By TIOL News Service

HYDERABAD, MAR 26, 2014: THE appeal is preferred against the judgment and order of the Customs, Excise and Service Tax Appellate Tribunal dated 08.01.2014 passed on an application made by the appellant for stay of operation of the impugned order of the Commissioner of Customs, Central Excise and Service Tax, Hyderabad-IV, allowing dispensation of pre-deposit. The Tribunal after assessing the prima facie case granted waiver of pre-deposit subject to condition that the appellant shall deposit Rs.30 crores as against the alleged demand of Rs.86 crores.

The Question of Law : Whether the learned Tribunal is correct in law in holding that financial difficulty is not a primary criteria for deciding the issue of undue hardship as mentioned 35F of the Central Excise Act, 1944, which has been adopted by the appropriate Finance Act.

The Counsel for the party submits that the aforesaid view of the Tribunal with regard to the financial hardship is patently wrong, as it is contrary to the judgment of the Supreme Court rendered in case of Benara Valves Limited vs. Commissioner of Central Excise - (2006-TIOL-156-SC-CX).

The High Court observed,

1. The Tribunal has gone wrong on the proposition of law holding that the financial difficulty is a subordinate criteria.

2. In our considered view financially undue hardship is also another criteria.

3. It seems that the Tribunal was under the view that prima facie case is only the criteria to adjudge the waiver of pre-deposit issue.

4. The relevant provision of law no way envisages making out prima facie case for waiver of pre-deposit.

5. However, the judicial pronouncement enables the Tribunal and Court of law to decide the prima facie case for granting stay and waiver of pre-deposit in a fit case.

6. The Supreme Court construed such undue hardship to be of financial hardship, but at the same time the interest of the Revenue has also to be safeguarded.

7. Therefore, a fair balancing exercise has to be worked out while passing the order of waiver of pre-deposit. This has been explained by the Supreme Court in clear terms in the case of Benara Valves Limited.

8. It is clear that prima facie case is not only criteria, but the financial hardship has also to be considered side by side.

9. Here the Tribunal has taken note of the case of financial hardship, but did not feel to decide or consider the same as the prima facie case was assessed.

The High Court was therefore of the view that the impugned judgment and order is completely contrary to the provisions of law as well as the principle laid down by the Supreme Court in the aforesaid case. The High Court therefore set aside the judgment and order of the Tribunal and directed the Tribunal to reconsider the issue of financial hardship taking note of the audited balance sheets of the appellant of the relevant time and also by following the aforesaid Supreme Court guidelines. In view of the urgency involved in this matter, High Court directed the Tribunal to decide the matter afresh in the aforesaid terms within a period of 15 days from the date of communication of this order.

The appeal is accordingly allowed.

(See 2014-TIOL-374-HC-AP-ST)