Holding

The appellate authority’s order directing the respondent to deposit 25 % of the penalty, exercised under the third proviso of Section 4‑M(1), is a reasonable exercise of discretion and does not require an oral hearing; therefore, the order is valid.

Summary

The respondent, Mis. Jesus Sales Corporation, was licensed to import brass scrap under a duty‑exemption scheme and was required to export a specified quantity. A show‑cause notice under Section 4‑M of the Imports and Exports (Control) Act, 1947 led to a penalty of Rs 6 lakh. The respondent appealed the penalty and sought exemption from the statutory pre‑deposit of the penalty amount. The appellate authority, exercising the discretion conferred by the third proviso of Section 4‑M(1), directed the respondent to deposit only 25 % of the penalty or furnish a bank guarantee. The respondent challenged this order in the Delhi High Court, which quashed it on the ground that no oral hearing was afforded, alleging a breach of natural justice. The Union of India appealed to the Supreme Court. The Court held that the appellate authority’s direction was a reasonable exercise of its discretion and that the statute does not mandate an oral hearing before such a decision; consequently, the High Court’s order was set aside.

Issues considered

Whether the appellate authority must afford an oral hearing before exercising the discretion under the third proviso of Section 4‑M(1) of the Imports and Exports (Control) Act, 1947 to dispense with the pre‑deposit of a penalty.
Whether the absence of a personal hearing renders the order directing a 25 % deposit violative of the principles of natural justice.

Legislation cited

Imports and Exports (Control) Act, 1947s. 4-M(1), s. 4-M(2)
Limitation Act, 1963s. 5

Subjects

natural justiceoral hearingpre‑depositpenaltyappellate authority discretionadministrative lawtax and revenue law

Judgment

'f
"

''
A ' UNION OF INDIA AND ANR.
v.
MIS. JESUS SALES CORPORATION

MARCH 26, 1996

B (N.P. SINGH AND K. VENKATASWAMI, JJ.]

Imports and Exports (Control) Act, 1947:

S.4-M( 1), Third Proviso-Imposition of penalty on importer-Ap-
e peal-Appellate authority directing the importer to deposit 25% of the amount
of penalry---Order challenged as violative of principle of natural justice since
appellate authority did not give the importer an oral hearing-High Court
quashing the order-Held, appellate authority' passed a reasonable
order-Third proviso does not envisage an oral hearing to be given to importer
before passing the order.

Administrative Law :

Principles of natural justice--Oral hearing-Held, order of appellate
authority under the third proviso to s. 4-M(1) of Imports and Exports (Con-
trol) Act, 1947 directing the' importer to deposit 25% ·of amount of penalty
·E without affording him an opportunity of personal hearing is not violative of
principles of natural justice.

A show cause notice was issued to the respondent under s.4-M of the
Imports and Exports (Control) Act, 1947; and ultimately a penalty of Rs.
6 lakbs was imposed on it. The respondent filed an appeal alongwith an
F application for dispensing with the pre-deposit. The appellate authority
directed the respondent to deposit 25% of the penalty amount or furnish
bank guarantee of the equal amount. The respondent challenged the said
order by filling a writ petition before the High Court. which allowed the
writ petition and quashed the order holding that the appellate authority
G should have given an oral hearing to the respondent before taking a
decision under the third proviso to sub-section (1) of s.4-M of the Act.
Aggrieved, the Revenue filed the present appeal.

Allowing the appeal, this Court

If HELD : 1.1. The Appellate authority by giving a direction to the
894
0

U.0.1. v. ~ESUS SALES CORPORATION 895

respondent to deposit only 25% of the.amount ofthe .penalty imposed upon A
it, passed a reasonable order which should not have been held to be invalid
,by the High Court merely on the gr~und that before passing the said order
.the .responde~t was
. not given oral hearing.
.
[902-G; 903-AJ

1.2. The third proviso to sub-section (1) of s.4-M which vests power in
the appellate authority to dispense with the deposit of.the amount of.the ·B
penalty unconditionally or on some conditions does not say specifically that
the order has to be passed only after hearing ·the parties concerned. The
appellate authority may dispense with such deposit in.its discretion taking
into.consideration the undue hardship which sm:h deposit'may cause to the
appellant. The discrel.ion is to be exercised in a reasonable and rational C
manner free from whims, vagariennd arbitrariness. [90l'D'E; 900•E]

