Full Judgment
3. Under the stay order No. S/281-283/01-NB (DB) dated 20.6.2001, Shri Ashwani Kumar Jain was directed to pre-deposit an amount of Rs. 1 crore, M/s Agemo Leather Components (P Ltd., were directed to pre-deposit an amount of Rs. 75 lakhs and Rs. 20 lakhs and M/s Sukumar Chemicals (P) Ltd., were directed to pre-deposit an amount of Rs. 50 lakhs and Rs. 20 lakhs out of the penalties imposed on them. All the three applicants had gone to Allahabad High Court against the stay order No. S/281-283/01-NB (DB) dated 20.6.2001. After considering all the submissions made by all the three applicants before the Hon'ble Allahabad High Court in Writ Petition No. 979 to 981 of 2001 the Hon'ble Allahabad High Court under order dated 14.10.2004 rejected their all the contentions and held that their argument that the petitioner should not be asked to deposit any amount in view of the pending claim with regard to duty drawback lacks merit. The Hon'ble High Court has observed: It was also submitted that the petitioners are entitled for the duty draw back and the department is illegally withholding the same on the earlier exports. An opportunity was given to the department to file a reply. The department has come out with the case that entitlement of the petitioner to receive the duty draw back, is very much in dispute. The department is disputing the claim of the petitioner. A writ petition for direction for payment of duty draw back was also filed. The said writ petition was dismissed by the Division Bench of this Court and the Supreme Court has also rejected Special Leave Petition. Therefore the said argument that the petitioner should not be asked to deposit any amount in view of pending claim with regard to duty draw back lacks merit.
As regards their financial position the Hon'ble High Court observed as under: It was then submitted that the petitioners are not in a financial position to deposit the amount as directed by the impugned orders as a condition precedent for hearing of the appeals filed by them before the respondent No. 1. It was contended that the respondent No. 1 has not taken into account the hardship placed before it. This argument at the first instance appears to be attractive but on deeper probing it does not hold water. In Paragraph 4 of the writ petition No. 979 of 2001 the petitioners have given magnitude of their export business. On their own showing in a period of about two months M/s Agemo Leathers (P) Ltd., had affected export sale worth Rs. 13 crores and in a period of about nine months M/s Sukumar Chemicals (P) Ltd., has made export sale worth Rs. 27 crores. Thus the petitioner according to their own showing made export sale worth approximately Rs. 40 crores up to 31.08.1998. These are admitted figures of the petitioners. It has been further admitted that the petitioners have received the aforesaid amount through their bankers. Meaning thereby that the petitioners were possessed of about Rs. 40 crores. Search operation is dated 14 15th September 1998. These undisputed facts have to be kept in mind to decide the question of grant of partial waiver by the respondent No. 1 in appeals. The petitioner have not given details and particulars where Rs. 40 crore have gone. The Tribunal in para 10 of its order has observed that plea of appellants regarding financial hardship also cannot be on the face of it taken to be true so as to allow them total waiver of pre-deposit of the penalty amount. This observation of the Tribunal clearly shows that even though the Tribunal was not satisfied with the plea of financial hardship raised by the petitioner, yet as a matter of grace granted partial relief. The Tribunal in the appeal of Ashwani Kumar allowed the waiver to the extent of 80% and directed him to deposit only 20% of the disputed amount. On the facts of the case it cannot be held that the Tribunal mis-directed itself and committed illegality in not granting full waiver or there is no application of mind by the Tribunal. Similarly in the appeal filed by M/s Agemo Leather Components (P) Ltd., and M/s Sukumar Chemicals (P) Ltd., the Tribunal has waived more than 50% of the disputed amount of penalty by the impugned order.
Thus, after considering all the arguments the Hon'ble High Court finally passed the following order: After the close of hearing of argument an affidavit dated 23.9.2004 was filed on behalf of the petitioner. Paragraph 4 of the said affidavit reads as under: 4. That the petitioners are facing financial crises but however, looking to the facts and circumstances and in order to purchase peace deponent submits that the direction may be issued for hearing of the appeals by the Tribunal and so far as pre-deposit is concerned the petitioners of each petition will deposit Rs. 15 lacs.
Rs. 15 lacs and Rs. 20 lacs each respectively totaling to Rs. 50 lacs or a consolidated amount of Rs. 50 lacs may be directed to be deposited in respect of all three writ petitions bearing Nos.
980/2001, 981/22001 and 979/2001, which were consolidated and connected together and three months time may be granted for depositing the amount. Till that time the recovery proceedings may be stayed and Tribunal may be directed to decide the appeal within reasonable time.
In view of the above averments it is desirable that the matter may be restored back to the file of respondent No. 1 to reconsider the matter. It is for the Tribunal to accept the offer made by the petitioner. Liberty is granted to the petitioner to file fresh applications containing aforesaid offer before the Tribunal and the Tribunal shall reconsider the matter and pass appropriate orders in accordance with law uninfluenced by the observations made in this judgment.
