Pre-deposit – A Nightmare?
EVERY assessee and his Advocate/Consultant shiver at the very thought of pre-deposit. The Department is famous for inflating demands on unsustainable issues and adjudicating authorities blindly confirm the demands made in the Show Cause Notices. And when you go to the Tribunal, there is the Damocles' sword of pre-deposit hanging on your head. Finally the appeal may be allowed but initially, you have to make a pre-deposit. When the impugned order demands Crores of rupees, the Tribunal would be naturally inclined to ask for at least 25 percent of the demand as pre-deposit – and this will also run into Crores. Most of the times, no assessee will be in a position to make this pre-deposit. And normally the High Court or the Supreme Court would not like to interfere with the interlocutory orders of the Tribunal. Where does the poor assessee go?
Once I approached a High Court against a pre-deposit order of the Tribunal against a client whose factory was closed and who had absolutely no means of paying the pre-deposit. I submitted to the Court that my client had no money and there was no way by which he could pay the pre-deposit. The Court asked me if I could submit a bank guarantee. I said, "no bank would give my client a bank guarantee". Then the Court asked me what would happen, if I lost the case finally in the Tribunal. I told the Court, "now or then, my client has no money to pay, but please give us an opportunity to prove our innocence."
The High Court was kind enough to consider my prayer and held, "the petitioner – Industry is not working at present"as the same is closed since June, 2003". This one fact undoubtedly may disclose the severe financial constraints and the financial hardship being faced by the petitioner on account of which it could not make necessary pre-deposit in terms of the Stay Order dated 19-04-2005 passed by the Tribunal. Normally, this Court in exercise of the jurisdiction under Article 226 of the Constitution of India does not interfere with such interlocutory order which creates any irreversible situation but having regard to the facts and circumstances and more particularly, the fact that the industry is closed ever since June, 2003 due to which the petitioner is not in a position even to make the pre-deposit, we consider it appropriate to modify the impugned order passed by the Tribunal and accordingly direct the Tribunal to hear the appeal preferred by the petitioner on merits . xxx The Tribunal shall not insist for the pre-deposit " [ ]
This was of course a rare case! Remember the case where a Commissioner imposed a personal penalty of Rs. 50 Crores on a BHEL employee? – [ ]. What would have happened if the Tribunal had asked him to pre-deposit some ten Crores?
Since the Departmental adjudication has become a total farce, this pre-deposit menace has to be removed. The government should stop treating all assessees as thugs, evaders and smugglers. They are in fact better partners in the enterprise of tax collection. The law should be amended to stipulate that there shall be no pre-deposit for appeals till the stage of Tribunal. This would also reduce opportunities for corruption at several stages.. If the government considers assessees as partners in progress instead of as adversaries, this can be done.