ORDER
E. Pai Anabhan, J.
1. W.P. No. 11047 of 1999 has been filed by M/s. ITC Limited, (Packaging and Printing Division) praying for the issue of a Writ of Certiorarified Mandamus, calling for the entire records leading to passing of impugned Order A. No. 41/99(M-I), dated 15-6-1999 by the first respondent herein, quash the same and direct the first respondent to hear and decide the appeal filed by the petitioner on merits without insisting pre-deposit of the balance amount of Rs. 3,23,90,292/- out of Rs. 4,48,90,292/- (i.e., after adjusting Rs. 1,25,00,000/- already paid by the petitioner).
2. W.P. No. 15140 of 1999 has been filed by M/s. Pradeep Drug Company Limited, Chennai praying for the issue of a Writ of Certiorarified Mandamus to call for the records of the Order dated 20-8-1999 passed by the second respondent herein in Appeal No. 153 of 1999 (M-III), quash the same and consequently direct the second respondent to hear the stay application afresh after granting personal hearing to the petitioner.
3. W.P. No. 15141 of 1999 has been filed by M/s. Tapan Preci Tec Limited praying for the issue of a Writ of Certiorarified Mandamus to call for the records of the interim Order, dated 1-6-1999 passed by the second respondent in Appeal No. 380 of 1998 (M-III), quash the same and direct the second respondent to hear the stay application afresh after granting personal hearing to the petitioner.
4. W.P. No. 15142 of 1999 has been filed by M/s. Pradeep Drug Company Limited who is also the petitioner in W.P. No. 15140 of 1999 praying for the issue of a writ of declaration to declare the CBEC Circular No. 459/16/99, dated 30-3-1999 passed by the first respondent as ultra vires of Sections 35A, 35F and 37B of the Central Excise Act, 1944 and Sections 128-A and 129-E of the Customs Act, 1962 and Articles 14, 19(1)(g) and 265 of the Constitution of India in so far as the petitioner is concerned.
5. W.P. No. 15143 of 1999 has been filed by M/s. Tapan Preci Tec Limited, Chennai who is the petitioner in W.P. No. 15141 of 1999 praying for the issue of writ of declaration to declare the CBEC Circular No. 459/16/99, dated 30-3-1999 passed by the first respondent as ultra vires of Sections 35A, 35F and 37B of the Central Excise Act, 1994, Sections 128A and 129E of the Customs Act, 1962 and Articles 14, 19(1)(g) and 265 of the Constitution of India in so far as the petitioner is concerned.
6. All the writ petitions were heard together as the points raised in these writ petitions are identical and common arguments are advanced by either side.
7. Heard Mr. Habibulla Basha, learned Senior Counsel, appearing for Mr. R. Raghavan, Petitioner in W.P. No. 11047 in W.P. Nos. 15140 to 15143 of 1999 and Mr. K. Veera Raghavan, Addl. Central Government Standing Counsel appearing for respondents in all the writ petitions.
II. Petitioners' case and contentions:
8. Under Section 35F of the Central Excise Act the interim order passed by the Commissioner of Central Excise (Appeals), Chennai in respect of the petitioners herein disposing of the stay petition without affording an opportunity of hearing before the Commissioner (Appeals) and directing the respective appellants to pre-deposit the entire duty payable in terms of the orders appealed against before the Appellate Authority within two weeks and report compliance besides holding that the appeal is liable to be rejected for non-compliance under Section 35F of the Central Excise Act if the pre-deposit ordered is not complied and reported as directed. As identical orders have been passed in respect of the three writ petitioners by the first respondent [Commissioner of Central Excise (Appeals), Chennai].
9. The writ petitioners mainly contend that the refusal to hear the appellant or the appellant's representative while considering the application for stay by the appellate authority has resulted in hardship and being a quasi-judicial order though of interim nature, the first respondent should have heard the petitioner before disposing of the request for interim orders of stay as was hitherto done before the circular issued by the Central Board of Excise and Customs, New Delhi. It is contended that principles of natural justice requires a minimum opportunity of hearing before disposing of the application of stay/dispense with pre-deposit and more so, when questions of law as well as technical aspects are involved and before imposing a financial burden, it is incumbent on the part of the Collector (Appeals) to hear the Counsel instead of passing chamber orders.
10. It is further contended that the circular issued by the Central Board of Excise and Customs is also without authority and amounts to interference with the quasi-judicial powers of the Statutory Appellate Authority viz., the first respondent and liable to be quashed. It is further contended that being the Appellate Authority the first respondent Commissioner (Appeals) has to consider the request or application for stay and dispose of them fairly and not arbitrarily, lest the provision of appeal itself is rendered futile or nugatory. It is further contended that the Appellate Authority has to act reasonably and fairly coupled with a duty besides exercising quasi-judicial powers.
11. It would be sufficient to refer to the facts in one of the writ petitions as points raised are identical in all the writ petitions. To be on the safer side, the petitioners have challenged the circular issued by the Central Board of Excise and Customs. Even the said contentions are also identical.
12. In W.P. No. 15140 of 1999, M/s. Pradeep Drug Company Limited being aggrieved by the Order passed by the Assistant Commissioner, Central Excise, Chengalpattu division, Chennai-III Commissionerate preferred an appeal challenging the proceedings of the Assessing Authority. The petitioner also moved the second respondent, Commissioner of Central Excise (Appeals) herein to waive pre-deposit of duty/tax payable by it as per the impugned order under Section 35F of the Central Excise Act, 1944. The Commissioner of Central Excise (Appeals) by the impugned proceedings dated 20-8-1999 while relying upon the decision of the Apex Court in Union of India and Ors. v. Jesus Sales Corporation Limited, reported in : 1996(83)ELT486(SC) , took a view that it is not required to afford a personal hearing to the appellant before it and decided the application for stay/exemption and on the basis of submissions set out in the appeal materials on record, it could pass orders.
13. The Commissioner of Central Excise (Appeals) referred to the details of the assessment and the contentions set out in the appeal memorandum as well as the plea of the petitioners with respect to the details of objection and financial hardship, ultimately took the view that the Appellate Authority is not impressed with the plea and that no prima fade case existed in favour of the appellants even though financial hardship was pleaded for which no documentary evidence had been placed and therefore the appellate authority was of the view that pre-deposit of duty would not cause financial hardship to the appellant.
14. In that view of the matter, the Commissioner (Appeals) directed the appellant before it to pre-deposit the entire duty as assessed in full as per the impugned order appealed against within two/three weeks and directed the appellants before it to report compliance, failing compliance, it has also been further directed that the appeal will be rejected for non-compliance under Section 35F of the Central Excise Act, 1944. Identical orders have been passed in the other connected cases by the very same Commissioner of Central Excise (Appeals). According to the petitioners, the said view of the Commissioner of Central Excise (Appeals) is arbitrary and liable to be interfered in this writ petition.
