Sachin Laxmichand Shah vs Union Of India And Anr
2017 Latest Caselaw 3304 Bom

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            IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                          CIVIL APPELLATE JURISDICTION

                            Writ Petition No. 4315 OF 2016

Haresh Nagindas Vora                                                               ...Petitioner
      Versus
1.Union Of India 
2.Principal Commissioner of Customs (General)                                      ...Respondents

                                         AND
                           Writ Petition NO. 4320 OF 2016

Sachin Laxmichand Shah                                                             ...Petitioner
      Versus
1.Union Of India 
2.2.Principal Commissioner of Customs (General)                                    ...Respondents

                                 ---
Mr.Suresh Balasubramanian, for the Petitioner in both the Petitions.

Mr.Pradeep S.Jetly, for the Respondents in both the petitions.
                                   ---
                               CORAM :  S.V. GANGAPURWALA & 
                                          G.S. KULKARNI, JJ.

                                     RESERVED ON:  5th  JUNE, 2017

                          PRONOUNCED ON   : 19th JUNE,2017
                                    ----

JUDGMENT: (PER G.S.KULKARNI,J.)



1.               Rule   returnable   forthwith.     Respondents   waive   service. 

By  consent   of   the   parties  and  at   their   request,  taken   up  for   final 




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hearing. As common question of law and facts arise, we dispose of 

both these petitions by this common judgment.



2.               The   principal   prayer   in   the   present   petitions   is   a 

challenge   to   the   constitutional   validity   of   Section   129E   of   the 

Customs Act,1962 (for short 'the Act'), as amended by the Finance 

Act   No.2   of   2014   and   brought   into   effect   from   6   August   2014, 

prescribing a mandatory pre-deposit for filing an appeal before the 

Tribunal   or   the   Commissioner   (Appeals).     The   petitioners   also 

challenge   the   common   Order-in-Original   dated   22   January   2016 

passed   on   the   show   cause   notice   dated   24   August   2015,   on   the 

ground that the order is illegal being passed without considering the 

submissions of the petitioners.



                 Briefly the facts are:

3.               The petitioners in each of the petitions are partners of 

one M/s.Bright International which is stated to be engaged in the 

business  of  export  and import of goods.   The genesis is, a search 

conducted   at   the   premises   of   M/s.Bright   International   by   the 

Directorate of Revenue Intelligence (DRI) wherein large number of 




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dubious   invoices   were   recovered.     The   scrutiny   of   those   invoices 

revealed that there were parallel invoices for various exports made 

by the partnership.   Further scrutiny revealed that in 29 cases, one 

invoice   indicated   actual   contract   value   and   the   other   invoice 

indicated   higher   value   which   is   used   for   availing   undue   duty 

drawbacks.    It  was also revealed that  in the  case  of export  of 71 

shipping bills, some of the items exported were of the same value as 

mentioned in the actual value invoices recovered during search.  The 

statements   of   both   the   partners   of   the   firm   were   recorded   under 

Section 108 of the Customs Act who admitted recovery of parallel 

invoices   for   the   same   goods   exported   by   them.  The   partners   also 

conceded  that   the   invoices of higher value were submitted to the 

Customs at the time of export to avail higher duty drawback and the 

actual invoice is the one with the lesser value.    Accordingly, a show 

cause   notice   dated   24   August   2015   was   issued   to   the   petitioner 

which was adjudicated by the impugned Orders-in-Original dated 22 

January 2016/ 1 February 2016.  The adjudicating officer concluded 

that   the   value   of   the   goods   exported   through   ICD   Mulund   was 

intentionally   mis-declared   in   the   documents   submitted   to   the 

Customs  to avail ineligible duty drawback thereby violating Section 




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50(2) of the Customs Act.  It was held that the goods exported in 63 

consignments   as   listed   in   Annexure   A   and   B   to   the   order   with 

declared   value   of   Rs.11,51,26,266/-   and   redetermined   value   of 

Rs.7,23,20,450/- were liable for confiscation under Section 113(i) of 

the Customs Act and that the firm was liable for penal action under 

Section 114(iii) and the partners-petitioners herein were liable for 

penal action under Section 114(iii), as also a penalty under Section 

114AA   of   the   Customs   Act.     Accordingly   the   adjudicating   officer 

passed the following order:-

                                                   ORDER

i. I order that the declared value of Rs.11,51,26,266/- in respect of the goods exported under the 63 Shipping Bills be re- determined at Rs.7,23,20,450/- (Rupees Seven Crores Twenty Three Lakhs Twenty Thousand Four Hundred and Fifty only) in terms of Rule 3 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 read with Section 14 of the Customs Act,1962 and the eligible drawback determined accordingly.

ii. Excess duty Drawback amount of Rs.63,53,024/- (Rupees Sixty Three Lakhs Fifty Three Thousand Twenty Four Only) availed by M/s.Bright International is to be recovered under Rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules,1995 along with interest under Section 75A of the Customs Act,1962.

iii. I order confiscation of the goods of a total declared value of Rs.11,51,26,266/- exported by M/s.Bright International, vide 63 Shipping Bills under the provisions of Section 113(i) of the Customs Act,1962. However, the same are not available for confiscation as already exported.

iv. I impose a penalty of Rs.1,00,00,000/- (Rupee One Crore only) on M/s.Bright International under Section 114(iii) of the Customs Act,1962.

