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M/s. Triputi Commodities v/s Commissioner, CGST Commissionerate

    Excise Appeal No. 2 of 2019
    Decided On, 02 August 2019
    At, High Court of Rajasthan Jaipur Bench
    By, THE HONOURABLE MR. JUSTICE MOHAMMAD RAFIQ & THE HONOURABLE MR. JUSTICE NARENDRA SINGH DHADDHA
    For the Appearing Parties: Arun Goyal, Sandeep Pathak, Vartika Mehra, Advocates.


Judgment Text
Mohammad Rafiq, J.

1. This appeal has been preferred by the appellant, M/s. Triputi Commodities, challenging order dated 24.10.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi (for short 'the Tribunal') whereby application filed by the appellant seeking waiver from predeposit of 7.5% of the duty demanded for entertaining the appeal, which the appellant filed against Order-in-Original dated 11.01.2017 issued on 12.01.2017, has been dismissed.

2. Initially, the appellant approached this Court by way of filing D.B. Civil Writ Petition No. 8612/2018 inter alia with the prayer that in view of its poor financial condition, appellant was not in a position to pay the huge amount of pre-deposit, it should be granted waiver from the requirement of pre-deposit. This Court vide order dated 27.04.2018 disposed of the writ petition requiring the appellant to produce its financial condition and turn over by way of application before the Tribunal, which was directed to pass appropriate order looking to financial condition and stability of the appellant for pre-deposit. It is this application, which the Tribunal has dismissed by the impugned order.

3. Mr. Arun Goyal, learned counsel for the appellant argued that the Tribunal while rejecting the application of the appellant has wrongly observed that there was no specific direction by this Court to waive the condition of pre-deposit. The Tribunal has misread and misapplied the judgment of Allahabad High Court in Ganesh Yadav Vs. Union of India, 2015 320 ELT 711 (All.) wherein it was clearly held that the High Court under Article 226 of the Constitution is vested with the jurisdiction to dispense with the requirement of predeposit in an appropriate case and the power of the Court under Article 226 of the Constitution is not taken away. Even the amended Section 35F of the Central Excise Act, 1944 (for short 'the Act') has not abridged the power of the High Court under Article 226 of the Constitution. Learned counsel relied upon judgment of Delhi High Court in Manoj Kumar Jha Vs. Directorate of Revenue Intelligence, WP (C) 3392/2018, CM APPL. 13411/2018 decided on 03.12.2018 and submitted that the Division Bench of Delhi High Court in that case observed that in view of the material on record, the petitioner therein appeared to be man of very limited means and directed waiver of the requirement of pre-deposit, however, with the further direction to the petitioner therein to furnish a bond and also provide reasonable security having regard to list of immovable properties produced before the Court. It is argued that the appellant has already, in terms of order dated 06.03.2019 passed by this Court, deposited 50% of the predeposit amount and therefore, if waiver of entire amount of predeposit is not granted to it, the appellant should be granted waiver to the extent of remaining 50%.

4. Learned counsel submitted that since the impugned order passed by the Tribunal was appellable, therefore, the appellant had to, in any case, file present appeal. Since the appellant had earlier approached this Court by filing writ petition and this Court directed the Tribunal to consider the financial hardship of the appellant, merely because the appellant has now not filed the writ petition but filed an appeal, would not in any manner affect the competence of this Court in issuing appropriate directions. It is therefore prayed that impugned order may be set aside and the Tribunal may be directed to decide the appeal of the appellant on merits without insisting on requirement of pre-deposit.

