Holding

Section 129E applies only when the goods are not in Revenue custody; the Tribunal erred by not considering the custody and undue hardship, and the appeal must be remitted to the Tribunal for fresh consideration.

Summary

Bhavya Apparels Private Ltd appealed a customs duty assessment. The Customs Appellate Tribunal dismissed the appeal for failure to pre‑deposit Rs 3 crores as required under Section 129E of the Customs Act, 1962, and the Gujarat High Court affirmed that order. The Supreme Court held that Section 129E applies only when the goods are not in the custody of the Revenue; since part of the goods were in Revenue custody, the Tribunal should have considered this fact and the question of undue hardship before imposing the pre‑deposit condition. The Court further clarified that statutory terms like "shall" are generally mandatory but may be interpreted as directory depending on context, and that a statutory right of appeal can be conditioned only within the limits of the statute. Consequently, the Supreme Court set aside the lower courts' orders and remitted the matter to the Tribunal for fresh consideration, directing it to examine the custody and hardship aspects.

Issues considered

Whether Section 129E of the Customs Act, 1962 mandates pre‑deposit of duty when part of the goods are in the custody of the Revenue.
Whether the Tribunal erred by not considering the custody of goods and the possibility of undue hardship in imposing the pre‑deposit condition.
Whether the pre‑deposit requirement under Section 129E is mandatory or can be waived at the discretion of the appellate authority.
Interpretation of the word "shall" in statutory provisions – mandatory versus directory.
Whether a statutory right of appeal can be conditioned in a manner that defeats the vested right of appeal.

Legislation cited

Customs Act, 1962s. 128A, s. 129A, s. 129B, s. 129E

Subjects

Customs ActSection 129Epre‑depositright of appealstatutory interpretationundue hardshipcustody of goodsstrict constructiontax law

Judgment

BHAVYA APPARELS PRIVATE LIMITED AND ANR
"}· A
V.

UNION OF INDIA

SEPTEMBER 18, 2007

(S.B. SINHA AND H.S. BEDI, JJ.] B

Customs Act, 1962 :
).
s. J29E-Predeposit ofcustom duty-Order passed by Tribunal
directing pre deposit ofduty ofRs. 3 crores as condition to hear appeal c
ofassessee-Tribunal dismissing appeal on failure ofpredeposit ofduty
amount-High Court affirming same-Correctness of-Held: Not
correct-While passing order ofpredeposit, Tribunal failed to consider
the fact that part ofgoods was in custody ofRevenue-Also Tribunal
did not apply its mind in regard to question of undue hardship on D
assessee-Matter remitted to Tribunal for reconsideration.
Interpretation ofstatutes:
Taxing statutes-Held: To be construed strictly.
E
Mandatory or directory statute-Use ofword 'shall' -Held: Is
imperative in nature but may be interpreted as directory if context
otherwise demands.
'!'
An adjudication proceeding was initiated against the appellant
and assessment of Custom Duty was made. An appeal was preferred' F
thereagainst. Tribunal dismissed appeal for failure to predeposit,
Rs. 3 crores. Appellant filed writ petition before High Court which
was also dismissed. Hence the present appeal.

Partly allowing the appeal, the Court
G
+, HELD: 1. The Customs Act, 1962 was enacted to consolidate
and amend the law relating to customs. It provides for assessing an
order of custom duty. S.129E mandates pre-deposit of any duty and
interest, in appeal which is preferred in respect of the goods which
I H
2 SUPREME COURT REPORTS [2007] 10 S.C.R.