The writ petitions are disposed of in the light of the observations made in the preceding paragraph. However there shall be no order as to costs 4. On the basis of this order of the Hon'ble High Court the applicants filed applications for restoration of appeals and fresh stay applications. The applications for restoration of appeals No.C/ROA/212-214/04-C were disposed of under miscellaneous Order No.M/180-82/05 dated 14.6.2005 which stood as withdrawn to enable the applicants to make a fresh applications. The said order is reproduced hereunder: Since this application does not contain any offer as was contemplated in the penultimate paragraph of the judgment of the High Court in Civil Misc. Writ Petition No. 979 of 2001, the applicant No. 1, who appears in person, seeks permission to withdraw this application with a view to makeup a fresh application.
Permission is granted and this application stands withdrawn to enable the applicant to make a fresh application. The applicant stales that he will file a fresh ROA application within two weeks 5. Thereafter all the three applicants filed ROA applications and stay applications on 20^th June 2005. The applicants were heard on 12.9.2005 when Shri Ashwani Kumar Jain himself appeared to argue the applications on behalf of all the three applicants and after considering the arguments of both the sides miscellaneous order No. M/218-220/05-Cus was passed by this tribunal rejecting the offer of pre-deposit of an amount of Rs. 50 lakhs in all the three applications. Against this Misc. order all the three applicants filed writ petition before the Hon'ble High court of Allahabad. The Hon'ble High Court under their order dated 09.11.2005 in writ petition No. 1515 of 2005 observed that the appellate Tribunal by its order dated 12^th Sept. 2005 in a cryptic manner without even considering the various contentions raised by the applicant rejected the application. The Tribunal was required to indicate the reasons why the contentions raised in the application did not find favour. In this view of the matter the order dated 12^th Sept.
05 passed by the appellate Tribunal was set aside and Tribunal was directed to decide the application dated 20^th June 2005 in the light of the observations made by the Hon'ble High Court.
6. Accordingly, as per direction of the Hon'ble Allahabad High Court, we have heard the applicants at length on the application dated 20^th June 2005. In the applications for Restoration of appeals they have stated that as per the direction in the order dated 13.10.2004 in Civil Writ Petition No. 979-981/2001 of Allahabad High Court, applications for RoA and applications for stay was moved before the Hon'ble Tribunal and same was given No. C/ROA/212-214/04-C. This matter came up for hearing before the Tribunal on 14.6.2005 and the Tribunal heard the matter and allowed the applications to be withdrawn as the offer for pre-deposit of consolidated amount of Rs. 50 lakhs in three appeals filed by M/s Azemo Leather Components (P) Ltd., M/s Sukumar Chemicals (P) Ltd., and Shri Ashwani Kumar Jain being Managing Director and Director of aforesaid companies respectively as per orders passed in Civil Writ Petition No. 979-981 of 2001 was not given in the applications. The applicants were given liberty to file fresh applications for restoration of appeals and fresh stay applications giving the offer within two weeks. The applicants after giving offer of pre-deposit of an amount of Rs. 50 lakhs in terms of order passed in Civil Writ Petition No. 979-981 of 2001 filed separate applications for restoration of appeals as well as applications under Section 129E of Customs Act for stay of recovery of pre-deposit of penalty. It was stated that in view of the order dated 13.10.2004 passed in Civil (Misc.) Writ Petition No. 979-981 of 2001 the offer is being given by the appellant for deposit of consolidated amount of Rs. 50 lakhs (Rs. 20 lakhs by Sh. Ashwani Kumar Jain, Rs. 15 lakhs by M/s Azemo Leather components (P) Ltd., and Rs. 15 lakhs by M/s Sukumar Chemicals (P) Ltd., 7. In all three applications in terms of order dated 13.10.2004 of Allahabad High Court and as per direction of this Tribunal dated 14.6.2005 it was prayed that the appeal No. C/17-19/01-C be restored to its original number and miscellaneous application is being moved alongwith RoA and application for stay of the pre-deposit of the penalty amount. In the stay application similar averments were made and it was stated that they offer for deposit of consolidated amount of Rs. 50 lakhs.