15. The refusal to afford an opportunity of hearing according to the petitioner results in denial of valuable opportunity and also renders the appeal ineffective. It is admitted that other Commissioners (Appeal) are affording an opportunity of hearing and it is the second respondent who alone had taken such a view. The reliance is placed upon the circular issued by the Central Board of Excise and Customs, New Delhi which circular is being challenged as one issued without authority of law and without jurisdiction. It is also being contended by the petitioner that the decision of the Apex Court in Union of India v. Jesus Sales Corporation Limited reported in : 1996(83)ELT486(SC) has no application to Section 35F of the Central Excise Act as the direction issued by the Supreme Court in the said case was in respect of Section 4(M) of the Imports and Exports (Control) Act, 1947 and the said decision of the Supreme Court is clearly distinguishable and has no application to the appeals preferred before the Commissioner of Central Excise (Appeals).
16. Further when the petitioner had specifically requested the Commissioner (Appeals) to post the application for personal hearing, there is no reason or justification to deny an opportunity of hearing when substantial question as well as quantum of tax are involved and by denying an opportunity and passing a routine chamber order and refusing to exercise the powers as a quasi-judicial authority, the very appeal provision itself is rendered nugatory. It is further contended that the appellate authority viz., the Commissioner (Appeals) has to act fairly as a quasi-judicial authority and it is an exercise of power burdened with the duty and being quasi-judicial authority, denial to hear the application amounts to denial to consider the merits and it would result in hardship.
III. Respondents' Case:
17. A counter affidavit has been filed on behalf of the respondent by the Asst. Commissioner of Central Excise (Legal), Chennai-III contending that hearing is not necessary and such a contention is legally unacceptable. The principles of natural justice do not require a personal hearing to be given in all cases at every stage and when the authority goes through the grounds of appeal and passes interim orders in consonance with the statutory prescriptions, it will amount to complying with the principles of natural justice. According to the respondents, natural justice does not always means personal hearing.
18. The contention raised by the writ petitioners and the construction placed on Section 35A and 35F of the Central Excise Act and the said provisions are to be read together or read into it is unsustainable since the object and purview of Section 35A is different and distinct from Section 35F. Section 35A provides an opportunity of being afforded to the appellant if the appellant so desires. While Section 35F enables the Commissioner (Appeals) to stay or dispense with the pre-deposit subject to such conditions as the said appellate authority may deem fit to impose so as to safeguard the interests of the revenue and that Section 35F speaks of the procedure to be followed regarding pre-deposit of the duties/penalty by the appellant and either in part or full and while considering the request for dispensing with such pre-deposit, it is not incumbent on the appellate authority to afford an opportunity of hearing to the appellant before it or to their Counsel.
19. Section 35F according to the respondent is in the interest of the revenue which has to be safeguarded by the appellate authority while passing an Order under Section 35F. The Appellate Authority has to apply its mind to the grounds of the appeal, consider the request for dispensing with the pre-deposit and Section 35F and 35A are not intertwined as sought to be contended by the petitioners. The issuance of Circular by Central Board of Excise and Customs is valid and the same would not amount to interfering with the discretion vested with the Appellate Authority while passing an Order under Section 35F of the Central Excise Act.
20. The decision of the Apex Court in Union of India v. Jesus Sales Corporation Limited reported in : 1996(83)ELT486(SC) is to be read with respect to the proposition of law declared by the Apex Court and the argument advanced by the petitioner in that respect is untenable. According to the respondent, Section 35F clearly speaks that it is for the appellate authority who has the discretion to afford a personal hearing or not and he has to exercise the same in a judicial manner being a quasi-judicial authority and there is no unfettered discretion given to the Appellate Authority and Section 35F is to safeguard the interest of the revenue. It is further contended that the Circular is only informative in nature and the Circular is neither inconsistent with the statutory provisions of the Act or Section 35F nor it confers extra power beyond the stipulation in Section 35F.
21. It is further contended that the second respondent appellate authority has applied its mind to the grounds of appeal and proviso to Section 35F and has passed a speaking order in the light of the pronouncement of the Apex Court in Union of India Limited v. Jesus Sales Corporation Limited and had rightly declined to dispense with the pre-deposit. None of the petitioners have substantiated their claim of financial hardship while seeking for dispensing with the pre-deposit and the respective appellants should have placed the materials along with the appeal papers and they need not wait for a hearing notice in their application for dispensing with pre-deposit.
22. It is admitted that without affording an opportunity and without giving notice to the appellants, orders were passed on the stay petition. According to the respondents, it is not necessary to give a notice of hearing in the stay petition or the application for taken out to dispense with the pre-deposit and hearing is not a condition precedent as sought to be contended by the petitioners.
23. The Circular has been issued by the Board in terms of Section 37B of Central Excise Act, 1944 and there is no prohibition for the issuance of such a circular, as such a circular merely enable authorities to follow the laws. The contention that the circular issued by the Board is contrary to the provisions of the Act is not sustainable in law. The circular is not ultra vires nor it is illegal and the circular is informative to the departmental officials. It is also being pointed out that the circular has not been issued in purported exercise of powers conferred under Section 37B of the Central Excise Act. The orders passed by the Appellate Authority in the application to dispense with the pre-deposit of the disputed duty is neither illegal nor arbitrary. The Circular is not ultra vires of Section 35A of the Central Excise Act or Section 129E of the Customs Act, 1962 or Section 35F and 37B of the Central Excise Act as well as Articles 14, 19(1)(g) and 265 of the Constitution of India and such contention is untenable.
24. It is further contended that affording opportunity or giving personal hearing is not a mandatory requirement at every stage and requirement of hearing is essential only at the time of final hearing of the appeal by the appellate authority. It has been repeatedly held that even the violation of principles of natural justice would not be a ground for issuing a writ under Articles 32 and 226 and in the case of petitioner, there is no violation of principles of natural justice since the petitioner had been afforded full opportunity before the original authority and he will be given further opportunity by the Appellate Authority while disposing the appeal.
25. It is pointed out that only in the interim application, the Appellate Authority is not hearing the petitioner in person as it has not been stipulated or contemplated in Section 35F and such a view is also in consonance with the precedents of the Apex Court. The judgment of the Apex Court in Union of India v. Jesus Sales Corporation Limited is very much applicable to the provisions of the Central Excise Act. The validity of Section 35F has not been challenged. Hence such a challenge to the Circular issued by the Board of Central Excise cannot be sustained. The contention that the circular will amount to interfering with the discretion of the second respondent who is exercising his appellate powers is unsustainable in law, as the circular in no way curtails the discretionary powers of appellate authority while passing an Order under Section 35F in the interest of the revenue. The direction of the appellate authority in directing the petitioner to pre-deposit the duty amount before the appeal was heard as valid and it is in conformity with the pronouncement of the Apex Court and valid reasons have been assigned in this respect.
26. The contention that Rule 213 of the Central Excise Rules have been violated is incorrect and untenable. The orders have been passed in terms of Section 35F by the Appellate Authority and circular issued by the Board is not at all the basis of the order. The plea that the writ petitioner suffers either financial hardship or he is entitled for waiver of pre-deposit could be decided only at the hearing in person is unacceptable in law. The orders have been passed by the Appellate Authority/the second respondent exercising discretion in terms of Section 35F.
