India Vision Satellite Communications vs Union of India

K.M. Joseph, J.—Petitioner has approached this Court under Article 226 of the Constitution of India, seeking to challenge Ext. P6 order of the third respondent and to quash the same to the extent it directs the petitioner to effect pre-deposit of fifty per cent of the tax confirmed, within fifteen days of receipt of the order. Petitioner also seeks a direction to the respondents to refrain from taking any coercive steps for recovery of the tax amount confirmed against the petitioner by Ext. P3 order. Briefly put, the case of the petitioner is as follows : Petitioner is a Malayalam Television News Channel engaged in Television Broadcasting services and hold Service Tax Registration under the Finance Act, 1994. According to petitioner, it is entitled to avail tax credit of nearly Rs. 85 Lakhs. However, petitioner came to be imposed with liability to pay out-put tax in a sum of nearly Rs. 40 Lakhs, overruling the claim of the petitioner for adjustment of the liability against the credit the petitioner has by way of the payment of tax. The claim of the petitioner came to be brushed aside. Petitioner immediately filed appeal. In the appeal, petitioner sought for dispensation of the liability to make the deposit. Ext. P6 order came to be passed on the stay petition by which the Appellate Authority, considering the fact that the lapses have been procedural, called upon the petitioner to pay fifty per cent of the tax.

I heard Shri A.K. Jayasankar, learned counsel appearing for the petitioner and also the learned standing counsel appearing on behalf of the respondents. Counsel for petitioner would submit that the materials on record would show that this is a clear case where the petitioner has established a strong prima facie case. He submits that if that be so, what weighed with the Authority to pass Ext. P6 still demanding deposit of fifty per cent is not forthcoming. Ext. P6 is not a reasoned order, complains counsel. The Authority is exercising quasi judicial function and the party must know what actually weighed with the Authority in directing deposit of fifty per cent, he contends. He submits that this is a clear case where barring some procedural infirmities, that may be there, in substance, the petitioner is entitled to the credit of nearly Rs. 85 Lakhs and under law it is entitled to adjust the said amount against the liability and if it is adjusted, this is a case where the petitioner would not be liable to pay any amount at all. He took me through the order of the Assessing Authority in an attempt to convince me that the petitioner has made out a strong prima facie case. He relied on the following decisions : (1) Bhikhubhai Vithlabhai Patel and Others Vs. State of Gujarat and Another, .

(2) Dharamshala Suthra and Another Vs. Administrator, Municipal Committee and Another, .

(3) Aravindakshan v. State of Kerala [2007 (3) KLT 440].

(4) Bongaigaon Refinery & Petrochem. Ltd. v. Collr. of C. Ex.(A), Calcutta [1904 (69) E.L.T. 193 (Cal.)].

(5) Mehsana Dist. Co-op. Milk P.U. Ltd. v. Union of India [2003 (154) E.L.T. 347 (S.C.)].

Bhikhubhai Vithalabhai Patel and Others v. State of Gujarat and Another [(2008) 4 SCC 144] was not a case actually under the Central Excise Act. Paragraphs 22 and 23 on which counsel made emphasis read as under:

Any opinion of the Government to be formed is not subject to objective test. The language leaves no room for the relevance of a judicial examination as to the sufficiency of the grounds on which the Government acted in forming its opinion. But, there must be material based on which alone the State Government could form its opinion that it has become necessary to make substantial modification in the draft development plan.

The power conferred by Section 17(1)(a)(ii) read with proviso is a conditional power. It is not an absolute power to be exercised in the discretion of the State Government. The condition is formation of opinion - subjective, no doubt - that it had become necessary to make substantial modifications in the draft development plan. This opinion may be formed on the basis of material sent along with the draft development plan or on the basis of relevant information that may be available with the State Government. The existence of relevant material is a precondition to the formation of opinion. The use of word "may" indicates not only a discretion, but an obligation to consider that a necessity has arisen to make substantial modifications in the draft development plan. It also involves an obligation to consider which of the several steps specified in sub-clauses (i), (ii) and (iii) should be taken.