8. We have heard the RoAs and stay applications in great details. It was argued that in their stay applications that the petitioners are facing financial hardship and due to this companies have been mined and virtually the appellants have become bankrupt. The appellants are not having any substantial funds and the companies are facing financial hardship and are in losses. The assets of appellant company M/s Sukumar Chemicals (P) Ltd., assets of M/s Azemo Leather components (P) Ltd had been taken over by financial institutions alongwith assets of the Director and guarantors. It was requested that instead of cash deposit, security may be taken for the amount. Initially it was also argued that they are not in a position to offer even Rs. 50 lakhs as their financial position has deteriorated further since the applications were made. However, when their attention was drawn to the order of the Hon'ble High Court in Civil Writ Petition No. 979-981 of 2001 they agreed that they will abide with the offer made by them before the Hon'ble High court and before this Tribunal in these applications. It was argued that the balance sheet of Shri Ashwani Kumar Jain although shows assets worth Rs. 3,44,49,467.54, but out of this, the stock worth Rs. 2,03,58,767.00 was of ball bearing which has been sold by them and amount has been deposited in the Hon'ble Supreme Court and is pending before the Hon'ble Supreme Court. Regarding the amount of Rs. 37,37,82,331/- stated against the head customs, it was pointed out that this amount has been included in the value of ball bearing. But still an amount of Rs. 1.10 crores remains out of which Rs. 1.04 crores as balance assets. In case of M/s Azemo Leather components (P) Ltd the total assets value is as on 31.3.2004 is Rs. 2,64,99,638.73, out of this Rs. 2,10,95,244.00 is the custom drawback receivable which leaves the balance amount of Rs. 54 lakhs. In case of M/s Sukumar Chemicals (P) Ltd., the total asset value is of Rs. 4,94,05,151.73, out of which Rs. 2,16.00,834.00 is receivable from customs as drawback leaving the balance of Rs. 2.78 crores. It was submitted that the assets are not in the hands of the applicants. No other contentions was raised on behalf of the applicants.
9. It was argued that the watches and readymade garments which were seized and confiscated by the department are lying with the department and the value of these will be more than Rs. 20 lakhs for watches and about Rs. 40 lakhs for garments. Therefore, this factor may also be taken into consideration. They have also submitted a chart of the assets showing the disposal of these either by the financial institutions or by banks.
10. On behalf of the Revenue, it was argued that at the time when the applications for stay was made there were sufficient assets with the applicants for pre-deposit of the amount. Slowly thereafter these were being disposed of either by banks or by the financial institutions and the position of the applicants therefore kept on deteriorating.
Therefore, the position as on 20^th June 2005 as reported in the said applications of stay should be taken into consideration for determining the amount of pre-deposit or in considering the offer made by them. It was argued that as per balance sheet of Shri Ashwani Kumar Jain, the assets valued worth Rs. 1.04 crore are without any dispute. Similarly, in case of M/s Azemo Leather components (P) Ltd, the assets worth Rs. 54 lakhs and in case of M/s Sukumar Chemicals (P) Ltd., assets of Rs. 2.7 crores are without dispute. Thus, on the date of the applications, an amount of Rs. 4.26 crores was with applicants without dispute. It was sufficient to make payment of the pre-deposit as was directed in the stay order. It was further argued that when miscellaneous order No.M/218-220/05-Cus dated 12.9.2000 was passed at that time Shri Ashwani Kumar Jain in person appeared in all the three applications. He did not argue or raise my such point as has been raised now. At that time he only argued without pointing out the position of the assets which has now been pleaded before the Tribunal. It was stated that in view of the assets without dispute as given in their balance sheet, there are sufficient assets with them to make the payment for the pre-deposit as determined by the Tribunal in the earlier order. It was also argued that the watches and readymade garments which has been confiscated absolutely have become the property of the Government. These cannot be taken as a security or considered property of appellants lying with the Government. It was finally argued that the scope of the matter is confined to the direction given by the Hon'ble Allahabad High Court for considering the offer and it cannot be enlarged.
11. We have considered the submissions made by both the sides and gone through the relevant papers. We find that the Hon'ble High Court in Civil Writ Petition No. 979-981 of 2001 has directed that in view of the averments made in para 4 of the affidavit dated 23.9.2004 filed by the applicants before the Hon'ble High Court which reads as under: 4. That the petitioners are facing financial crises but however, looking to the facts and circumstances and in order to purchase peace deponent submits that the direction may be issued for hearing of the appeals by the Tribunal and so far as pre-deposit is concerned the petitioners of each petition will deposit Rs. 15 lacs.
Rs. 15 lacs and Rs. 20 lacs each respectively totaling to Rs. 50 lacs or a consolidated amount of Rs. 50 lacs may be directed to be deposited in respect of all three writ petitions bearing Nos.
980/2001, 981/22001 and 979/2001, which were consolidated and connected together and three months time may be granted for depositing the amount. Till that time the recovery proceedings may be stayed and Tribunal may be directed to decide the appeal within 'reasonable time.
