Shri Subhash Jain vs Commissioner Of Central Goods And ...
2023 Latest Caselaw 7730 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

?Court No. - 47
 

 
Case :- CENTRAL EXCISE APPEAL DEFECTIVE No. - 5 of 2023
 

 
Appellant :- Shri Subhash Jain
 
Respondent :- Commissioner Of Central Goods And Service Tax
 
Counsel for Appellant :- Anil Prakash Mathur
 
Counsel for Respondent :- Parv Agarwal
 

 
Hon'ble Ashwani Kumar Mishra,J.

Hon'ble Vinod Diwakar,J.

In Re: Civil Misc. Delay Condonation Application

Delay in filing of the appeal has been explained to the satisfaction of the Court.

The prayer is otherwise, not seriously opposed, therefore, the delay is condoned.

The appeal is treated to have been filed in time.

Order on Appeal

This appeal is preferred under Section 35G of the Central Excise Act, 1944 challenging an order passed by the Customs Excise and Service Tax Appellate Tribunal, Allahabad in Defect Diary No. 705102020, whereby the appeal preferred by the appellant is treated to be defective for non-deposit of mandatory 7.5 % pre-deposit and consequently rejected vide order dated 28.04.2022.

The appellant contends that the tribunal is not justified in-enforcing Section 35F of the Act while deciding the appeal, which on face of it is illegal and ultra virus, as it infringes the inherent right of appellant to file appeal and to be heard on merits. Various submissions are made on facts in order to submit that the appellant lacks requisite resources to deposit the amount and as the appeal otherwise, raises triable issues, therefore, dismissal of it on account of non-deposit of 7.5 % amount would cause grave injury to the appellant. It is also submitted that the appellant has no concern with the firm and merely because he happens to be the father of the Director, as such, proceedings have been initiated against him. It is also urged that reasons for non-deposit of amount is also not considered on merits.

Learned counsel further points out that Writ Petition No. 1126 of 2022 was filed earlier by the appellant which came to be dismissed by learned Single Judge of this Court on 14.09.2022, on account of availability of alternative remedy of filing appeal under Section 35G.

Learned counsel for the appellant places reliance upon an order passed by this Court in Central Excise Appeal Defective No. 6 & 7 of 2023, which have been admitted by this Court on 14.03.2023, on the questions as to whether the tribunal is justified in insisting on mandatory pre-deposit when nothing was left with the appellant as all the assets and immovable property have been auctioned and the factory was under the orders of liquidation? The other question on which the appeal has been admitted is as to whether the tribunal is justified in keeping an honest assessee and dishonest assessee on the same footing. Parity accordingly, is sought by the learned counsel for the appellant with the orders passed in the aforesaid appeals.

Learned counsel for the appellant has also placed reliance upon a judgement of Division Bench of this Court in Writ Tax No. 750 of 2017 whereby the Court dispensed with the condition of pre-deposit of 7.5 % for entertainment of appeal by the appellate tribunal.

Shri Parv Agarwal, for the Department, per contra, submits that the appeal under Section 35F of the Central Excise Act, 1944 is a creature of statue and the conditions stipulated therein would have to be satisfied in order to render the appeal itself maintainable under the Act. Section 35F of the Act, reads as under:-

"SECTION 35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal ? The tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal-

(i) under sub-section (1) of section 35, unless the appellant has deposited seven and a half per cent. of the duty in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Commissioner of Central Excise.

(ii) against the decision or order referred to in clause (a) of sub-section (1) of section 35B, unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty where such penalty is in dispute, in pursuance of the decision or order appealed against:

(iii) against the decision or order referred to in clause (b) or sub-section (1) of section 35B, unless the appellant has deposited ten per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty where such penalty is in dispute, in pursuance of the decision or order appealed against:

Provided that the amount required to be deposited under this section shall not exceed rupees ten crores:

Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No. 2) Act, 2014.

Explanation- For the purposes of this section "duly demanded" shall include.

(i) amount determined under Section 11D,

(ii) amount of erroneous Cenvat credit taken;

(iii) amount payable under rule 6 of the Cenvat Credit Rules, 2001 or the Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004."

Learned counsel for the Department places reliance upon a judgment of a co-ordinate Bench of this Court in Custom Appeal No. 4 of 2022, wherein a similar issue fell for consideration before this Court in respect of a pari materia provision contained in the Customs Act, 1962. Upon consideration of the statutory scheme as also the provision which required mandatory pre-deposit of 7.5 % amount as a pre-condition for entertainment of appeal has been examined to hold that non compliance of the mandatory condition of pre-deposit under Section 129 E (ii) of the Customs Act, 1962 renders the appeal liable for dismissal, due to non fulfillment of mandatory conditions of pre-deposit.

Learned counsel further submits that the statutory provision is not under challenge and in such circumstances, this Court in exercise of its appellate jurisdiction under the statute cannot waive the condition of pre-deposit. It is also urged that no substantial question of law otherwise arises for consideration in this appeal which merits summary dismissal.

Reliance has also placed upon an order passed by the Supreme Court in Chandra Sekhar Jha vs. Union of India in Civil Appeal No. 1566 of 2022, wherein the provisions of Customs Act for pre-deposit of part of the amount under the Customs Act fell for consideration before the Supreme Court. Upon examination of the issues the Supreme Court observed as under in para 6 to 12 of the judgment.