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                 v.      I   impose   a   penalty   of   Rs.20,00,000/-   (Rupee   Twenty  

Lakhs only) on Shri.Harish Nagindas Vora under Section 114(iii) of the Customs Act,1962.

vi. I impose a penalty of Rs.2,00,000/- (Rupee Two lakhs only) on Shri.Harish Nagindas Vora under Section 114AA of the Customs Act,1962.

vii. I impose a penalty of Rs.20,00,000/- (Rupee Twenty Lakhs only) on Shri.Sachin Shah under Section 114(iii) of the Customs Act,1962.

viii. I impose a penalty of Rs.2,00,000/- (Rupee Two Lakhs only) on Shri.Sachin Shah under Section 114AA of the Customs Act,1962.

4. Against the above Order-in-Original, an appeal is

maintainable under Section 128 of the Customs Act before the

Commissioner of Customs (Appeal). During the course of the

arguments, the learned Counsel for the petitioners appreciating the

settled legal position that this Court in exercise of writ jurisdiction

under Article 226 of the Constitution would not wield the powers of

an Appellate Authority, confined his arguments on the issue of

constitutional validity of Section 129E of the Customs Act, we

accordingly keep the challenge to the Order-in-Original open to be

agitated by the Petitioner before the appellate authority.

5. In assailing the legality of Section 129E of the Act, the

contention interalia urged on behalf of the Petitioners is that the

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provision is discriminatory and violative of Articles 14, 19 and 21 of

the Constitution. It would be appropriate to extract the contention

of the petitioner in the terms as set out in the ground 'A' on page 17

of the petition which reads thus:-

"... .... ....

That the impugned newly substituted Section 129E mandates pre-deposit of certain percentage of only the duty, in case where duty or duty and penalty are in dispute, and certain percentage of penalty where only penalty is in dispute before filing an appeal. It is submitted that therefore the said substitution is discriminatory between two identically placed classes, mandating one class to pre-deposit only certain percentage of duty where both duty and penalty are in dispute and mandating another class to pre-deposit certain percentage of penalty where only penalty is in dispute. The said amendment therefore, takes care of interest of revenue where by mandating to pre-deposit certain percentage of duty only where both duty and penalty are in dispute but imposes onerous and unreasonable condition where only penalty is in dispute ignoring the fact that the penalty is not considered as revenue and is therefore not a tax which needs to be safeguarded. It is further submitted that putting a class into advantageous position by mandating to pre- deposit only certain percentage of duty where both duty and penalty are in dispute and putting another class into disadvantageous position mandating to pre-deposit certain percentage of penalty where only penalty is in dispute is ultra vires of Articles 14, 19 and 21 of the Constitution of India and/or null and void."

6. The next contention as urged on behalf of the Petitioners

is that Section 129E as amended has taken away the powers earlier

conferred on the appellate authority to waive the pre-deposit, upon

forming an opinion that a pre-deposit would cause undue hardship.

Further the Petitioners relying on the decision of the Supreme Court

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in the case "Mardia Chemicals Ltd. Vs. Union of India"1 contend

that in the said case the provision mandating 75% of deposit under

the Securitization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act (SARFAESI) was held to be

constitutionally invalid.

7. The revenue has contested the petitions and a reply

affidavit of Mr.B.Bhattacharya, Principal Commissioner of Customs,

dated 16 September 2016 has been filed. On behalf of the revenue it

is contended that the challenge as raised is no more res integra in

view of the decision of the Division Bench in the "Nimbus

Communications Ltd. Vs. Commissioner of S.T., Mumbai"2 as also

following the said decision, the Division Bench also dismissed Writ

Petition No.747 of 2017 in the very same case. It is contended that

also other Writ Petitions in the case "Ajit Bapu Satam Vs. Union of

India & Anr."3 and "Deepak Sharad Jare Vs. Union of India & Anr."4

were dismissed by the Division Bench by order dated 3 October

2016.