12. The Hon'ble High Court has observed that in view of the above averments, it is desirable that the matter may be restored back to the file of respondent No. 1 to reconsider the matter. It is for the Tribunal to accept the offer made by the petitioner. Liberty is granted to the petitioner to file fresh applications containing aforesaid offer before the Tribunal and the Tribunal shall reconsider the matter and pass appropriate orders in accordance with law uninfluenced by the observations made in this judgment. On the basis of these directions the applicants first made applications for restoration of appeals without making the offer. These applications were be withdrawn by them and they submitted the applications for restoration of appeals and applications for stay on 20^th June 2005. The stay applications after hearing Shri Ashwani Kumar Jain on behalf of all the three applicants decided under the order No. M/218-220/2000-05-Cus dated 12.9.2005. In the said order after hearing Shri Ashwani Kumar Jain it was observed that keeping in view the reasoning adopted by the Tribunal and the fact that the applicants have not been able to demonstrate any adverse financial condition, we do not find any valid reason to take a different view of the matter on the pre-deposit amount. There is absolutely no warrant for accepting the offer of the applicants. The applications were therefore, rejected. This order was set aside by the Hon'ble Allahabad High Court on the ground that the appellate Tribunal by its order dated 12^th September 2005 in a cryptic manner has rejected the applications. The Tribunal was required to give reasons why the grounds raised in the applications did not find favour with it and directions were issued to Tribunal to decide the applications dated 20^th June 2005.
13. All the RoA and stay applications were heard together at length and liberty was given to the applicants to explain the various annexures in support of their offer. After examining the balance sheets submitted by them, it was found that undisputed assets of more than Rs. 4.3 crores in all the three cases were still available with appellants. The applicants can deposit the amount which was earlier determined by the Tribunal for pre-deposit for hearing the appeals. We find that Shri Ashwani Kumar Jain had made a offer to make a pre-deposit of a sum of Rs. 20 lakhs instead of Rs. 1 crores as fixed by this Tribunal earlier and offer of Rs. 15 lakhs each by M/s Agemo Leather Components (P) Ltd., (now M/s Ajemo Exim) and M/s Sukumar Chemicals (P) Ltd., (now M/s Sajai International Ltd.,). On scrutiny of the balance sheets placed on record above as on 31.3.2004 the assets of Shri Ashwani Kumar Jain were Rs. 3,44,49,467.54. It was stated by applicant that this amount Rs. 2,03,58,767/- was for the value of ball bearing which have been sold and Rs. 1 crores have been deposited with the Hon'ble Supreme Court.
The amount of Rs. 37,82,331/- relates to draw back which is in dispute.
Thus, the balance amount of Rs. 1.04 crores is not in dispute. In case of M/s Ajemo Leather Components (P) Ltd., the assets as per balance sheet are worth Rs. 2,64,99,638.73 and out of this Rs. 2,10,95,244/- relates to drawback which they have yet to get from the customs and thus only Rs. 54 lakhs is the clear amount without any dispute. In case of M/s Sukumar Chemicals (P) Ltd., out of the total assets of Rs. 4,94,05,151.73, amount of Rs. 2.78 is without any dispute. Thus undisputed amount of assets is more than Rs. 4.3 crores for all the three applicants together.
14. The applicants have also claimed that watches worth more than Rs. 20 lakhs are with the department alongwith (garments -rags) which have now been valued about Rs. 40 lakhs are with the department and these may be taken into consideration. We find that these watches and garments have been absolutely confiscated as these were being exported under claim of draw back and for claiming DEPB benefit by over invoicing the goods and by giving wrong description of the garments in the shipping bills. Since these have been absolutely confiscated, these have become property of the Government and these cannot be taken as a security for the applicants.
15. Even if these are taken into account the offer of Rs. 50 lakhs on behalf of the three applicants is not justified having regard to the totality of the disputed amount in appeals.
16. In para 6 of the application dated 10.1.2006 the applicant has submitted as under: It is submitted that the financial position of the Appellants has very adversely deteriorated since 23.9.2004, when the offer for pre-depositing Rs. 50 lakh was made before the Hon'ble High Court.
The assets of the appellant companies have been taken over by the financial institutions, along with assets of the Directors and the guarantors. The companies are closed and the Directors have no regular source of income. The detailed chart is enclosed for your kind consideration.
In accordance with law the total waiver of pre-deposit is to be granted if appellant's financial condition is bad and the appellant will face undue hardship if pre-deposit condition is imposed and as such the condition of pre-deposit be waived.
17. From these pleadings it appears that the assets of the appellants are systematically getting eroded by passage of time and therefore as mentioned above they have requested that the conditions of pre-deposit may be waived. This cannot be in consonance with the offer made by them before the Division Bench of the Hon'ble High Court which has remanded the matter to consider the offer of depositing Rs. 50 lakhs and to consider the application of 20^th June 2005 which contains such offer.
18. Having regard to all the relevant factors and after considering all the details and conditions raised in the applications, we do not find any justification in accepting the offer. All these applications alongwith RoAs and stay applications are therefore rejected.