A are not under the control of the custom authorities or any penalty -r
levied under the Act. Proviso appended thereto, however, empowers
the Commissioner of Appeal or the appellate tribunal to dispense
with such deposit-if it comes to the conclusion that the deposit of duty
and interest would cause undue hardship to the appellant.
B [Para 8) [5-G; 6-B, CJ
2. A right of appeal is not a fundamental right. It is a statutory
right. As a right of appeal is a statutory right, it may also be hedged
by conditions. It is, however, trite that conditions imposed may not
be such which may for all intent and purport take away a vested right
C of appeal. [Para 9) [6-D]
Dilip S Dahanukarv. Kotak Mahindra Co. Ltd. & Anr., (2007) 5
SCALE 452, relied on.
3. S.129E of the Customs Act would be attracted where the
D goods in question are not in the custody of the Revenue. The said
provision, therefore, would be attracted only when the ingredients
thereof exist. In the instant case, part of the goods is in custody of
the Revenue. It was obligatory on the part of the Tribunal to take
that factor into consideration in making the order of pre-deposit.
E Furthermore, while exercising its jurisdiction, the Tribunal was also
required to apply its mind in regard to the question of undue hardship
on the part of the appellants upon considering existence of a prim a
facie case. Merit of the case ordinarily should not othenvise be gone
into unless the question on the face of it appears to be concluded.
[Paras 10 and 11) [6-E-G]
F
Kishori Pujari Granite Pvt. Ltd v. Union ofIndia, 184 ELT 225
andAshoka Rubber Products v. Colleetor ofC.Ex., (1989) 43 ELT 605,
referred to.
G 4.1. The taxing statute must be strictly construed. However, only
because the word "shall" is. '.used, the same may not be construed to _4-
be imperative in .character. [Para' . 17) [10-A,
~ . B]
Manish Maheshwari v. Asstt. Commissioner ofIncome Tax and
Anr., (2007) 3 SCALE 627 and Southern Petrochemical Industries Co.
H Ltd. v. Electricity Inspector and E.Tl.O. and Ors., (2007) 7 SCALE
..,
BHAVYAAPPARELSPRIVATELIMITEDv. U.O.I. .)

}--- 392, relied on. A

Mardia Chemicals Ltd and Ors. v. Union ofIndia and Ors., [2004]
4 sec 311, referred to.

4.2. The word "shall" primafacie would be construed to be
imperative in character. It may, however, be held to be directory in B
certain situation. While construing a statute of this nature, the
context plays an important role. Interpretation of a statute would
also depend upon the fact situation obtaining in the case. There are,
however, certain exceptions to the said rule. Even where a statute
is clearly mandatory or prohibitory, yet, in many instances, the courts c
will regard certain conduct beyond the prohibition of the statute
through the use of various devices or principles. Most, if not all of
these devices find their justification in considerations of.justice. It
is a well-known fact that often to enforce the law to its letter produces
manifest injustice, for frequently equitable and humane D
considerations, and other considerations of a closely related nature,
--+ would seem to be of a sufficient calibre to excuse or justify a technical
violation of the law. [Para 17] [10-C, D, G, H; 11-A]
Management, Pandiyan Roadways Corp. Ltd v. N Balakrishnan,
(2007) 7 SCALE 758, relied on. E

5. The Tribunal failed to take into consideration the limitation
of its jurisdiction under s.129E which emanates fro in the custody of
the goods. As a part of the goods is in the cus.tody of the Revenue
and furthermore in view of the fact that the High Court instead of F
considering the question as to whether direction to deposit the
amount would cause undue hardship or not has gone into the merit
of the_ matter, the interest of justice would be subserved if the
impugned judgments are set aside and the matter is remitted to the
Tribunal for consideration of the matter afresh. [Para 18] (11-B, C] G
-+' CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4340 of
2007.

From the Judgment and Order dated 04.10.2004 of the High Court
of Gujarat at Ahmedabad in S.C.A. 9569 of 2004. H
4 SUPREME COURT REPORTS [2007] 10 S.C.R.

A C.N. Sreekumar, Prakash R. Nayak and Harshad V. Hameed, for
the Appellant.
Vikas Singh, ASG, Amrita Narayan and B.K. Prasad for the
Respondents.
B The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.

2. Interpretation of the provisions of Section 129E of the Customs
)._'"
Act, 1962 (for short "the Act") is in question in this appeal which arises
c out of a judgment and order dated 4.10.2004 passed by a Division Bench
of the High Court of Gujarat at Ahmedabad in Special Civil Application
No. 9569 of 2004.
3. An adjudication proceeding was initiated against the appellant.
D Assessment of Custom Duty was made. An appeal was preferred
thereagainst. The said appeal was dismissed for failure to pre-deposit a
sum of Rs. 3,30,00000/- as directed by the Court of Appeal. +.,,
4. We may notice that in the earlier round of litigation when a
statement was made before the High Court that the Tribunal may hear
E the appeal on merit without asking the appellant to make any pre-deposit,
it was asked to make that prayer before the Tribunal. Pursuant thereto
an application was filed. The Tribunal in terms of its order dated
14.01.2004 opined:
y
F "We accordingly order that the appellant company deposit Rs. 3
crores out of the total duty demand upon such deposit further
deposit of duty and penalty imposed on the company is waived
and recovery thereof stayed. We further order that the director of
the company Shri R.C. Agarwal deposit Rs. 20 lakhs and the
G power of attorney holder of the Company Shri H.R. Agarwal
deposit Rs. 10 lakhs within 12 weeks of the date of the order. __,._
Compliance on 26.4.2004. Appeal is liable to be rejected for non-
compliance without further notice."