27. The contention that the impugned order is violative of the pronouncement of the Calcutta High Court reported in Hooghly Mills Co. Ltd. v. Union of India - : 1999(108)ELT637(Cal) is also incorrect and unacceptable. It is not necessary that the petitioner is to be heard in person while passing interim order and it is equally untenable to contend that the Appellate Authority cannot arrive at a conclusion on the hardship aspect without affording an opportunity of hearing. It is incorrect to contend that the petitioner has no further alternate remedy except to approach this court when the petitioner has got a statutory remedy before the Appellate Tribunal which the petitioner had failed to exhaust and has rushed to this court.
28. It is further contended that the appellate authority has applied the judicial discretion conferred on him under the statute and passed a speaking order on proper application of mind and taking into consideration of the main criteria provided in Section 35F, which directs that the appellate authority should secure the interest of revenue. It is further submitted that deposit of duty/penalty under Section 35F is a mandatory requirement for the appeal to be heard and the requirement of pre-deposit is relatable to the maintainability of the appeal itself. The petitioner is not entitled to the relief prayed for, either with respect to the order passed by the Commissioner of Central Excise (Appeals) or with respect to the circular issued by the Central Board of Excise and Customs.
29. It is fairly stated on either side that before issue of circular by the Board, the Appellate Authority used to hear the appellant in respect of exemption application for pre-deposit and even after the issuance of the said circular by the Board, the other Commissioner (Appeals) heard the appellant but the respondent alone as a matter of course rejected the application for waiver of pre-deposit of the disputed tax-penalty and had passed chamber orders. This had necessitated the filing of the writ petitions to challenge the circular issued by the Board as well as individual order passed by the appellate authority in refusing to stay or grant exemption with respect to pre-deposit.
IV. Contentions:
30. The points that arise for consideration in these writ petitions are :-
(A) Whether the impugned Circular issued by the Central Board of Excise and Customs in No. 459/16/99, dated 30-3-1999 is ultra vires and Sections 35A, 35F and 37B of Central Excise Act, 1944, Sections 128A and 129E of the Customs Act, 1962 and Articles 14, 19(1)(g) and 265 of the Constitution of India?
(B) Whether the impugned Circular issued by the Central Board interferes or fetters with the appellate powers of the Commissioner of Central Excise (Appeals) and whether such circular is binding on the Commissioner (Appeals)?
(C) Whether the Commissioner (Appeals) is required to afford an opportunity of hearing while considering application for stay or seeking exemption of pre-deposit under Section 35F of the Act?
(D) Whether Section 35F excludes personal hearing by the Commissioner (Appeals) at the time of considering petition for stay or seeking exemption of pre-deposit of duty /penalty?
(E) Whether the refusal to afford an opportunity of hearing by the Commissioner of Central Excise (Appeals) vitiates the impugned orders?
31. Before taking up the points for consideration, it is essential to extract the material portion of the circular issued by the Central Board :-
'From the above it is evident that though discretion is vested with the Appellate Authority to give personal hearing in the facts and circumstances of the particular case, before disposing of stay petitions, but this should be more of an exception and not the normal rule. Commissioner (Appeals) do not commit any irregularity if they dispose of the petitions for dispensation of pre-deposit without hearing advocates or parties concerned. They must, however, in such cases pass a reasoned order in an objective manner considering the facts as given in representation/stay petition.'
32. While issuing the Circular, the Central Board had referred to the decision of the Apex Court in Union of India v. Jesus Sales Corporation as well as the judgment of the Gujarat High Court and had expressed its opinion that the decision of the Apex Court is most relevant and had expressed that personal hearing before disposing of stay petitions should be more often an exception and not the normal rule.
33. This Circular according to the learned Counsel appearing for the petitioner fetters the exercise of quasi-judicial powers or would amount to interfering with the exercise of quasi-judicial powers by the Commissioner (Appeals) and the Board has no such authority to issue such a circular. On the contrary, it is being contended on behalf of the respondents that it is not a direction or a notification, but the circular is only informative issued by the Board to bring the latest development of case law and appraisal of the same to the Commissioner (Appeals), who exercises quasi-judicial powers. It is sought to be sustained on the ground that the Board had only drawn the attention of the appropriate authorities about the latest legal position and it is not as if the Board had issued any directions much less a specific direction.
34. In the light of the above contentions, the first two points are to be taken up for consideration. It is being contended vehemently that the Board has no powers to issue any circular to the Commissioner (Appeals) and issuance of such circular is ultra vires of Section 37B of the Central Excise Act, Article 14, 19(1)(g) and 265 of the Constitution of India. Though the circular do not refer to Section 37B of the Act, it is sought to be contended that the circular had been issued by the Board in purported exercise of powers conferred under Section 37B. Section 37B of the Act reads thus :-
'37B. Instructions to Central Excise Officers :- The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board:
Provided that no such orders, instructions or directions shall be issued -
(a) so as to require any Central Excise Officer to make a particular assessment or to dispose off a particular case in a particular manner; or
(b) so as to interfere with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of his appellate functions.
35. The above provision enables the Central Board of Excise and Customs to issue instructions or directions to the Central Excise Officers for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods. However, proviso to Section 37B forbids that such instructions or directions shall not require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner or to interfere with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of appellate functions.
36. In other words, the administrative orders or instructions or directions issued under Section 37B is required to be observed by the Excise Authorities. However, when authorities are required to act as quasi-judicial authorities or functionaries, they are to decide the matter independently and they are statutorily protected from such type of directions or instructions. The object behind Section 37B being to achieve uniformity in the classification of excisable goods or levy of duty of excise on such goods.
37. Nextly, it is to be considered as to whether the first respondent has the authority or jurisdiction to issue a circular when the point in issue is covered by a judicial precedent? And whether the first respondent has the authority to issue a circular by way of clarification or information or intimation and give its interpretation in respect of the judicial pronouncement.
38. In Indichem v. Union of India reported in : 1996(88)ELT35(Guj) the very same question was considered by a Division Bench of the Gujarat High Court. B.C. Patel, J., speaking for the Bench while considering the scope of Section 37B of the Act held thus :-
'This Section empowers the Board to issue circulars for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods. Certainly, this section does not authorise the Board to issue directions which is contrary to the decision rendered by the Tribunal. Mr. Ajmera, learned Advocate could not point out anything which would suggest that the Board has such powers or that the Board was justified in issuing such circulars. It may be that the Board may not be in agreement with the view taken by the Tribunal. Then in that case, the Board may carry the matter in appeal, but once the decision has become final by issuing circular, the decision rendered by the Tribunal cannot be made to be nugatory.'
39. The Division Bench of the Gujarat High Court further held thus :-
'Thus, Section 37B, does not empower or authorise the Board to issue directions which are contrary to the decision rendered by the Tribunal. It may be that the Board may not be in agreement with the views expressed by the Tribunal. Then in that case, the Board may carry the matter in appeal. But once the decision has become final by issuing circular the decision rendered by the Tribunal cannot be made to be nugatory. The Board cannot use its authority or powers in issuing Circulars in a manner which may have ultimate effect of nullifying the decision of CEGAT as it taking the order in Appeal and reversing the order exercising the powers as if it is sitting as Apex Court. In the instant case, the Apex Court has confirmed the views expressed by the Tribunal.