2.1. Under different situations and conditions the ·requirement of
compliance of the principle of-natural justice vary. The courts cannot insist
that under all circumstances arid under different siatutory provisions per-
sonal hearings have to be afforded to the persons concerned. [900-G]
1 ... ' . . .' . .
D
' Shyam Kisltore imd Oihers·.v. Milnii:ipal Corporation of Delhi and
. Another, [1993) 1 SCC 22; referred tO. . . .
' .,.,, . ·'.>
'2.2. Wh~n I'rincfpfes·OfnatOrafjustice requi~e an opportuhityfo be
' ' ' :E
heard before -an adverse order is ,passed on any appilal, ,or application, it.
does. not .ht alf. drcumstan·ces mean a personal hearin('.'The ·reqnirement
is complied With by affording an opportunity to the person concerned tci
· . present his .case J1efore such quasi-judicial authority who is expected' to
.apply his judicial mind. to the issu.es .involved. ;[901'8,G)
F
2.3. In the matters of taxation and revenue, the normal rule is that
before :filing the appeal or before the appeal is heard, the person concerned
shotild deposjtthe amount.which be· has .been directed. to deposit as a tax
or .Penalty.. The non-deposit of such amount .itself is an exception ·which
has .been. Incorporated in ·different· statutes Including the ,present one
~erein the statutory requlrem~nt as ·envisaged ·by second proviso to. s; 4-
M(l), Is that beforj! an appeal is entertained, the amo.unt of penalty has
to be deposited by the :appellant; .n order illspenslnl! with ·s.uch ·deposit
shall amount to '8D exception to the said requirement ·Of deposit. 'Thel"j!•
fore, tr. the appellate authority while passing .an order Under the third
proViso .rejects the prayer of an appellant to dispense with the deposit H
.\ !
,.
~

896 SUPREME COURT REPORTS [1996) 3 S.C.R.

A unconditionally or dispenses with such deposit subject to some conditions
without hearing the appellant, on perusal of the petition filed on behalf of
the appellant for the said purpose, it can not be said that the order itself
is vitiated and liable to be quashed being violative of principles of natural
justice. (901-F-H; 902-B-C]

B CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3597 of
1995.

From the Judgment and Order dated 29.9.93 of the Delhi High Court
in C.W.P. No 2441 of 1993.
c A. Subba Rao and Ms. A. Subhasini for the Appellants.

Atul Nanda and P. N. Puri for the Respondents.

The Judgment of the Court was delivered by
D N.P. SINGH, J. This appeal has been filed on behalf of the Union
of India against the judgment of a Full Bench of Delhi High Court holding
that an oral hearing had to be given to the respondent by the Appellate .,,
authority before taking a decision under third proviso to sub-section (1) of
Section 4-M of the Imports and Exports (Control) Act, 1947 (hereinafter
E referred to as the 'Act'). On the aforesaid fmding the writ petition filed on
behalf of the respondent was allowed and the order passed by the Appel-
late authority was quashed. A direction was giv.en to afford an opportunity
to the said respondent to be heard on the question as to whether the appeal
filed on behalf of the respondent should be entertained without deposit of
F the penalty imposed.

The respondent obtained an advanced licence for import of brass
scrap on certain conditions, under the Duty Exemption Scheme. The said
licence was issued subject to the respondent's exporting 78 .MT Brass
Artware for approximate FOB value of Rs. 14,00,420. A show cause notice
G was issued to the respondent under Section 4-M of the said Act on basis
of the report of investigation. Ultimately a penalty of Rs. 6 lakhs was
imposed against the said respondent. An appeal was filed on behalf of the
respondent along with an application for dispensing with the pre-deposit.
By a communication dated 18.2.1993 issued on behalf of the Appellate
H authority,' the respondent was directed to deposit 25% of the penalty
U.0.1. v. JESUS SALE? CORPORATION [N.P. SINGH,J.] 897

amount or bank guarantee for the same amount. The validity of this 'A
· communication was questioned before the High Court saying that before
rejecting the prayer made on behalf of the respondent to dispense with the
·• · whole amount o_f penalty an opportunity should have been given to the said
respondent of being heard in terms of the proviso to Section 4-M of the
Act. Section 4-M of the Act provides :
. . . B
"(1) Any person aggrieved by any decision or order made under
this Act may prefer an appeal, -

·l. (a) where the decision or order has been made by the Chief
Controll~r or Additional ~hief Controller, to the Central Govern- C
ment;
'.
(b) Where the. 'decision or order has been made by any officer
below the rank of the Additional Chief Controller, to the Chief
Controller or where. he so dir~cts, to the Additional Chief Con-
troller, · - · . ' D

within a -period of forty-five days from the date on which the order
is· served on such.person,:

