23 July, 2012

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CESTAT defines Scope of Undue Hardship

Skoda Auto INDIA PVT LTD v. CCE, AURANGABAD

- Applicants are engaged in the manufacture of cars. Applicants are selling cars through dealers throughout the country. As per the Agreement the dealers were given fixed discount for selling cars of the appellant company and dealers have to provide Pre-Delivery Inspection (PDI) and two free services from such dealers' margin. The demand was confirmed on the ground that the charges in respect of PDI and free service charges are to be added to the transaction value of the cars in view of the provision of Section 4 of the Central Excise Act, 1944 and Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.


- Two issues in Question 

a) Whether PDI and free service charges includable in Valuation for central excise?
b) Waiver of pre-deposit of Demand, Interest & Penalty.

For a), refer to complete judgement with link below.

Waiver of pre-deposit of Demand, Interest & Penalty

35F. Deposit, pending appeal of duty demanded or penalty levied-

Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied :

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

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

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

12. As noted above there are two important expressions in Section 35(F). One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka and Ors . (AIR 1994 SC 923) that under Indian conditions expression “Undue hardship” is normally related to economic hardship. “Undue” which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

13. For a hardship to be ‘undue' it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it.

14. The word “undue” adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.

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

15. In view of the above decision of the Hon'ble Supreme Court we find that the present case is not case which can be considered that denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen' faith. As the Larger Bench of the Tribunal in the case of Maruti Suzuki India's case (supra), after taking into consideration of the decision now relied upon by the appellant, on the same issue held in favour of the Revenue, therefore the applicant has not made out a case for waiver of pre-deposit of the dues. However, taking the facts and circumstances of the case and interest of Revenue as provided under Section 35F of the Central Excise Act, 1944, we direct the applicant to deposit 50% of the duty amount within eight weeks. On deposit of the above mentioned amount, we waive pre-deposit of the balance of duty, interest and penalty and stay recovery thereof during the pendency of the appeal.

16. Report compliance on 06.9.2012.

Judgement Citation : 2012 (7) TMI 509 - CESTAT, MUMBAI

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