Appeal to CESTAT from Commissioner (A) - Quantum of pre-deposit

By Vijay Kumar

AS per the Laws as amended by the Finance Act 2014 with effect from 06.08.2014, the amount of pre-deposit payable for appeals in Customs, Central Excise and Service Tax matters are:

When you appeal to the Tribunal from an order of the Commissioner (Appeals), you have already deposited 7.5% at the time of appealing to the Commissioner (Appeals). So, when you appeal to the Tribunal, should you pay 10% or the difference of 2.5%?

In DDT 2439 17.09.2014, I raised this question - As per the amended provisions, a pre-deposit of 10 percent is to be made for an appeal to the Tribunal against an order of a Commissioner (Appeals). While appealing to the Commissioner (Appeals), an amount of 7.5 percent of the duty/penalty must have already been deposited. Now the doubt is whether the 10 percent deposit for appeal to the Tribunal is in addition to the 7.5 percent already deposited or is it inclusive of that?

Earlier in DDT 2394 - 11.07.2014, we had raised this doubt - "There is a doubt on payment of another 10 percent for the second appeal. Though the TRU letter states that another 10 percent, the amendment does not say so clearly. So, there is a doubt whether the pre-deposit at the second appellate stage is 10 percent or 17.5 percent. Even if it is 17.5 percent, what will happen to the 7.5% deposited with the Commissioner (A)?. Shouldn't that also be considered as pre-deposit? This also needs clarification statutorily."

A single Member Bench of the Tribunal in 2016-TIOL-3050-CESTAT-KOL held:

Neither Section 35F(iii) of the Central Excise Act, 1944 nor CBEC Circular dated 16.09.2014 specifically mention whether 10% deposit required before Appeal is entertained should be inclusive or exclusive of 7.5% deposit made before the first appellate authority.

It is a well known fact that success rate of departmental cases before the appellate authorities is very poor. That is the reason that percentage of deposit required to be made before the first appellate authorities is as low as 7.5% of the disputed amounts or penalties. After success at the level of first appellate authority may be Legislature wants that the case has passed one test of first appeal successfully and Revenue deserves an additional 10% of the duty or penalty as deposit till the issue is finally decided in the second appellate stage.

In any case, Appellant is not at a loss in the above procedure of paying additional 10% of deposit, because in case Appellant wins then Appellant is eligible to interest from the date of deposit it made, as per Section 35FF of the Central Excise Act, 1944 or Section 129EE of the Customs Act, 1962, all introduced w.e.f. 06.08.2014.

In case Appellant loses the case, then also Appellant will have to pay lesser interest for the period when amount was lying with the department as deposit.

Recently, a Division Bench of the Tribunal also came to a similar conclusion:

On plain reading of the afore said provisions, we find that the wordings employed therein is as clear as daylight. In clause (iii) it is unambiguously prescribed that any person aggrieved by a decision or order referred to Clause (b) of sub-Section (1) of Sec129A/35B of Customs Act/Central Excise Act, unless deposits 10% of the duty/penalty or duty and penalty, as the case may be, the appeal shall not be entertained. We do not find any reason to read the said provision in any other manner so as to come to the conclusion that the Appellants are required to deposit 2.5% and not 10% as prescribed under the said provision in view of the settled principle of statutory interpretation.

But what happens to the 7.5% already deposited at the time of appeal to the Commissioner (Appeals). Will they refund it when the appellant files a further appeal to CESTAT?

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