Mr. Patel, learned Advocate appearing for the respondent submitted that before the Tribunal, the contention was raised but the Tribunal stated that for the first time, it cannot be raised and more particularly when that aspect would require examination of fact. He submitted that the Circular is issued for the reasons indicated in the preamble of the circular itself. We are not able to agree with the contention raised by Mr. Patel for the simple reason that the Tribunal not in one but more than the decision has given positive finding that entry under sub-heading 2802.00 under Heading 23.02 related to preparations of a kind used in animal feeding including dog and cat food. Preparation of food of a kind used in animal feeding including dog and cat food would be covered by sub-heading 2303.00 and under Heading 23.02. There is a positive finding then there is no need to have a negative finding when the product is not covered by hearing or under any other sub-heading.'
40. I am in respectful agreement with the view taken by the Division Bench of the Gujarat High Court on merits as well as to absence of the authority of the first respondent to issue the circular to the Commissioner (Appeals).
41. In W.P. No. 10347 of 1999, Pioneer Miyagi Chemicals Private Limited v. Central Board of Customs & Excise : 2000(116)ELT441(Mad) , I had an occasion to consider an identical situation and held that the Board has no power or authority to issue a circular. Proviso to Section 37B makes it abundantly clear that no circular or instruction or direction shall be issued by the Board to dispose of a particular case in a particular manner or so as to interfere with or fetter the discretion of the Commissioner of Central Excise (Appeals) in the exercise of its appellate functions even while passing interim orders.
42. The appellate functions of the Commissioner of Central Excise (Appeals) include the powers to consider the stay application and grant of exemption of pre-deposit. It is clear that by a circular the Central Board cannot restrict or interfere with the powers of the Commissioner of Central Excise (Appeals) with respect to the exercise of powers or to the grant of stay. But what has been directed is as to how the Commissioner (Appeals) should dospose of the applications for stay/exemption and the Commissioner (Appeals) shall not normally afford an opportunity of hearing but opportunity of hearing in a stay application is an exception. Powers of Appellate Authority includes and will take in all incidental powers including grant of stay.
43. Even if there is no particular provision for grant of stay, it is by now well settled that the Appellate Authority who has got the power to set aside, modify or reverse the orders of the Original Authority has also the incidental power to grant stay of order appealed against. In this respect, it is useful to refer to the decision of the Apex Court in Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi reported in AIR 1969 Supreme Court 430. The Apex Court held that the Tribunal has got power to grant stay as it is an incidental or ancillary to its appellate jurisdiction and also expressed a view that the appellate jurisdiction implies doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory.
44. Their Lordships of the Apex Court in this respect held thus :
'Section 255(5) of the Act does empower the Appellate Tribunal to regulate its own procedure, but it is very doubtful if the power of stay can be spelt out from that provision. In our opinion the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when Section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when Section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory.
A certain apprehension may legitimately arise in the minds of the authorities administering the Act that if the Appellate Tribunals proceed to stay recovery of taxes or penalties payable by or imposed on the assessees as a matter of course the Revenue will be put to great loss because of the inordinate delay in disposal of appeals by the Appellate Tribunals. It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the tribunal will consider whether to stay the recovery proceedings and on what conditions and the stay will be granted in most deserving and appropriate cases where the tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal.
45. In Mst. Dhani Devi v. Sant Bihari Sharma and Ors. reported in AIR 1970 Supreme Court 759, at page No. 761, the Apex Court held thus :
'As stated in American Jurisprudence, 2nd, Vol. 2 (Administrative Law), Article 340 P. 155 'where the statute does not require any particular method of procedure to be followed by an administrative agency, the agency may adopt any reasonable method to carry out its functions.' (see also Corpus Juris Secondum, Vol. 73 (Public Administrative Bodies and Procedure, Article 73, p. 399). The Regional Transport Authority has complete discretion in the matter of allowing or refusing substitution.'
46. Here, the Apex Court has emphasized that such quasi-judicial bodies should follow or adopt any reasonable method or fair procedure to carry out its functions. In terms of Section 37B, the Central Board of Excise and Customs, it is to be pointed out that it cannot neither or fetter restrict not enlarge the scope of the powers of the appellate authority. Such circulars cannot be issued to restrict the powers of the appellate authority nor it could be issued to direct that the discretion should be used in a particular manner or fashion or in a particular style or procedure. The Board also cannot issue a circular directing the quasi-judicial authority viz., the Collector (Appeal) to follow a particular fashion or style of hearing or to point out that there is no requirement at all to afford opportunity of hearing, while considering an application for exemption.
47. In Orient Paper Mills Ltd. v. Union of India, AIR 1969 Supreme Court 48, it has been laid down that quasi-judicial authorities like the Commissioner (Appeals) shall not allow its judgment or decisions to be influenced by administrative consideration or by instruction or directions given by their superiors. This is a well settled proposition of law.
48. In the light of the above pronouncement of the Apex Court as well as the Division Bench judgment of the Gujarat High Court and this Court's earlier decision in W.P. No. 10347 of 1999 : 2000(116)ELT441(Mad) , the Central Board has neither authority nor the jurisdiction to issue circular or instructions to the Commissioner (Appeals), who exercises quasi-judicial powers either to hear or not to hear or as to the manner in which the application for stay or exemption is without jurisdiction, illegal as it fetters the exercise of quasi-judicial exercise of power. Such application has to be disposed of, as held by the Apex Court in Dhani Devi's case as well as Income Tax Officer, Cannanore case, the quasi-judicial authority has to adopt a fair procedure and such procedure should be fair and reasonable to advance justice.
49. The powers of the Appellate Authority also takes in the power to hear not only the appeal but also consider and pass orders on the application for stay or exemption. Such powers includes either to reject or allow the application for stay or exemption as the facts of case may warrant of depending upon the merits of the individual case. Such a decision or the Order that may be passed on the stay application/exemption application will include the process of making a decision as well namely consideration of relevant materials and hearing of the appellant on merits.
50. Any direction issued by the Central Board instructing the Commissioner (Appeals) to adopt the specific procedure, while hearing the stay petition/exemption application, which the Central Board directs or holds definitely amounts to interfering with the exercise of discretion and also the process of passing the orders by the quasi-judicial authority. It definitely fetters the powers of the appellate authority, which has to act independently as a quasi-judicial functionary. Hence, the circular though it is Bought to be contended as informative or merely bringing to the notice of the appellate authority about the pronouncements of various courts, in my considered view, the said circular is an instruction or direction, viz., Commissioner (Appeals) not to afford an opportunity of hearing in all stay applications and such opportunity should be an exemption or a rarity. Hence, on a consideration of the entire facts, the first two points are to be answered against the Revenue and in favour of the petitioners and consequently the Circular has to be quashed and a direction has to be issued to the Commissioner (Appeals) to adopt a fair procedure without reference to the Circular issued by the Central Board while considering the application for stay and pass orders thereon.