Dharamshala Suthra and Another Vs. Administrator, Municipal Committee and Another, , related to the disposal of a Writ Petition by the High Court without independently recording reasons and the Court emphasised the need for reasons. Aravindakshan v. State of Kerala [ 2007 (3) KLT 440] was a case of a Writ Petition challenging dismissal of an employee. The decision of the Calcutta High Court in Bongaigaon Refinery & Petrochem Ltd. v. Collr. of C. Ex. (A), Cal [1994 (69) E.L.T. 193 (Cal.)], no doubt, relates to the question of dispensation of pre-deposit. There, the learned Judge took the view that the establishment of a prima facie case itself suffices for the grant of an order of pre-deposit. The learned Judge took the view that undue hardship is not confined to financial hardship alone and that in the case of strong prima facie case, full waiver is grantable. On the other hand, learned standing counsel for the respondents drew my attention to a decision which I feel should hold the field being not only later in point of time, but also, as it is a decision of the Apex Court on the point. The decision is Benara Valves Ltd. v. Commissioner of Central Excise [2006 (204) E.L.T. 513 (S.C.) = 2008 (12) S.T.R. 104 (S.C.)]. The Court, inter alia, stated as follows :

It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But, if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved.

It is further stated in paragraphs 11, 12 and 15 which read as follows :

Two significant expressions used in the provisions are "undue hardship to such person" and "safeguard the interests of Revenue". Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view.

As noted above, there are two important expressions in Section 35F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva Vs. State of Karnataka and others, that under Indian conditions expression "undue hardship" is normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

The other aspect relates to imposition of condition to safeguard the interest of Revenue. This is an aspect which the Tribunal has to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the interest of Revenue. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate condition as required to safeguard the interest of Revenue.

On a conspectus of the position obtaining, particularly having regard to the latest decision on this question itself, it cannot be gainsaid that the matter could not be looked at only from the point of view of prima facie case being established. There are other elements also in the decision making process. The question of interest of Revenue cannot be brushed aside. Further, as held by the Apex Court, the question of undue hardship must be judged on the basis of materials produced before the Authority. In this connection counsel for petitioner has submitted that the petitioner had specifically brought to the notice of the Authority and also made available materials that the petitioner-Company is in dire financial constraints. In fact, counsel would submit that the present loss is in the tune of nearly Rs. 28 Crores and though this was brought to the notice of the Authority, this issue was not addressed, he contends. On this submission made, I directed the counsel for the respondents to get specific instructions on the question whether the petitioner has specifically pleaded financial hardship and also produced materials. Today, when the matter was argued, counsel for the respondents brought to my notice that neither the petitioner had specifically pleaded financial hardship, nor was any material produced. Counsel for petitioner also produced a Verified Petition producing a petition to dispense with the payment of duty. It reads in its substantial portion as follows : 3. The Statement of facts and Grounds stated in the appeal petition may be read as part of this Affidavit. The appellant is advised that there are prima facie good grounds for allowing the appeal. If the appeal is allowed, no amount will be due to the Department. If the appellant is compelled to pay the amount, as a condition precedent in filing the appeal, the appellant will be put to irreparable loss and undue hardship. It is therefore just and necessary and it is humbly prayed that the Commissioner (Appeals) be pleased to dispense with payment of duty and penalty as a condition precedent in filing the appeal and stay the operation of the order pending disposal of the appeal.

On a reading of this paragraph, I am unable to conclude that the petitioner had in fact projected the case of financial hardship as is now sought to be addressed before me. If that be so, it may not be open for me to overturn the decision of the Appellate Authority who never had the opportunity of considering the specific plea of economic hardship which the learned counsel for petitioner projected before me. I would also think that the materials were as such not made available. If that is so, having regard to the principles which I have already referred to, I cannot say that the decision taken by the Appellate Authority in passing Ext. P6 is such that it requires interference under Article 226 of the Constitution of India. But, at the same time, I feel that ample time should be granted to make pre-deposit demanded of the petitioner. Accordingly, while rejecting the Writ Petition, it is ordered that Ext. P6 will be deemed to have been complied with if the petitioner makes pre-deposit within a period of six weeks from today.