5. A writ application filed by the appellants questioning the
H
(

l
BHAVYA APPARELS PRIVATE LIMITED v. U.0.1. 5
[SINHA,J.]
..,.._ correctness of the said order has been dismissed by reason of the A
impugned judgment.
6. Mr. C.N. Sreekumar, learned counsel appearing on behalf of
the appellants, in support of this appeal, inter alia would submit:
(i) The High Court committed a manifest error insofar as it B
failed to take into consideration the ingredients of Section
129E of the Act.
(ii) Section 129E, if construed properly, would not give rise to
a conclusion that in absence of any provision made in that
behalf, non-compliance of the order of pre-deposit itself c
would lead to automatic dismissal of the appeal.
(rii) A right of appeal conferred upon a suitor having been
provided for in a statute, the provision for pre-deposit must
receive strict interpretation.
D
(iv) Provisions for payment of court fee and power to grant stay
-1 having been conferred in the Tribunal, the impugned
judgment could not have been passed particularly when
Section l 29E of the Act does not provide for any
consequence arising out of non-compliance of the order of E
pre-deposit.
7. Mr. Vikas Singh, learned.Additional Solicitor General appearing
on behalf of Union oflndia, on the other hand, would submit that
1 interpretation of Section 129E of the Act is concluded by a decision
of this Court in Vijay Prakash D. Mehta and Anr. v. Collector of F
Customs (Preventive), Bombay, [1988] 4 SCC 402.
8. The Act was enacted to consolidate and amend the law relating
to customs. It provides for assessing an order of custom duty. It also
provides for seizure of goods. Penalty may also be levied by the
G
adjudicating authorities. Chapter XV of the Act provides for appeals
to the Commissioner from any decision passed by an officer of custom
lower in rank than the said authority. Section 128A provides for the
procedure therefor. Section 129 provides for the constitution of the
appellate tribunal wherefor procedures have also been laid down.
H
'
i_
6 SUPREME COURT REPORTS [2007] 10 S.C.R.

A Proviso appended to Section 129A enumerates the cases in respect
whereof jurisdiction of the appellate tribunal is barred. Sub-section (6)
of Section 129A envisages payment of court fee. Sub-section (2A) of
Section 129B specifies a period of three years during which the appeal
may be disposed of. A Tribunal is also empowered to grant stay. Section
B 129E, however, mandates pre-deposit of any duty and interest in appeal
which is preferred in respect of the goods which are not under the control
of the custom authorities or any penalty levied under the Act. Proviso
appended thereto, however, empowers the Commissioner of Appeal or
the appellate tribunal to dispense with such deposit if it comes to the
c conclusion that the deposit of duty and interest would cause undue
hardship to the appellant.
9. A right ofappeal is not a fundamental right. It is a statutory right.
As a right of appeal is a statutory right, it may also be hedged by
conditions. It is, however, trite that conditions imposed may not be such
D which may for all intent and purport take away a vested right of appeal.
[See Dilip S. Dahanukar v. Kotak Mahindra Co. Ltd & Anr., (2007)
5 SCALE 452.]
10. We, however, having regard to the facts and circumstances of
E this case are of the opinion that the larger question, viz., interpretation of
Section 129E of the Act need not be gone into.
Section l 29E of the Act would be attracted where the goods in
question are not in the custody of the Revenue. The said provision,
therefore, would be attracted only when the ingredients thereof exist.
F
The learned Additional Solicitor General very fairly submits that a
part of the goods is in custody of the respondents. If that be so, in our
opinion, it was obligatory on the part of the Tribunal to take that factor
into consideration in makjng the order of pre-deposit. Furthem10re, while
G exercising its jurisdiction, the Tribunal was also required to apply its mind
in regard to the question of undue hardship on the part of the appellants
upon considering existence of a prima facie case. Merit of the case
ordinarily should not otherwise be gone into unless the question on the
face of it appears to be concluded.
H 11. The Tribunal while imposing the condition of pre-deposit was
BHAVYAAPPARELSPRIVATELIMITEDv. U.0.1. 7
[SINHA,J.]
)' required to apply its mind in regard to the existence or otherwise of A
the conditions laid down in the statute.
12. In Vijay Prakash D. Mehta (supra), applicability or
interpretation of Section 129E of the Act came up for consideration
before this Court wherein it was held:
B
"9. Right to appeal is neither an absolute right nor an ingredient
of natural justice the principles of which must be followed in all
judicial and quasi-judicial adjudications. The right to appeal is
a statutory right and it can be circumscribed by the conditions
in the grant. c
*** *** ***
11. These observations cannot be applied to the facts of this
case. Here we are concerned with the right given under Section
129A of the Act as controlled by Section 129E of the Act, and D
that right is with a condition and thus a conditional right. The
petitioner in this case has no absolute right of stay. He could
obtain stay of realisation of tax levied or penalty imposed in an
appeal subject to the limitations of Section 129E. The proviso
gives a discretion to the authority to dispense with the obligation E
to deposit in case of "undue hardships". That discretion must
be exercised on relevant materials, honestly, bona fide and
objectively. Once that position is established it cannot be
contended that there was any improper exercise of the
jurisdiction by the Appellate Authority. In this case it is manifest F
that the order of the Tribunal was passed honestly, bona fide
and having regard to the plea of 'undue hardship' as canvassed
by the appellant. There was no error of jurisdiction or
misdirection.