1 ((2004) 4 SCC 311)

2 2016(44) S.T.R. 578 (Bom.) 3 Writ Petition No.7948 of 2015 Order dt.3.10.2016 4 Writ Petition No.9148 of 2015 Order dt.3.10.2016

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8. Learned Counsel for the revenue contends that the

substituted section has been introduced as a measure to facilitate

trade, business and industry by speedy resolution of disputes before

various appellate forums. It is submitted that the appellate

authority's working hours were being consumed in disposing of

applications for waiver on pre-deposit, these working hours can now

be used for disposing of the main appeals preferred by the parties. It

is submitted that even pre-deposit of disputed amount of duty or

penalty for the longer period by the appellants is no more required

after imposition of substituted Section 129E of the Act. The assessees

are no more required to deposit the entire disputed amount to

prevent the recovery officer, for not resorting to any coercive

measure for recovery of dues. It is submitted that waiver of pre-

deposit under the pre-amended Section of 129E of the Act was not as

a matter of right of the Appellants and the Appellate authority after

due consideration of the facts and circumstances of the case could

grant a waiver in appropriate cases. It is submitted that under the

present disposition after the amendment, the assessee gets immunity

from any coercive action for recovery of dues in case the appeal is

pending before any appellate authority under Section 129 of the Act.

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The respondents accordingly submit that the writ petitions be

dismissed.

9. As noted above Section 129E, as it stands, has been

substituted by the Act 21 of 2014 as brought into effect from 1

October 2014. To consider the challenge to the validity of Section

129E of the Act, it would be appropriate to extract the Section 129E

of the Act as amended, which reads thus:-

129-E. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal - The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal -

(i) under sub-section (1) of section 128, unless the appellant has deposited seven and a half per cent of the duty demanded or penalty imposed or both, in pursuance of a decision or an order passed by an officer of customs lower in rank than the Commissioner of Customs;

(ii) against the decision or order referred to in clause (a) of sub- section (!) of section 129-A, unless the appellant has deposited seven and a half per cent of the duty demanded or penalty imposed or both, in pursuance of the decision or order appealed against;

(iii) against the decision or order referred to in clause (b) of sub- section (1) of section 129-A, unless the appellant has deposited 10 per cent of the duty demanded or penalty imposed or both, in pursuance of the decision or order appealed against;

Provided that the amount required to be deposited under this section shall not exceed rupees ten crores:

Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act,2014."

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It would also be appropriate to note the said provision as it stood

prior to its amendment by the Act 25 of 2014, which reads as

follows:-

"Section 129E prior to the amendment 129-E. Deposit, pending appeal, of (duty and interest) demanded or penalty levied. - Where in any appeal under this Chapter, the decision or order appealed against relates to any (duty and interest) demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the (duty and interest) demanded or the penalty levied:

Provided that where in any particular case, the (Commissioner (Appeals)), or the Appellate Tribunal is of opinion that the deposit of (duty and interest) demanded or penalty levied would cause undue hardship to such person, the [Commissioner (Appeals)] or, as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue;

Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty and interest demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so decide such application within thirty days from the date of its filing."

10. As seen from a plain reading of the provision, Section

129E provides for deposit of certain percentage of duty demanded or

penalty imposed or both, as a condition precedent for the appellate

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authority to entertain an appeal. Sub-clause (i) and (ii) of Section

129E mandates deposit of 7.5% of the duty demanded or penalty

imposed or both, in case of an appeal before the Commissioner

(Appeals) (Section 128A) and before the Tribunal (Section 129A)

respectively. Clause (iii) of Section 129E provides for deposit of 10%

of the duty demanded or penalty imposed or both in pursuance of

the order appealed against. The first proviso provides that the

amount which is required to be deposited under this section shall not

exceed Rs.10 crores.

11. The intention of the Parliament in amending Section

129E by the amending Act in question needs to be noted. Prior to the

amendment, in view of the powers and discretion conferred with the

appellate authority to waive/dispense with the pre-deposit,

substantial time was expended on the adjudication of such

applications and in deciding issues, as to whether, the contention of

the applicant in the stay application, of an undue hardship is being

caused, could be accepted to grant an appropriate waiver.

Resultantly, orders on the stay application generated further

litigation before the higher forums taking a toll on the valuable time

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of the tribunal delaying the adjudication of the appeals. This

undoubtedly caused a serious prejudice to the parties before the

Tribunal. Thus the aim of the amended provision is also to curtail

litigation which had assumed high proportions, leaving no time to

the appellate authorities to devote the same to important issues.

