Waiver of Pre-Deposit – No Licence to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest
We have often come across the Departmental adjudicators confirming astronomical demands and when you approach the Tribunals, they routinely ask for pre-deposit of anything ranging from 40% to 80% of the duty/tax demanded, which the poor assessee will not be able to pay. If you approach the High Court, the usual stand is that the High Court should not interfere in these interim orders. You know you are sure to win the case, but you do not have money to make the pre-deposit; what do you do? Are you doomed?
The Commissioner who imposed a penalty of Rs.50 Crores on a BHEL employee knew pretty well that he could not pay. Incidentally the Commissioner ruled that he could have imposed a penalty of Rs. 68 Crores, but being kind hearted, he imposed only Rs. 50 Crores. The Tribunal held that no penalty was imposable. Now what would have been the fate of this poor PSU employee if Tribunal was not kind enough to grant him waiver of pre – deposit? And the High Court would not interfere!
In a case I argued in a High Court, I submitted that the assessee's factory was closed and the company dissolved and there was no way it could deposit a huge sum. The Court asked me, “what will happen if I lose the case?” I replied that the Department can take any action it deemed fit, but there was no money with the assessee.
The High Court ordered, “the petitioner – Industry is not working at present “as the same is closed since June, 2003”. This one fact undoubtedly may disclose the severe financial constraints and the financial hardship being faced by the petitioner on account of which it could not make necessary pre-deposit in terms of the Stay Order dated 19-04-2005 passed by the Tribunal. Normally, this Court in exercise of the jurisdiction under Article 226 of the Constitution of India does not interfere with such interlocutory order which creates any irreversible situation but having regard to the facts and circumstances and more particularly, the fact that the industry is closed ever since June, 2003 due to which the petitioner is not in a position even to make the pre-deposit, we consider it appropriate to modify the impugned order passed by the Tribunal and accordingly direct the Tribunal to hear the appeal preferred by the petitioner on merits” - 2005-TIOL-181-HC- HYD - CX.
Maybe there should be some change in Law that there would be no requirement of pre-deposit till the stage of Tribunal- in any case when the assessee is required to pay duty, he is required to pay interest.
Yesterday, the Supreme Court passed an important order on ‘waiver of pre-deposit', which we will bring you tomorrow.
Supreme Court, in Assistant Collector of Central Excise v. Dunlop India Ltd. is a good read for all students of the subject.