51. Taking up the next contentions whether the Commissioner (Appeals) the appellate authority should afford an opportunity of hearing in an application for stay/exemption, it has been emphasized that hearing of an application forms part of the principles of natural justice and therefore, a hearing should be afforded and it is a must according to the Counsel for the petitioners even though it is only a petition for stay/exemption.
52. It may be that in a given case, the Appellate Authority may grant stay or exemption and in that case, it may not be essential at all to afford an opportunity of hearing, but in a case where the appellate authority declines to grant stay and takes a view that it is not a fit case to grant stay or to waive pre-deposit of disputed tax and penalty, the question that arises is whether it is part of natural justice for the Appellate Authority to afford an opportunity before rejecting an application for stay/exemption. Much reliance has been placed upon the decision of the Apex Court in Union of India v. Jesus Sales Corporation - : 1996(83)ELT486(SC) by the Board as well as by the Counsel for the respondents.
53. Per contra, the Counsel appearing for the writ petitioners contend that the pronouncement of the Apex Court in Union of India v. Jesus Sales Corporation do not support the view taken by the Revenue. The said case arose out of the proceeding under Section 4(M) of the Imports and Exports (Control) Act, 1947, where a provision has been made by which the Appellate Authority had to exercise his discretion to dispense with such deposit conditionally or on conditions as it may impose when the Appellate Authority is of the opinion that such a pre-deposit will cause untold hardship to the appellant before it. In the said case, their Lordships held thus :
'Now the question is as to whether the same requirement has to be read as an implicit condition while construing the scope of third proviso to Sub-section (1) of Section 4(M) i.e., the Appellate Authority before refusing to entertain an appeal on the ground that no deposit of the amount of penalty imposed had been made, should hear the appellant on the question of dispensing with such deposit unconditionally or subject to conditions. It may be mentioned at the outset that the provisions requiring pre-deposit of the amount of penalty or tax imposed before the appeals are heard are of two types. There are some statutory provisions which specifically prescribe and provide that before the appeals are heard, the amount of tax or penalty imposed have to be deposited. No discretion has been left by the statute in question in the Appellate authority to waive such deposit taking into consideration the hardships of the appellants concerned. One such provision was considered by this Court in the case of Shyam Kishore and Ors. v. Municipal Corporation of Delhi and Anr., : AIR1992SC2279 under Delhi Municipal Corporation Act, 1957. In that Act, pre-deposit is a must before an appeal can be heard. This Court held that the Appellate authority has no jurisdiction to waive the condition or stay collection of tax pending disposal of the appeal. The grievance that the said provision in that event shall be deemed to be violative of Article 14 of the Constitution being harsh in nature was rejected. But there are statutes which vest power in the Appellate Authorities to waive deposit unconditionally or with conditions. So far the present case with which we are concerned, as already pointed out above, the third proviso vests power in the Appellate Authority to dispense with the amount of penalty unconditionally or subject to conditions. As such it is different from the provision under the Delhi Municipal Corporation Act referred to above. Here the discretion has been vested specifically in the Appellate authority to dispense with such deposit whether unconditionally or subject to such conditions as it may impose taking into consideration the undue hardship which such deposit may cause to the appellant.
The learned Counsel appearing on behalf of the Union of India took a stand that when aforesaid proviso requires the Appellate authority to exercise discretion taking into consideration the facts and circumstances of each case, it does not flow from the said provision that before exercising such discretion, the Appellate authority should hear the appellant; this discretion can be exercised by the Appellate authority as the said authority may deem think proper. Now it is too late to urge that when a statute vests discretion in an authority to exercise a statutory power such authority can exercise the same in an unfettered manner. Whenever an unfettered discretion has been exercised courts have refused to countenance the same. That is why from time to time courts have 'woven a network of restrictive principles' which the statutory authorities have to follow while exercising the discretion vested in them. This principle has been extended even when the authorities have to exercise administrative discretions under certain situations. Another well settled principle which has emerged during the years that where a statute vests discretion in the authority to exercise a particular power, there is an implicit requirement that it shall be exercised in a reasonable and rational manner free from whims, vagaries and arbitrariness.
In this background, it is difficult to hold that if the Appellate authority has rejected the prayer of the appellant to dispense with the deposit unconditionally or has dispensed with such deposit subject to some conditions without hearing the appellant, on perusal of the petition field on behalf of the appellant for the said purpose, that order itself is vitiated and liable to be quashed being violative of principles of natural justice.
(Emphasis supplied)
It shall not be out of place to mention that Sub-section (2) of Section 4-M provides specifically that appellant shall be given reasonable opportunity of being heard if he so desires before final order is passed on his appeal. That requirement according to us cannot be read impliedly as an implicit condition in the third proviso to Sub-section (1) of Section 4(M). But it need not be impressed that when the Appellate authority has been vested with the discretion to dispense with such deposit unconditionally or on conditions, then it has to apply its mind on that question like a quasi-judicial authority taking into consideration all the facts and circumstances of the case including the undue hardship which has been pointed out on behalf of the appellant.
In that proviso the two expressions 'opinion' and 'discretion' both have been used. In view of the settled position that whenever a statutory authority has to form an opinion on a question, it does not mean that it has to be formed in a subjective or casual manner. That opinion must be formed objectively on relevant considerations. Same is the position in respect of the exercise of discretion. The (framers) of the Act require such Appellate authority to exercise its discretion in a reasonable and rational manner taking into consideration the relevant facts and circumstances of a particular appeal while considering the question as to whether the deposit of the amount of the penalty be dispensed with unconditionally or subject to the conditions.'
54. It is clear from the said pronouncement that on the facts of the said case, their Lordships of the Supreme Court had taken the view that the failure to afford an opportunity while considering the request for exemption is not fatal. On the contrary, it has to be pointed out that it has not been held by the Apex Court that the Appellate authority need not or shall not afford an opportunity of hearing while passing orders on the stay/exemption application.
55. It has been emphasized that to grant or not to grant or to afford or not to afford an opportunity of hearing while disposing of the stay/exemption application, the Authority has to form an opinion objectively on relevant consideration. Their Lordships have not laid down that no opportunity at all need be afforded to the appellant by the Appellate Authority while disposing of the stay/exemption application. Though the Division Bench of their Lordships have taken the view that it is difficult to hold that if the Appellate Authority has rejected the prayer of the appellant to dispense with the deposit unconditionally without hearing of the appellant, it cannot be held that the Order itself is vitiated and liable to be quashed being violative of principles of natural justice.
56. The said decision has been rendered with reference to the provisions of Mines and Minerals Act. There is difference in the methodology and expression between the two provisions. Proviso to Section 35F confers power on the Appellate authority to dispense with such pre-deposit subject to such conditions as he or it may deem fit and impose conditions so as to safeguard the interest of revenue. It is rightly pointed out that the element of discretion and exercise of fair discretion is prescribed in Section 35F.