*** *** *** G

13. It is not the law that adjudication by itself following the rules
of natural justice would be violative of any right-constitutional
or statutory, without any right of appeal, as such, if the statute
gives a right to appeal upon certain conditions, it is upon fulfilment H
8 SUPREME COURT REPORTS (2007] 10 S.C.R.

A of those conditions that the right becomes vested and exercisable
·--f
to the appellant. The proviso to Section 129E of the Act gives a I

discretion to the Tribunal in cases of undue hardships to condone
the obligation to deposit or to reduce. It is a discretion vested in
an obligation to act judicially and properly."
B
13. Mr. Sree Kumar, however, submits that inter alia having regard
to the decision of the Madhya Pradesh High Court in Kishori Pujari
Granite Pvt. Ltd. v. Union of India, [ 184 EL T 225] and the decision
of the Kerala High Court in Ashoka Rubber Products v. Collector of
C C.Ex., (1989) 43 EL T 605, the matter requires reconsideration. As at
present advised, we are not inclined to do so.
14. We are satisfied that in a case ofthis nature, where a part of the
goods which is the subject matter of the proceedings under the Act is in
possession of the Revenue, proviso appended to Section 129E of the Act ·
D should have been invoked.
15. Justification for enacting such a provision has been considered
by a Constitution Bench of this Court in Mardia Chemicals Ltd. and Ors.
v. Union of India and Ors., (2004] 4 SCC 311 wherein it was held:
E "56. The contention of the petitioners is that in the first place such
an oppressive provision should not have been made at all. It works
as a deterrent or as a disabling provision impeding access to a
forum which is meant for redressal of the grievance of a borrower.
It is submitted where the possession of the secured assets has
F already been taken over or the management of the secured assets
of the borrower including the right to transfer the same, in that event
it would not at all be necessary to burden the borrower doubly
with deposit of 75% of the demand amount. In a situation where
the possession of the secured assets have already been taken over
G or its m~agement, it is highly unreasonable further to ask for 75%
of the amount claimed before entertaining the grievance of the
b()ITOWer.

57. Secondly, it is submitted that, it would not be possible for a
borrower to raise funds to make deposit of the huge amount of
H
/

.x
BHAVYAAPPARELSPRIVATELIMITEDv. U.0.1. 9
[SINHA,J.]
75% of the demand, once he is deprived of the possession/ A
management of the property namely, the secured assets. Therefore,
the condition of deposit is a condition of impossibility which renders
the remedy made available before the DRT as nugatory and illusory.
The learned Attorney General refutes the aforesaid contention. It
is further submitted that such a condition of pre-deposit has been B
held to be valid by this Court earl~r and a reference has been made
to SCC at p. 202 in Anant Mills Co.Ltd. Vs. State of Gujarat to
J
submit that such a provision is made to regulate the exercise of
the right of an appeal conferred upon a person. The purpose is
that right of appeal may not be abused by any recalcitrant party c
and there may not be any difficulty in enforcing the order appealed
against if ultimately it is dismissed and there may be speedy
recovery of the amount of tax due to the corporation.