Provided that the Appellate authority may, if itis satisfied that
the appellant was prevented by sufficient cause from preferring . E
the appeal within the aforesaid period of forty-five days, allow such
appeal to be preferred within a further period of forty-five days:

Provided further that in .the case of an appeal against an order
imposing a penalty, no such appeal.shall be entertained unless the
amount of the penalty has been deposited by the appellant: F

Provided also that, where ihe Appellate authority is of opinio~
that· .the deposit to be made will cause u_nciue hardship to the
appellant, it may, at its discretion, dispense with. such deposit either .
·.~·· .
unconditionally o} subject to such' conditions as it 'ro'ay impose.
. . .. ' G
"'
.. !"
.(2) The Appellate authority may, after giving to the appellant a
reasonable opporttin1ty of being heard, if he so desires, atid after
making such further inquiries, if any, as it may consider neces~ary,
· pass such orders as it thinks fit, confirming, modifying or reversing
the decision or order app_ealed ·against, or may send back the case, H
,,
898 SUPREME COURT REPORTS [1996) 3 S.C.R.

A with such directions as it may think fit, for a fresh adjudication or
decisions, as the case may be, after taking additional evidence, if
necessary:
•
Provided that an order enhancing or imposing a penalty or
confiscating goods or materials of a greater value shall not be made
B under this section unless the appellant has had an opportunity of
making a representation, and, if he so desires, of being heard in
his defence."

In view of the aforesaid Section any person aggrieved by any decision or
C order made under the said Act may prefer an appeal before the authority
prescribed there in and within the time fixed. The first proviso to sub-sec-
tion (1) of Section 4-M vests power in the Appellate authority if it is
satisfied that appellant was prevented by sufficient cause from preferring
the appeal within the period prescribed to allow such appeal to be
D preferred within a further period of forty-five days. The second proviso
prescribes a condition that an appeal against an order imposing a penalty
shall not be entertained .unless the amount of the penalty has been ..,
deposited by the appellant. Having said so, the third proviso says that
where the Appellate authority is of the opinion that the deposit to be made
will cause undue hardship to the appe:Iant, it may at its discretion dispense
E with such deposit either unconditionally or subject to such conditions as it
may impose .. Neither the first proviso which vests power in the Appellate
authority for condonation of delay in filing the appeal nor the third proviso
which vests power in the Appellate authority to dispense with the deposit
of the amount of the penalty unconditionally or on some conditions say
p specifically that such orders have to be passed only after hearing the parties
concerned. The Appellate authority in its discretion may condone the delay
in filing the appeal. Same is the position so far the question of pre-deposit
of the amount of penalty is concerned. The Appellate authority may
dispense with such deposit in its discretion. The proviso relating to the
condonation for d6lay in filing the appeal is more or less on the pattern of
G Section 5 of the Limitation Act. Some how, a practice has grown
throughout the country that before rejecting the prayer for. condonation of
delay in filing the appeal or application, opportunities are given to the
appellants or petitioners, as the case may be, to be heard on the question
whether such delay be condoned. Opportunities to be heard are also given
H to the contesting respondents in snch appeals. In different statutes where
·. :u.o.I. v. JESUS SALES CORPORATION (N.P. SINGH, J.] · 899