57. It is the contention of the learned Counsel appearing for the petitioners that Section 35A has to be read into Section 35F. It is true that Section 35A mandates a hearing in the final disposal of the appeal by the Commissioner (Appeals). Sub-section (1) of Section 35A provides that the Commissioner (Appeals) shall give an opportunity to the appellant to be heard, if he so desires, when once it is being contended that Section 35F should be read into Section 35A even though Section 35F is silent about affording an opportunity of hearing it follows that such a hearing will constitute a fair and reasonable procedure. It is being highlighted by the petitioners if for non-deposit the appeal stands rejected, where does the opportunity of hearing arise and how Section 35A is complied.
58. It is also settled view that in case if the relevant material is not taken into consideration by the Appellate Authority while passing orders on the stay petition/waiver application, the Court could interfere with such orders in exercise of powers of judicial review and remit the matter back to the Appellate Authority for fresh consideration. So also by the statutory Tribunals if such an order is found to be deficient or the Authority has not taken into consideration of the relevant material and it passed an order rejecting the application without application of mind, it warrants exercise of power of judicial review. But with an appearance or the hearing of the stay petition/exemption application definitely enables the Commissioner (Appeals) to decide the request for exemption or stay in a manner expected of the said Appellate Authority, which application also requires to be disposed in a fair manner as a quasi judicial functionary.
59. The Counsel appearing for the writ petitioners referred to the later decision of the Apex Court in 1998 (103) E.L.T. 5 Sangfroid Remedies Ltd. v. Union of India as well as the decision of the Calcutta High Court in Bongaigaon Refinery & Petrochem. Ltd. v. Collector of C.Ex. (A), Cal. reported in : 1994(69)ELT193(Cal) and it is contended that wherever the statute confers a discretionary power on Public Officer, it is normal for exercise of such power by the person concerned in a fair and reasonable manner expected of it unless there is some sound and relevant reason for denying the benefits of discretionary power.
60. The Calcutta High Court in Tata Iron & Steel Co. Ltd. v. Commissioner (Appeals), Central Excise, Calcutta reported in : 1998(98)ELT350(Cal) while setting aside the Order passed by the Commissioner (Appeals) in respect of Order rejecting stay dispensation of pre-deposit, held thus :-
'The observation of the Commissioner extracted in the opening part of his judgment suggests that he was of the view that the existence of a prima facie case is a wholly irrelevant consideration in deciding the question about permitting or not permitting the appellant to ask for dispensing with the deposit of the amount in question. Perhaps the Commissioner was not correct in his approach since prima facie case, albeit, a strong and excellent prima facie case is indeed a relevant factor in deciding the question under the proviso to Section 35F of the Act as to whether an appellant is entitled to the relief of dispensing with the deposit of the amount of duty or penalty. Undoubtedly financial hardship, administrative inconvenience and such like other factors are also of paramount importance in entitling an appellant to ask for the dispensing with the deposit of amount but at the same time, if the appellant succeeds in establishing an excellent prima facie case and persuades the appellant forum to take a view, at the stage of admission of appeal or at the stage of an application seeking dispensation of deposit that the Order appealed against patently suffered from legal infirmities, this is a highly determinative factor for the appellate forum to consider while deciding the question as to whether the appellant was to be granted the relief of dispensation of deposit of the amount in question.
Unfortunately, however, in the manner the impugned order has been granted or passed by the ld. Commissioner he did not take into consideration all these relevant factors, thus resulting in miscarriage of justice.'
61. It is pointed out by the Revenue that the rule of natural justice does not necessarily extended to all cases and at all levels nor it confer a right of audience at the appellate stage as has been observed in F.N. Roy v. Collector of Customs - : 1983ECR1667D(SC) . However, it is pointed in Mohindersingh Gill v. Chief Election Commissioner reported in 1971 (1) SCC, 405, right of hearing has been claimed and assured. There is no dispute that the Commissioner (Appeals) is exercising quasi-judicial powers as the said Appellate authority has been constituted as the statutory Authority to determine questions affecting the rights of parties and it has the duty to act judicially. In Nagendra Nath Bora and Anr. v. Commissioner of Hills Division and Appeals, Assam and Ors. reported in : [1958]1SCR1240 , the emphasis being whether or not any rules of natural justice had been contravened should be decided not in a preconceived notion, but in the light of the statutory rules and provisions.
62. In the considered view of this court, Section 35F of the Act does not preclude a personal hearing, yet it may be contended that personal hearing is not a must. But when as a result of rejection of an application for stay/exemption, but if such an Order leads to the dismissal of the appeal, the very appeal is rendered nugatory and it deprives the right of appeal and fair hearing. In this respect, this Court has already referred to the decision of the Supreme Court in 1969 S.C. 430 Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi, wherein it had been held that grant of power of doing all such acts by employing such missions such statutory power carries with it the duty in proper cases to make such orders for staying proceedings as will prevent the appeal if succession being rendered nugatory. In the present case also, on the rejection of the application for exemption/stay and on the petitioners failing to deposit the amount within a period of three/two weeks as directed, the appeal stands rejected. Thus the appeal remedy and provision rendered nugatory. Such an approach or Order prevent the appeal unsuccessful and it renders the remedy of appeal nugatory. This pronouncement of the Supreme Court in this respect has to be emphasized at the risk of repetition.
63. Majority of the pronouncements in which the principles of natural justice i.e. audi alteram partem has been emphasized relate to final orders or adjudication or decision. There is no reason at all to hold that different scale has to be applied or adopted in respect of interim application or order passed by a quasi-judicial authority and more so result of such an interim order results in rejection of remedy of appeal itself.
64. In the Scheduled Caste and Weaker Section Welfare Association (Regd.) and Anr. v. State of Karnataka and Ors. reported in : [1991]1SCR974 , it has been held thus:-
'It is one of the fundamental rules of our constitutional set-up that every citizen is protected against exercise of arbitrary authority by the State or its officers. If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power and the rule of natural justice operates in areas not covered by any law validly made. What particular rule of natural justice should apply to a given case must depend to an extent the facts and circumstances of that case, the framework of the law under which the enquiry is held and the body of persons appointed for that purpose. It is only where there is nothing in the statute to actually prohibit the giving of an opportunity to be heard, but on the other hand, the nature of the statutory duty imposed itself necessarily implied an obligation to hear before deciding that the audi alteram partem rule could be imported.'
(Emphasis supplied)
65. In Ravi S. Naik v. Union of India and Ors. reported in : [1994]1SCR754 , the Apex Court held that principles of natural justice have an important place in modern Administrative Law and whether the requirement of natural justice have been complied with or not has to be considered in the context of the facts or circumstances of a particular case. It has been held thus :-
'Principles of natural justice have an important place in modern Administrative Law. They have been defined to mean 'fair play in action'. (See Menaka Gandhi v. Union of India, Bhagwati, J.) As laid down by this Court: 'They constitute the basic elements of a fair hearing, having their roots in the innate sense of man for fairplay and justice which is not the preserve of any particular race or country but is shared in common by all men' (Union of India v. Tulsiram Patel). An order of an authority exercising judicial or quasi-judicial functions passed in violation of the principles of natural justice is procedurally ultra vires and, therefore, suffers from a jurisdictional error. That is the reason why in spite of the finality imparted to the decision of the Speakers/Chairman by paragraph 6 (1) of the Tenth Schedule such a decision is subject to judicial review on the ground of non-compliance with rules of natural justice. But while applying the principles of natural justice, it must be borne in mind that 'they are not immutable but flexible' and they are not cast in a rigid mould and they cannot be put in a legal strait-jacket. Whether the requirements of natural justice have been complied with or not has to be considered in the context of the facts and circumstances of a particular case.'