Considering these hard realties and to have a expeditious disposal of

the statutory appeals which undoubtedly is a necessary requirement

of effective trade, commerce and business, the Parliament in its

wisdom amended the provisions of Section 129E of providing

deposit of 7.5% and 10% respectively as sub-clauses (i), (ii) and (iii)

respectively provide. If such is the aim and insight behind the

provision, it certainly cannot be held to be unreasonable, onerous,

unfair or discriminatory for two fold reasons. Firstly, the object of a

public policy sought to be achieved by the amendment, namely

speedy disposal of the appeals before the appellate authorities is a

laudable object and cannot be overlooked, so as to label the

provision as unreasonable and onerous and violative of Article 14 of

the Constitution. Secondly that the amount which is required to be

deposited is not unreasonable from what the earlier (pre amended)

regime provided.

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12. The contention of the petitioner that the provision is

rendered discriminatory as it creates two different classes when it

mandates pre-deposit of duty demanded or penalty imposed or both,

and more particularly when penalty cannot be considered to be a

revenue as it is not a tax requiring it to be safeguarded, also cannot

be accepted. It may be pointed out that even the pre-amended

provision stipulated for a deposit in case of appeals from orders

levying penalty. This submission of the petitioners also cannot be

accepted considering the decision of the Supreme Court in "Vijay

Prakash D.Mehta and Jawahar D.Mehta Vs. Collector of Customs

(Preventive), Bombay"5, which lays down that right to appeal is a

statutory right and not an absolute right, which can be circumscribed

by the conditions in the grant. In "Nand Lal Vs. State of Haryana" 6

the Supreme Court referring to the earlier decision in Anant Mills

Co. Ltd vs State Of Gujarat & Ors.7 held as under:-

"It is well settled by several decisions of this Court that the right of appeal is a creature of a statute and there is no reason why the legislature while granting the right cannot impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory (vide the latest decision in Anant Mills Ltd. v.

5 AIR 1988 SC 2010 6 AIR 1980 SC 2097 7 AIR 1975 SC 1234

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State of Gujarat, AIR 1975 SC 1234)"

Thus by virtue of Section 129E the right to appeal as conferred

under the said provision is a conditional right, the legislature in its

wisdom has imposed a condition of deposit of a percentage of duty

demanded or penalty levied or both. The fiscal legislation as in

question can very well stipulate as a requirement of law of a

mandatory pre-deposit as a condition precedent for an appeal to be

entertained by the appellate authority. In view of the above settled

position in law, Section 129E of the Act cannot be held to be

unconstitutional on the ground as assailed by the petitioner.

13. Learned Counsel for the revenue is quite right in relying

on the decision in the case Nimbus Communications Ltd.(supra),

though it arises in the context of Section 35F of the Central Excise

Act which is a provision pari materia to Section 129E of the Act. We

may observe that the decision was rendered in deciding a central

excise appeal, in which the question of law interalia as considered by

the Court was that the right of appeal being a vested right, whether

the provisions of law as applicable at the commencement of the lis

would apply or the amended provisions as on the date of filing of

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appeal would apply. Though the Court was not dealing with the

validity of the provision, the Court considering the provisions of law

and considering the decision of the Madras High Court in

"M/s.Dream Castle Vs. Union of India & Ors."8 and the Allahabad

High Court in the case "Ganesh Yadav Vs. Union of India"9 held that

Section 35F of the Central Excise Act did not defeat or render the

vested right of appeal illusory and that the condition of pre-deposit is

a reasonable condition and such condition did not defeat the vested

right of appeal. The Court accordingly confirmed the order of the

Tribunal directing the appellants therein to deposit the sum

mandated by Section 35F(1) of the Central Excise Act

14. As regards the contention of the petitioners relying on

the decision of the Supreme Court in Mardia Chemicals Ltd. Vs.

Union of India (supra) that the condition of deposit of 75% was

held to be invalid and therefore, Section 129E of the Act also is

required to be held to be invalid, cannot be accepted. The

submission in the present context is too far fetched. Under Section

129E of the Act, the requirement of deposit is 7.5% and 10%

8 2016(43) STR 25 (Mad) 9 2015(320) ELT 711 (All)

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respectively as provided in sub-clauses (i), (ii) and (iii) of the said

provision. As noted by us earlier such reasonable percentage of

deposit cannot be labeled as unreasonable deposit. It is surely not a

deposit of 75% as considered by the Supreme Court in Mardia

Chemicals Ltd. Vs. Union of India (supra) so as to render the right of

appeal illusory. In our opinion, the petitioners' reliance on the

decision in Mardia Chemicals Ltd. is completely misplaced.

15. In the light of the above discussion, we conclude that the

Writ Petitions lack merit. The Writ Petitions are accordingly

dismissed. No order as to costs.

           (G.S.KULKARNI, J.)                     (S.V. GANGAPURWALA, J.)