power has been vested in the Appellate auihority io coiidone the' de.lafit\. A'
~ filing si\cli appeals or applicatioris; th.ere are ·no·specific provisions in those
statutes saying that before such delays are condoned the appel\allts or the·
applicants shall be heard, ·but on basis of practice which has grown during
the years the courts and quasi- judicial authorities have been hearing the
appellants and applicants before dismissing such appeals or appHcations J3t
as barred by limitaiions. It can b~ said that courts have read the.require-
ment~ of hearing the appellants: or the applicants before· dismissing their·
appeals or. applications filed beyorid time on principie of iiaturai justice,
although the concerned statute does ·not prescribe- such· requirement
specifically. rJ.
A. ', ' c
·Now the question is as to whether the sanie requirement· has to be·
read as an irripHcit condition whil<fronstruing the scope 6f third proviso tci
sub-section (l)'to·Section 4-M, i.e. the Appellate authority-before' reflising·
to entertain an appeal on. the ground that no. deposit of'the amotlht of
penalty imposed had been made, should hear the appellant ort the ·question DJ
of dispensing with such deposit unconditionally or subject to •conditions. It ·
may ·be mentioned at the outset that the provisfons 'requiring pre-deposit
of the amount of pe~alty or tax imposed befpre the appeals are heard are·
of two types.· .There are sortie statutory provisions which specifically·
prescribe and provide'that ·b'efore the appeals are heard, the amount 'of the E <
or penalty imposed have fo be deposited. Nd. discretion has been· ieft by·
the statute in. question in the .Appellate authority ·to \vaive 'such ·deposit
taking lt'ito consideration the hardships of the appellants concerned.·One ·
such provision was considered by this Court in the 'case of Shyam Kislwre
and Othe1~ v. Municipal Co1poratioi1 'of Delhi dhd Ai1dther, [1993l 1 SCC 22
Under Delhi.Municipal Corporation Ac!, 1957. In that 'Act, pre-deposit' is·· F ~
a'must before an appeal can be heard.This.Court hdd·tliat the Appellate'
authority has'no jurisdictiorito".vaive the condition or stay Ccillection of tax•
pending disposal of the appeal. The grievance that'the' said prcivisiori' in
that-event shall be deemedio be 'violative·of article 14.bf'the C6nstitutioii;
being· harsh i~ nature was rejected. But there are statutes which vest power'• G'
in the Appellate aqthorities to waive deposit unconditionally or With con: ·
ditions'. So· far tlie present case With which we are concerneil, as already ..
pointed out above, the· third proviso vests power in ihe Appellate •authority
to dispense with the. amount of the penalty iincondiiionally or tubje~Ho ·
conditions."As such it is different from the provision undet the· Delhi' Jcf!
900 SUPREME COURT REPORTS [1996) 3 S.C.R.

A Municipal Corporation Act referred to above. Here the discretion has been
vested specifically in the Appellate authority to dispense. with such deposit
either unconditionally or subject to such conditions as it may impose taking
into consideration the undue hardship which such deposit may cause to the
appellant.
B
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
c 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 dis-
cretion has been exercised, courts have refused to countenance the same.
D 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
E 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 ar-
bitrariness. .,.

The High Court has primarily considered the question as to whether
F denying an opportunity to the appellant to be heard before his prayer to
dispense with .the deposit of the penalty is rejected, violates and con-
travenes the principles of natural justice. Jn that connection, several judg-
ments of this Court have been referred. It need not be pointed out that
under differen~situations and conditions the requirement of compliance of
G the principles of natural justice vary. The courts cannot insist that under
all circumstances and under different statutory provisions personal hear- y
ings have· to b_e afforded . to the persons concerned. If this principle of
affording personal hearing is extended whenever statutory authorities are
vested with the power to exercise discretion in connection with statutory
H appeals, it shall lead to chaotic conditions. Many statutory appeals and
U.O.i.v. JESUS SALES CORPORATION [N.P. SINGH, J.] 901

applications are dispo~ed of by the competent authorities who 'have bee~ A
i vested "1ith powers to dispose of the· same. Such auth6rities which shali be
deemed to be quasi- judicial authorities "are expected to apply their'judicial.
1
mind over the grievances made by the appellants"or applicants 'cbncerned, .
but it cannot be lield that before dismissing such appeals or application~
in all events the quasi- judicial authorities musr hear the appellants or the B,
applicants, as the ·case rtiliy be. When principles· of natural j~stice require
an opportunity to be heard before an adverse order is passed o\n\rty'appe'al;
or application, it does not in all circumstances mean' a personal he"afing.
The requirement is complied with· by affording, an opportunity 'io the'
> person concerned to present his case before such quasi-judicial authority C
who is expected to apply his judicial mind to the issues involved .. Of course,
if in his OWn discretioiJ. lf he ~equires ·the appellant 'br the appli'cant to be
. he~rd because of spe~ial facts ~nd circumstance~ the case; then certainly
•. ; \ . ' • . . '
of ,• • . . . ' . . . ,,.,1,
ir is always open to such authority to decide the appeal or the apphcat10n
• - . ·. ,-. . . - J- . . ..., . . . • 'f - .. • . ,,-

oiily after affording a personal hearing. But any order passed after taking
inio consideratibn the· points 'raised in the appe~l or the appii~ation shali D '
• , • • • t • I. . · · : - ;t. •