*** *** *** D
64. The condition of pre-deposit in the present case is bad
rendering the remedy illusory on the grounds that (i) it is imposed
while approaching the adjudicating authority of the first instance,
not in appeal, (ii)there is no determination of the amount due as
yet (iii) the secured assets or its management with transferable E
interest is already taken over and under control of the secured
creditor (iv) no special reason for double security in respect of an
amount yet to be determined and settled (v) 75% of the amount
claimed by no means would be a meager amount (vi) it will leave
the borrower in a position where it would not be possible for him F
to raise any funds to make deposit of 75% of the undetermined
demand. Such conditions are not alone onerous and oppressive
but also unreasonable and arbitrary. Therefore, in our view, sub-
section (2) of Section 17 of the Act is unreasonable, arbitrary and
violative of Article 14 of the Constitution." G

16. The Constitution Bench, therefore, was of the opinion that such
a condition would be onerous and, thus, arbitrary if a suitor is required
to deposit such an amount at the initial stage and not at the appellate stage.
H
10 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 17. We are not oblivious that the taxing statute must be strictly
construed. [See Manish Maheshwari v. Asstt. Commissioner ofIncome ·"(
Tax and Anr., (2007) 3 SCALE 627 and Southern Petrochemical
Industries Co. Ltd. v. Electricity Inspector and E.T.IO. and Ors.,
(2007) 7 SC;\LE 392]
B We are also nQt oblivious of the fact that only because the word
"shall" is used, the same may not be construed to be imperative in
character.
In Management, Pandiyan Roadways Corp. Ltd. v. N. ...i.
C Balakrishnan, (2007) 7 SCALE 758, this Court observed:
"12. On a plain reading of the said provision and particularly in
view of the fact that the word "shall" has been used,primafacie
it would be construed to be imperative in character. It may,
however, be held to be directory in certain situation. While
D construing a statute of this nature, the context plays an important
role. Interpretation of a statute would also depend upon the fact
situation obtaining in the case. There are, however, certain .>-
exceptions to the said rule. The question came up for consideration
before this Court in UP. State Electricity Boardv. Shiv Mohan
E Singh and Anr., wherein it was, inter-alia, noticed:
96. Ordinarily, although the word shall is considered to be
imperative in nature but it has to be interpreted as directory if the
context or the intention otherwise demands. (See Sainik Motors
v. State of Rajasthan AIR para)
F 97. It is important to note that in Crawford on Statutory
Construction at p. 539, it is stated:
271. Miscellaneous implied exceptions from the requirements of
mandatory statutes, in general. Even where a statute is clearly
G mandat01y or prohibitory, yet, in many instances, the courts will
regard certain conduct beyond the prohibition of the statute through
the use of various devices or principles. Most, if not all of these
devices find their justification in considerations of justice. It is a
well-known fact that often to enforce the law to its letter produces
manifest injustice, for frequently equitable and humane
H
f
BHAVYAAPPARELSPRIVATELIMITEDv. U.O.I. 11
[SINHA, J.]
considerations, and other considerations of a closely related nature, A
would seem to be of a sufficient calibre to excuse or justify a
technical violation of the law."
18. In view of our findings aforementioned, the matter, in our opinion,
requires reconsideration at the hands of the Tribunal. The Tribunal failed B
to take into consideration the limitation of its jurisdiction under Section
129E which emanates from the custody of the goods and as a part of the
goods is in the custody of the Revenue and furthermore in view of the
fact that the High Court instead of considering the question as to whether
direction to deposit the amount would cause undue hardship or not has
gone into the merit of the matter, the interest ofjustice would be subserved C
if the impugned judgments are set aside, and the matter is remitted to the .
Tribunal for consideration of the matter afresh. We direct accordingly. We
would request the Tribunal to consider the desirability of disposing of the
matter as early as possible.
D
19. The appeal is allowed to the aforementioned extent. No costs.
D.G. Appeal partly allowed.

,.\ ..