that a deposit of the amount of duty and the penalty, in terms of S. 35F of the Act, would cause undue hardship to the Applicant and since the Superintendent, Central Excise, Modinagar had issued an order for recovery of the aforesaid aggregate amount: of about Rs. 5 lakhs and is threatening the sale of the cylinders attached by him, the stay of the operation of the order is also required to be issued in the interests of justice.
4. Indisputably, the Applicant has no independent existence. It is only a unit owned by M/s. Modi Industries and has no independent existence.
It is not separately registered as a company or firm. The Applicant is not a juridical person, capable of suing and being sued in its own name, being only a unit of M/s. Modi Industries Ltd., Modinagar, in the district of Ghaziabad, U.P. Without going, at this stage, into the question if the Appeal, itself, is maintainable by the Applicant as described in the cause Title, even though, as it may well be, the Applicant had been licensed on its own for purposes of excise, the question of undue hardship has, necessarily, to be examined qua M/s.
Modi Industries, admittedly the owner of the Applicant, rather than on its own, as a unit of M/s. Modi Industries. It is not as if the liquidity position of a unit and not the owner of the unit that has to be looked into to ascertain if the deposit, if insisted upon, will cause undue hardship. At our instance, therefore, the latest balance sheet of M/s. Modi Industries Ltd. had been produced and, admittedly, it is not as if their liquidity position is such that it will even remotely cause undue hardship to them, if the amount required to be deposited is, indeed, duly deposited. Quite to the contrary.
5. This is not the first of such cases where it is being contended that just because the Applicant has got a good prima facie case in appeal, it would cause undue hardship if the amount of duty or penalty is required to be deposited in terms of S. 35F of the Act, notwithstanding that, financially speaking, there may be no undue hardship in the deposit thereof. On the issue as to whether the existence of the prima facie case in Appeal is sufficient to constitute undue hardship in making the deposit, we had occasion to observe, construing the parallel provision in S. 129E of the Customs Act, 1962, in our Order No.284/1985 (Sri Parasmal Solanki v. Collector of Customs, Bombay) as follows :- "(b) nor does the provision on its terms, speak of a stay of recovery of the duty or penalty that is required to be deposited. An order under the proviso to S. 129E dispensing with the deposit does not operate as a stay of recovery of duty or penalty, proprio vigore. A stay of such recovery can be granted, additionally, if prayed for, in the exercise of the incidental or ancillary powers that inhere in the Appellate forum [AIR 1969 S.C. 430-I.T.O. v. M.K. Mohammad Kunhi; and the Tribunal decisions in 1983 (2) ETR 357 (Atma Steels Pvt. Ltd. v. Collector of Central Excise) and 1984 (16) E.L.T. 445 (C.C.E., Bombay v. Crescent Dyes & Chemicals Ltd.) while examining the scope of S. 35F of the Central Excises and Salt Act, 1944, in para materia, with S. 129E of the Act]; (c) S. 129E of the Act prescribes a deposit as a condition precedent for the hearing of the Appeal. It is, hence, relatable to the maintainability of the Appeal itself rather than to any order, interlocutory in nature, in Appeal, once it is held to be maintainable, like for e.g., a stay of recovery of the tax or duty in question by virtue of the inherent powers of the Tribunal. An Appeal can even be rejected for failure to make the deposit, where it is not dispensed with [AIR 1971 S.C. 2280-Navin Chandra Choteylal v. The Central Board of Excise & Customs-construing the parallel provision in S. 129 of the Act as it previously read]; (d) in the premises, such aspects of the case as may be relevant for the grant of stay of recovery by means of an interlocutory order in the Appeal, are not germane for a consideration of the question of maintainability of the Appeal itself; (e) in terms of the proviso to S. 120E, a deposit of the duty or penalty in question in the Appeal can be dispensed with only and only if the deposit thereof would cause "undue hardship"; (f) 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) E.L.T. 22 (S.C.) [Assistant Collector of Central Excise v. Dunlop India Ltd. ] to deprecate the indiscriminate grant of stay, ostensibly, in exercise of the jurisdiction under Art. 226 of the Constitution of India. Said their Lordships, "We have come across cases where the Collection of public revenue has been seriously jeopardised and budgets of Governments and Local Authorities affirmatively prejudiced to the points of precariousness consequent upon interim orders made by Courts ... All this is not to say that interim orders may never be made against public authorities ... 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. "But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice inconvenience or harm and that a prima facie case has been shown. " [Para 5 of Judgment in the aforesaid case]. And again, "Even assuming that the company had established a prima facie case, about which we do not express any opinion we do not think that it was sufficient justification, for granting the interim orders as was done by the High Court. " There was no question of any balance of convenience being in favour of the respondent-company. The balance of convenience was certainly in favour of the Government of India.
Governments are not run on mere Bank Guarantees. We notice that very often some Courts act as if furnishing a Bank Guarantee would meet the ends of justice. No governmental business or for that matter no business of any kind can be run on mere Bank Guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. 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 there should not be the slightest indication of a likelihood of prejudice to the public interest. [Para 8 of the report of the Judgment].
(g) if this were so in the case of a Writ Petition under Art. 226 of the Constitution of India, the question of the existence of a prima fade. case loses all relevance in the context of S. 129E of the Act.
If an Appeal cannot be heard and it may even be rejected, unless the deposit is either made or dispensed with, an enquiry into the existence of a prima fade case in a consideration of "undue hardship" in making the deposit is not called for. It is as much as to come to a conclusion on the merits of the Appeal howsoever tentative or perfunctory a prima facie view can be; (h) in construing the expression "undue hardship", one is not to lose sight altogether of the context or the setting in which it occurs. The provision speaks of a pre-deposit as a condition precedent for the maintainability of the Appeal, except where the deposit would, if insisted upon, cause "undue hardship". The undue hardship is inextricably linked to the deposit. It cannot be any hardship, in the premises, nor relatable to the deposit or the pecuniary difficulties of the Appellant in making the deposit. The injunction to impose such conditions as would safeguard the interests of the Revenue in a case of proven undue hardship also makes it clear that "undue hardship" is nothing but grave financial difficulties in complying with the mandatory requirement of a deposit as a condition precedent for hearing the Appeal. Any other construction to the expression would, necessarily fly in the face of not merely the statutory provision itself but the weighty observations of the Hon'ble Supreme Court in the aforesaid case. If the existence of a good prima facie case, or the balance of convenience are factors that are to be considered in the determination of "undue hardship" in making the deposit, there is nothing to have prevented the legislature from giving expression to it suitably. Nothing could be easier than that. One cannot, however, read those factors into the expression "undue hardship", in the context in which it occurs, in the absence of a clear legislative intent to include them within the ambit of the said expression.
Accordingly, it was held by the Hon'ble Supreme Court in dismissing a Petition for Special Leave by the assessee (No. 7762 of 1984- Spencer & Co. Ltd., Madras v. Collector of C.E.) that "undue hardship" (occurring in S. 35F of the Central Excises and Salt Act, 1944 in pari materia with S. 129E of the Act) "would include a consideration, inter alia, of the aspect of liquidity possessed by the assessee." 7. We see no reason to differ from our views extracted supra and the Application is, accordingly, dismissed.