CE/ST/Customs - Appeals - Mandatory Pre-deposit - Unconstitutional?
T&AP High Court grants Interim Relief - allows appeal to be filed without pre-deposit; waiver can be sought under the old regime. Notice Issued to Attorney General
THIS is a great order. In a few lines, the High Court touched upon very serious issues. As you will remember, from 6.8.2014, appeals in Central Excise, Customs or Service Tax are not accepted if the mandatory pre-deposit of 7.5% or 10% is not paid.
The Petitioner prayed the High Court of Judicature at Hyderabad that:
1. Section 35F of the Central Excise Act, 1944 read with Section 83 of Finance Act, 1994, as amended by Section 105 of the Finance (No.2) Act, 2014 w.e.f. 06.08.2014 which provides for a mandatory pre-deposit of 7.5% for first appeals and 10% for second appeals of the total tax or penalty demanded, as a mandatory condition for the entertainment of the appeal, be declared as unconstitutional;
2. CBEC Circular No. dated the 16th September, 2014, be declared as unconstitutional and ultra vires the Act; (This Circular specifically mentioned that the amended provisions apply to appeals filed after 6th August, 2014. Sections 35F of the Central Excise Act, 1944 and Section 129E of the Customs Act, 1962 contain specific saving clause to state that all pending appeals/stay applications filed till the enactment of the Finance Bill shall be governed by the erstwhile provisions.);
3. CESTAT Circular F.No.15/CESTAT/General/2013-14, dated 14-10-2014, issued by the Registrar, CESTAT, be declared as unconstitutional and ultra vires the Act; (In this Circular, the CESTAT clarified that Pre-deposit is mandatory even for appeals against orders issued prior to 06.08.2014)
4. The Order-in-Original dated 26.11.2014 may be quashed.
The High Court observed that two points are involved:
1. The vires of the amendment of Section 35 (F) of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994.
2. The retroactivity of this amendment viz., from 06th August 2014.
The High Court was of the view that these points require examination by the Court.
So the High Court
1. Issued notice to the respondents.
2. Issued Notice to the Attorney General of India.
The respondents are:
1. Revenue secretary,
2. Commissioner of Central Excise and Service Tax,
3. CESTAT, Bangalore,
4. Registrar, CESTAT, New Delhi and
5. CBEC.
The High Court noted that the Show Cause Notice in this case was issued in 2013 and therefore lis has been started long before the amendment.
The High Court is of the prima facie view that on the date of initiation of proceedings the right to appeal also accrues on that date, as appeal is in continuation of the original proceedings. In other words, on the date of initiation of lis the aforesaid amendment was not in force. However, during the pendency of this matter the aforesaid amendment is made.
The Relief: The High Court ordered that the petitioner can very well approach the appellate authority with an application for waiver of pre-deposit. The appellate authority for the time being without insisting upon pre-deposit as per the amended provision, shall consider such application in accordance with law (as it existed prior to 6.8.2014).
Appeals without mandatory pre-deposit?:
Now, for Show Cause Notices issued prior to 6.8.2014, for which Adjudication Orders are passed after 6.8.2014, the appellant can file an application for waiver of pre-deposit and need not pay the mandatory pre-deposit - at least in the States of Andhra Pradesh and Telangana.
Will the Tribunal take the High Court order as an order in rem and admit appeals without the mandatory pre-deposit? Or should each appellant go through the High Court? We have to wait for answers.
We bring you the important High Court today. At least for few hours from now, it is TIOL exclusive. Please see - 2015-TIOL-511-HC-AP-CX.
Twist in the Tale:
What happens if the Tribunal agrees that mandatory pre-deposit need not be paid, but orders, say a pre-deposit of 50%? The appellant is doomed. Can he plead that as per the present law, there cannot be a pre-deposit of more than 10%?
One more twist:
Though the issue is not identical, the Kerala High Court - in a judgement delivered a day before the date of the Hyderabad High Court's order, held that 7.5% pre-deposit is mandatory. The High Court observed, "the right of appeal granted by the statute is a conditional one and the conditions are not so onerous as to deprive the petitioner of an effective right of appeal. This is more so, because what is required to be deposited by the petitioner, as a condition for maintaining the appeal, is only a small percentage of the duty/penalty amount confirmed against him, and the said amount has to be refunded to the petitioner in the event of his succeeding in the appeal before the Appellate Tribunal."