66. In Satyavir Singh and Ors. v. Union of India and Ors. reported in : (1986)ILLJ36SC , D.P. Madon, J. speaking for the Bench held thus :-
'Article 14 applies not only to discriminatory cases legislation but also to arbitrary or discriminatory State action. Violation of rule of natural justice results in arbitrariness which is the same and where discrimination is the result of a State action, it is a violation of Article 14. Therefore, a violation of a principle of natural justice by a State action is a violation of Article 14.
The principles of natural justice apply both to quasi-judicial as well as administrative inquiries entailing civil consequences.
(Emphasis supplied)
It is well established both in England and in India that the principles of natural justice yield to and change with the exigencies of different situations and do not apply in the same manner to situations which are not alike. They are neither cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible and can be adopted, modified or excluded by statute and statutory rules as also by the constitution of the tribunal which has to decide a particular matter and the rules by which such tribunal is governed. Instances of cases in which it has been so held are Norwest Hoist Ltd. v. Secretary of State for Trade, (1978) 1 Ch. 201, Suresh Koshy George v. University of Kerala, : [1969]1SCR317 , A.K. Kraipak v. Union of India, : [1970]1SCR457 , Union of India v. Col. J.N. Sinha, : (1970)IILLJ284SC , Swadeshi Cotton Mills v. Union of India, : [1981]2SCR533 , J. Mahapatra and Co. v. State of Orissa, : [1985]1SCR322 and Menaka Gandhi v. Union of India : [1978]2SCR621 .'
67. In the light of the above pronouncements and catena of decisions, principles of natural justice has to be followed when a decision or Order being final or interim is arrived at which results in civil consequences or deprivation of a valuable right of appeal or right of appeal is denied as a result of such decision. The decision will also include a decision or Order in interlocutory stage and the expression of adjudication cannot be confined to the final adjudication or Order alone but it may take interim orders as well in a given circumstances. If such interim orders results in rejection of remedy of appeal or appeal is rendered nugatory and it merely confirms the order of adjudication or proceedings passed by the Original Authority. Even in respect of interim orders where there is no bar or a statutory exclusion of the applicability of principles of natural justice, the rule of audi alteram partem has to be read into, less it will offend Article 14.
68. Much reliance had been placed by the Central Board in the decision of the Apex Court in Union of India v. Jesus Sales Corporation reported in : 1996(83)ELT486(SC) , N.P. Singh, J. while disposing of the Civil Appeal held that mere failure to afford an opportunity of hearing an application for stay/dispense with pre-deposit, on the facts of the said case, it was held that the Order is not vitiated and is not liable to be quashed being violative of principles of natural justice. The said pronouncement of the Apex Court has to be confined to the facts of the said case and nowhere the Apex Court in the said case has ruled that the principles of natural justice or audi alteram partem will have no application in respect of an application for stay/exemption before the appellate Authority.
69. In my considered view, their Lordships have not laid down that it is not necessary or it is an universal rule that the principles of audi alteram partem is excluded in respect of such exemption/stay application. In this background of the said case and with reference to terminology employed in Section 4(M)(2).
'In this background, it is difficult to hold that if the appellate authority has rejected the prayer of the appellant to dispense with the deposit unconditionally or has dispensed with such deposit to some conditions without hearing the appellant, on perusal of the petition filed on behalf of the appellant for the said purpose, the order itself is vitiated and is liable to be quashed being violative of the principles of natural justice.'
(Emphasis supplied)
With respect of their Lordships, this Court is of the considered view that by this pronouncement, the Apex Court has not excluded the applicability of the principles of natural justice in respect of stay/exemption application. In my considered view, such an inference by the respondents is neither called for nor it could be sustained. Besides such a proposition which is too wide will offend Article 14 and deprive a right of appeal.
70. Proviso to Section 35F of the Central Excise Act provides that the Commissioner (Appeals) if he is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person he may dispense with such deposit subject to such condition as he may deem fit to impose. It is true that the said proviso emphasize that the appellate authority shall safeguard the interests of the revenue.
71. The Appellate Authority is required to examine as to whether in a given case, deposit of duty demanded or penalty levied would cause undue hardship to the appellant before it and also has to decide with reference to the facts of each case as to rate or quantum or extent to which such predeposit could be dispensed with and also subject to such conditions as the said Appellate Authority may impose and deem fit. All these aspects have to be taken care of by the Commissioner (Appeals).
72. It is not as if Section 35F excludes the applicability of principles of natural justice and it is not as if that the entire duty demanded or penalty levied has to be deposited without there being any exception. It may be that proviso could be considered as an exception and not as a general rule, but when an appeal is filed, it is in respect of a disputed tax and/or penalty. If such disputed tax/penalty is not remitted, the resultant position is the appeal stands rejected, which is the Order passed in the present case.
73. According to the impugned Orders, if the disputed duty/penalty is not deposited and direction is issued if not complied with within a period of two/three weeks, the appeal is liable to be rejected for non-compliance with Section 35F of the Central Excise Act. Hence, as a result of either failure to comply with the direction or failure to deposit the disputed tax/penalty, remedy of appeal is denied and the entire statutory appeal provision is frustrated or rendered nugatory as has been held by the Supreme Court in Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi reported in AIR 1969 S.C. 430. Hence discretion has to be exercised fairly and reasonably depending upon each case or contentions raised therein as the case may be. This would mean that the Commissioner (Appeals) has to apply his mind and his order of rejection of stay/exemption application as it frustrates the remedy of appeal and render statutory appeal provision nugatory, it is needless to emphasize that such an approach will defeat the very statutory remedy of appeal and an assessee who is unable to pay the disputed tax/penalty even for bona fide reasons or reasons beyond his control will be denied of a valuable right of appeal as the non-compliance leads to rejection of the appeal resulting in infraction of constitutional guarantees.
'75. In practice, the application for stay is not taken up on the day on which the appeal is presented before the Commissioner (Appeals). Application for stay is taken up after several months from the date of presentation of application and in the meantime, there are some developments. In some cases, error might have crept in calculation in arithmetics and in some cases, the appellant might have paid substantial amount or there might have been an Order of exemption or waiver which the Original Authority might not have taken into consideration or referred. If an opportunity of hearing is given while taking up the application for exemption/stay, it would enable the appellant before the Commissioner (Appeals) to produce some materials or such material including subsequent developments which may justify grant of full exemption or exemption in part on the peculiar circumstances of the case. This has to be taken note of as failure to remit the disputed tax or penalty results in rejection of the appeal which is an infraction of Article 14 of the Constitution.