"6. On a conspectus of the provisions of Section 129E before and after the substitution, it becomes clear that the law giver has intended to bring about a sweeping change from the previous regime and usher in a new era, under which the amount to be deposited was scaled down and pegged at a certain percentage of the amount in dispute. In other words, while under Section 129A, as it stood prior to the substitution, the appellant was to deposit the duty and the interest demanded or the penalty levied, in the present regime, the appeal is maintainable upon the appellant depositing seven and the half percent of the amount. Under the earlier regime, in other words the entire amount which was in dispute had to be deposited. Under the earlier avatar of Section 129E, the law giver also clothed the appellate body with power as contained in the first proviso. The first proviso provided the Commissioner (Appeals) or as the case may be, Appellate Tribunal the power to dispense with such deposit, subject to conditions as he deemed fit to impose to safeguard the interest of the revenue.

7. The question whether it is undue hardship has been the subject matter of the judgment of this Court in Benara Valves Ltd. and others vs. Commissioner of Central Excise and another, reported in (2006) 13 SCC 347, wherein it, inter alia, held as follow:-

"13. For a hardship to be "undue" it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it."

8. It is in sharp departure from the previous regime that the new provision has been enacted. Under the new regime, on the one hand, the amount to be deposited to maintain the appeal has been reduced from 100% to 7.5% but the discretion which was made available to the appellate body to scale down the pre-deposit has been taken away.

9. The first proviso of Section 129E of the present Section enacts a limitation on the total amount which can be demanded by way of pre-deposit. The first proviso provides that the amount required to be deposited should not exceed Rs.10 Crores. In this regard, the law giver has purported to grant relief to an appellant. The second proviso contemplates that Section 129(e) as substituted would not apply to stay applications and appeals which are pending before the Appellate Authority prior to the commencement of the Finance Act (2) of 2014. The amended provision, as we have already noticed has come into force from 06.08.2014. Therefore, in regard to stay applications and appeals which were pending before any Appellate Authority prior to commencement of The Finance (No.2) Act 2014, Section 129E as substituted would not apply. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision.1

10. As far as the argument of the appellant that for the reason that the incident which triggered the appeal filed by the appellant took place in the year 2013, the appellant [See in this regard, a discussion in Justice G. P. Singh, Principles on Statutory Interpretation (12th Edition) page No.676. must be given the benefit of the power available under the substituted provision, it does not appeal to us. The substitution has effected a repeal and it has re-enacted the provision as it is contained in Section 129E. In fact, the acceptance of the argument would involve a dichotomy in law. On the one hand, what the appellant is called upon to pay is not the full amount as is contemplated in Section 129(E) before the substitution. The order passed by the Commissioner is dated 23.11.2015 which is after the substitution of Section 129E. The appellant filed the appeal in 2017. What the appellant is called upon to pay is the amount in terms of Section 129E after the substitution, namely, the far lesser amount in terms of the fixed percentage as provided in section 129E. The appellant, however, would wish to have the benefit of the proviso which, in fact, appropriately would apply only to a case where the appellant is maintaining the appeal and he is called upon to pay the full amount under Section 129E under the earlier avtar.

11. We would think that the legislative intention would clearly be to not to allow the appellant to avail the benefit of the discretionary power available under the proviso to the substituted provision under Section 129E. When the appellant is not being called upon to pay the full amount but is only asked to pay the amount which is fixed under the substituted provision, we do not find any merit in the contention of the appellant. However, in the interest of justice we extend the period for complying with Section 129E by a period of two months from today. Subject to the same, the appeal will stand dismissed.

12. There will be no order as to costs."

We have heard learned counsel for the parties and perused the materials on record.

At the very outset, we may clarify that this Court is exercising its appellate jurisdiction under Section 35G of the Central Excise Act, 1944 which provides that the appeal can be entertained on substantial question of law only. Moreover, the tribunal has rejected the appeal as it was preferred without complying with the requirement of pre-deposit specified in Section 35F of the Act of 1944.

Section 35F has been extracted above, which contains specific requirement with regard to the condition of pre-deposit of part of the amount for entertainment of appeal. Since the entertainment of appeal itself is dependent upon pre-deposit of amount specified in this act and there is no provision of exemption, the non compliance of such requirement would clearly render the appeal non-maintainable in law.

For the appeal to be entertained, the appellant will have to deposit the amount in terms of the statue. The appellate authority would clearly be justified in refusing to entertain the appeal on account of the failure to deposit the mandatory pre-deposit under the statue. The contention advanced by the appellant that Section 35F is ultra virus also cannot be examined by this Court in exercise of its jurisdiction created under the statue itself.

We may clarify that this Court is not exercising its Constitutional jurisdiction under Article 226 of the Constitution of India and being a creature of statue under the Act, the Court would have to abide by provisions contained therein. We find absolutely no error in the order passed by the appellant authority in refusing to entertain the appeal on account of mandatory non-deposit of the amount.

So far as the order passed by this Court in Central Excise Defective No. 6 and 7 of 2023 is concerned, we find that the order admitting the appeal has not taken into consideration the statutory scheme nor the binding effect of the judgement of the Co-ordinate Bench in Custom Appeal No. 4 of 2022 as well as the order of the Supreme Court in Chandra Sekhar Jha (supra) has been examined. It appears that scheme of the Act as also the judgments applicable had not been placed before this Court. The Division Bench judgment of this Court in the case of Writ Tax No. 750 of 2017, also would not be of any help to the appellant because this Court was exercising its power under the writ jurisdiction and not under the statue.

In that view of the matter, the appeal lacks merit and is dismissed.

Dismissal of this appeal, however, will not preclude the appellant from complying with the requirement of pre-deposit of 7.5% amount along with recall application. We hope and trust that if the appellant does so, the tribunal shall accord sympathetic consideration to such prayer of the appellant.

Order Date :- 17.3.2023

Ujjawal