not be held to be invalid merely on the ground that no persona_! hearing
. had bei:n afforded. This is'all the mo~e-importanfiii the'context ofiaxation
,-.., -1 ' . t t· ' •· · , . I _ . -· · ·
and revenue matters. When ·an authority has determined. a tax liability or
. . . • . . . .,·. ' . ' , ·r· .·. .
has imposed a penalty, then the requirement that before the appeal. is E •
heard such tax or penalty should b~· ~~p'o~ited 'cannot ·be held io bd
~' ' • '· < . . ' ' ; f . • . •'11
unreasonable as already pointed out above.· In the case of Shyam Kishore
v. Municipal C01porati01i of Delhi, (supra) it has .been, hdd by'this cci1~f
, ' • • > • ' • • ,,< 1' . '• ,,
that such requirement cannot be held to be harsh or Violative of article 14 ·
of the Constit~tion so ~s to declare the ;eqtiir'~n{ent of pre-dbposit itself
as 'unconstitutional. I~ thiS ·baJkgfOu~d·, it ~~n be said iha.i' norinal r'~i~ is F '
" ·• ~ .·
that before filing the appeal or before the appeal is .heard,· the person
..
' . ;"/ . ~ -• ' '.· ' ~.·.

1
concerned should deposit tlie -amount which he has been. directed 'to •
' • :. ' ' • • ... ) ·- i I - • .-. ' - .. ~ ' . ;, ' ,J. -· •. __., •• ~ . ·• l ... ;
deposit as a tax or penalty. The non-deposit of such amount itself is an
l'" 1· · . ' . , · · • · · . r ,... · , t, · . · ·. -r ' ·;
ex2eption which hasbeeii incorp?raied in different Statutes including the
1
one witb.'which are co~cerned.' Second p~ovisci'io sub-section (1) of.Se~tion G ,
4-M says in clear .and unambiguous words that'~;{ app~al against an c:i~cter
imposing a penalty shall not be entertained unless the amom1t of the
' • . . • y . ' . - ' . . ' . • .. .. ·. . i : (· •

pe.nalty has been deposited by the appellant. Thereafter the thi_rd provis9.,
vests a discretion i~ such Appellate authority io dispense. with s~ch deposit ,
. unc~ndiiionally or subje~t to' sue~ .conditions "as it may i;;,p~se in its . H
· .., , fT f . · l' J ·•
902 SUPREME COURT REPORTS (1996] 3 S.C.R.

A discretion taking into consideration the undue hardship which it is likely
to cause to the appellant. As such it can be said that the statutory require-
ment is that before an appeal is entertained, the amount of penalty has to
be deposited by the appellant; an order dispensing with such deposit shall
amount to an exception to the said requirement of deposit. In this back-
B ground, 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 lo 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 liable to be quashed being
C violative of principles of natural justice.

It shall not be out of place to m.ention that sub-section (2) of Section
4-M provides specifically that appellant shall be given reasonable oppor-
tunity 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
D implicit condition in the third proviso to sub-section (1) of Section 4-M.
But it need noi be'impressed that when the Appellate authority has been ·
vested with th~ discretio~.t~i"dispense with such deposit unconditionally or
on conditions, then it·. ha;, fo apply its mind on that question like a
. ' , ;J·c
quasi-judicial authoiity. taking into'. consideration all the facts and cir-
E cumstances of the ·case including the undue hardship which has been
pointed out on behalf of the appellant. In that proviso the two ~xpressions
'opinion' and .:discretion' both have have been used.Jn vie~ of the settled
position that ;.,henever a statutory a~thority has to form an opinion on a
qt1estion, it does not mean that ·it has io be formed in a subjective or casual
manner. Thaf opinion must be formed obje~tively on'relevant considera-
F
tions. Same i.s the position in respect of the exercise of discretion. The
framers of the Act require such appellate authority to exercise its discre-
tion 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
G dispensed with unconditionally or subject to the conditions.

In the. present case on the application filed by the respondent, a
direction wds given to deposit only 25% of the amoun.t of the penalty which
had been iffiposed against the said respondent. According to us, the
H Appellate authority passed a reasonable order which should not have been
\,/

U.0.1. v. JESUS SALES CORPORATION [N.P. SINGH, J.] 903

held to be invalid by the High Court merely· on the ground that before A
passing the said order the respondent was n?t given oral hearing, which
amounted to 'violatio·n of the .principles of natural justice.

The appeal is accordingly allowed. The ·impugned order is set aside.
In the facts and circumstances of the case, there shall be no order as to
cost. . ' B

R.P. Appeal allowed.

' ' ..

! ' • . '·

••
.. ,.

. '•

·•

'