75. In one of the cases on hand, the Appellate Authority had not taken into consideration of the additional deposit made by the petitioner and without referring to the amount so deposited which is admitted by the Assessing Authority, directions have been issued by the Appellate Authority to deposit the entire disputed tax and penalty levied. If an opportunity had been given, the appellant would have definitely pointed out the actual amount due after giving credit to the duty if any remitted.
76. In fact, in W.P. No. 11047 of 1999, I.T.C. Limited v. Commissioner of Central Excise (Appeals), the Appellate Authority, it has been rightly pointed out has not taken into consideration of what has already been deposited towards pre-deposit or remitted and without reference to the said remittances, substantial amount is directed to be deposited and exemption application is rejected. Such an eventuality could have been avoided, had an opportunity been given. There are many developments after the passing of the orders of adjudication and equally there will be a situation which might have financially worsened the assessee and this could as well be brought to the notice or placed before the Appellate Authority. Subsequent developments which are relevant which do not have a hearing also brought to the notice of the appellate authority.
77. There are many cases in which the entire property owned by assessee is charged or a floating charge is created in respect of various state levies and this may also disable the...from raising funds from any financial institutions in view of the floating charge. Thus in any view of the matter, opportunity of hearing is an essential before disposing of an application for stay/exemption and refusal to afford an opportunity violates Article 14 and infracts constitutional guarantees. Further, Section 35F do not exclude the applicability of the principles of natural justice and to certain extent, proviso to Section 35F confers a wide discretion, which discretion has to be exercised fairly and justly with a view to provide an effective appeal remedy or advance the remedy of appeal. Hence, the minimum requirement of hearing either the appellant or his Counsel is essential. In the light of the above pronouncements of the Apex Court, this Court is of the considered view that the refusal to afford an opportunity vitiates the impugned proceedings and the view taken is an arbitrary exercise.
78. Flitherto before and in particular before the impugned Circular issued by the Central Board, opportunity of hearing was being afforded. It is also admitted that other Commissioners (Appeals) afford opportunity of hearing while passing orders of stay/exemption application. There is no reason at all for this second respondent alone to deviate and such deviation also offends the concept of legitimate expectation which has gained importance.
79. In Union of India v. Hindustan Development Corporation reported in : AIR1994SC988 , it has been held that legitimacy of an expectation can be inferred only if it is founded on the section of law or custom or an established procedure followed in regular and natural consequences. Such expectation should be justifiably legitimate and protectable. The Apex Court had approved a passage in Administrative Law (6th Edition) by H.W.R. Wade and it has been held thus :
'It has to be noticed that the concept of legitimate expectation in Administrative Law has now, undoubtedly, gained sufficient importance. It is stated that 'legitimate expectation' is the latest recruit to a long lists of concepts fashioned by the courts for the review of administrative action and this creation takes its place besides such principles as the rules of natural justice, unreasonableness, the fiduciary duty of local authorities and 'in future, perhaps, the principle of proportionality'. A passage in Administrative Law, Sixth Edition by H.W.R. Wade page 424 reads thus:-
'These are revealing decisions. They show that the courts now expect Government departments to honour their published statements or else to treat the citizen with the fullest personal consideration. Unfairness in the form of unreasonableness here comes close to unfairness in the form of violation of natural justice, and the doctrine of legitimate expectation can operate in both contexts. It is obvious, furthermore, that this principle of substantive, as opposed to procedural, fairness may undermine some of the established rules about estoppel and misleading advice, which tend to operate unfairly. Lord Scarman has stated emphatically that unfairness in the purported exercise of a power can amount to an abuse or excess of power, and this seems likely to develop into an important general doctrine.'
Another passage at page 522 in the above book reads thus :-
'It was in fact for the purpose of restricting the right to be heard that 'legitimate expectation' was introduced into the law. It made its first appearance in a case where alien students of 'Scientology' were refused extension of their entry permits as an act of policy by the Home Secretary, who had announced that no discretionary benefits would be granted to this sect. The court of appeal held that they had no legitimate expectation of extension beyond the permitted time, and so no right to a hearing, though revocation of their permits within that time would have been contrary to legitimate expectation, just as they may create it, as seen above. In a different context, where car-hire drivers had habitually offended against airport byelaws, with many convictions and unpaid fines, it was held that they had no legitimate expectation of being heard before being banned by the airport authority.
There is some ambiguity in the dicta about legitimate expectation, which may mean either expectation of a fair hearing or expectation of the licence or other benefit which is being sought. But the result is the same in either case; absence of legitimate expectation will absolve the public authority from affording a hearing..
On examination of some of these important decisions it is generally agreed that legitimate expectation gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation is to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallized right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words where a persons's legitimate expectation is not fulfilled by taking a particular decision then decision-maker should justify the denial of such expectation by showing some orverriding public interest. Therefore even if substantive protection of such expectation is contemplated that does not grant an absolute right to a particular person. It simply ensures the circumstances in which that expectation may be denied or restricted. A case of legitimate expectation would arise when a body of representation or by past practice aroused expectation which it would be within its powers to fulfil. The protection is limited to that extend and a judicial review can be within those limits. But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest. If it is a question of policy, even by way of change of old policy, the courts cannot interfere with a decision. In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact. If these tests are satisfied and if the court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors.'
80. In the light of the above pronouncements as well as the pronouncement of the Supreme Court in Kraipak's case, : [1970]1SCR457 and Menaka Gandhi v. Union of India, : [1978]2SCR621 , this court has no hesitation in holding that the powers exercised by the Commissioner of Appeals while considering the application under Section 35F, being quasi-judicial powers, which in the very nature of things is required to be exercised fairly, judiciously and objectively and at any rate without arbitrariness and subject to the rules of natural justice including hearing of the application to grant and to record reasons for the conclusions ultimately arrived at as rejection of an application for exemption or waiver or stay leads to rejection of the very appeal itself and denial of a remedy of appeal which violates Article 14 and also renders the very remedy of appeal nugatory. The view taken by the Commissioner (Appeals) cannot be sustained.
81. In conclusion, this Court holds that the impugned Circular issued by the Central Boards of Excise and Customs is ultra vires and invalid as it infracts the constitutional guarantees on the first point. On the second point, this Court holds that the Circular also interferes or fetters the appellate powers of the Commissioner (Appeals) and the remaining points are also answered in favour of the petitions and this Court holds that the Commissioner (Appeals) had to afford an opportunity of hearing and the impugned proceedings are vitiated.
82. Individual orders which is being challenged also, it has to be pointed out without contradiction that the Commissioner (Appeals) had passed a stereotyped chamber orders without much strain and without reference to the merits of the case as well as the financial conditions and surrounding circumstances which might have weight with him if he had afforded an opportunity or hearing and if he had been apprised of full facts, subsequent events in view of the time lag as well.
83. Without expressing any final opinion, on the merits of the stay/exemption application, the impugned order rejecting the application for stay/exemption in all the writ petitions are quashed and the matter is remitted back to the Commissioner (Appeals) for affording an opportunity of hearing and thereafter pass fresh orders according to law and such exercise of powers should be fair, judicious and objective and at any rate shall not render the appeal remedy nugatory.
Accordingly, the writ petitions are allowed in the above terms. No costs. Consequently all the W.M.Ps are closed.