5. Mr. Sandeep Pathak, learned counsel appearing on behalf of the respondent opposed the appeal and submitted that post amendment Section 35F of the Act does not leave any discretion with the Tribunal to waive the requirement of predeposit. However, in the erstwhile regime, the Tribunal was vested with considerable discretion with respect to waiver of pre-deposit of 7.5% of the total demand. By way of the Finance Act, 2014, such discretion has been curtailed and pre-deposit of 7.5% of demand has been made a mandatory precondition for entertaining any appeal by the Tribunal. Relying on the judgment of the Bombay High Court in Kim Steel Strips Pvt. Ltd. & Others Vs. The Commissioner of Central Excise and Customs, Writ Petition No. 5654 of 2017 decided on 03.08.2017, learned counsel argued that the High Court refused to exercise extra-ordinary jurisdiction for waiver of requirement of pre-deposit holding that mere fact that the petitioners therein were not in a financial condition to deposit, the amount cannot be considered as an exceptional circumstance to waive the condition of pre-deposit, particularly when the requirement is for depositing only 7.5% of the duty demanded. It is argued that Special Leave to Appeal (C) No. 25664/2017 filed against the aforesaid judgment was dismissed by the Supreme Court vide judgment dated 09.10.2017. Reliance in support of his arguments is also placed on judgment of Delhi High Court in Pioneer Corporation Vs. Union of India, 2016 340 ELT 63 (Del.); judgment of Bombay High Court in Nimbus Communications Limited Vs. Commissioner of Service Tax, Service Tax-VI, Mumbai & Others, 2016 44 STR 578 (Bom.); judgment of Allahabad High Court in Cyquator Media Services P. Ltd. Vs. Union of India & Others,2018 10 GSTL 297.

6. We have given our anxious consideration to rival submissions and carefully perused the material on record. Section 35F of the Act, as it earlier stood, invested the Tribunal with the discretion to dispense with the requirement of pre-deposit, if it was of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, however, subject to such conditions as the Tribunal may deem fit to impose so as to safeguard the interests of the revenue. However, Section 35F of the Act, amended vide the Finance (No.2) Act, 2014, which came into force w.e.f. 01.04.2014, has done away with that discretion. Section 35F now in the present form stands as under:

"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) of 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 "duty 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.]" Section 35F(i) of the Act provides that unless the appellant has deposited 7.5% of the duty in case where the 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, the Tribunal or the Commissioner (Appeals), as the case may be, appeal shall not be entertained.

7. Constitutional validity of aforesaid Section 35F of the Act has been upheld by the Allahabad High Court in Ganesh Yadav (supra) wherein it has been held that the High Court under Article 226 of the Constitution is vested with the jurisdiction in an appropriate case to dispense with the requirement of pre-deposit and the power of the Court under Article 226 of the Constitution is not taken taken away or abridged thereby. Delhi High Court in Pioneer Corporation (supra) while dealing with this aspect of the matter in para 9 and 10 held as under:

"9. Under Section 35F of the CE Act as it stood prior to 6th August, 2014, a discretion was available to the CESTAT to consider the financial hardship and accordingly determine the pre-deposit amount. That discretion has been consciously sought to be curtailed and thus an amendment was made to Section 35F of CE Act requiring making of a pre-deposit of 7.5% in all cases subject to an upper cap of Rs.10 crores. A direction, therefore, to the CESTAT that is should waive the pre-deposit would be contrary to the express legislative intent expressed in the amended Section 35F with effect from 6th August, 2014.

10. While, the jurisdiction of the High Court under Article 226 of the Constitution to grant relief notwithstanding the amended Section 35F cannot possibly be taken away, the Court is of the view that the said power should be used in rare and deserving cases where a clear justification is made out for such interference. Having heard the submissions of Mr. Datta and having perused the adjudication order, the Court is not persuaded to exercise its powers under Article 226 to direct that there should be a complete waiver of the pre-deposit as far as the petitioner's appeal before the CESTAT is concerned. For all the above-mentioned reasons, the writ petition is dismissed but in the circumstances, with no order as to costs."

8. Thereafter, the Delhi High Court in Suvidha Signs Studios Pvt. Ltd. Vs. Union of India, 2016 336 ELT 274 (Del.), following the judgment of Allahabad High Court in Ganesh Yadav (supra), again reiterated the same view. In that case, Delhi High Court upheld the constitutional validity of amended Section 35F of the Act and observed that the petitioner therein having failed to comply with the statutory and mandatory requirement of depositing 7.5% of the demand of duty and penalty, the CESTAT was right in dismissing petitioner's appeal. Delhi High Court even declined to accept the submission of the petitioner therein that it was in grave financial difficulty therefore it should be granted some more time to pay the pre-deposit amount.

9. Madhya Pradesh High Court in Shree Marwal Sew Ashram Vs. CESTAT, New Delhi, 2018 361 ELT 570 (M.P.) upheld the order passed by the CESTAT dismissing the appeal on the ground of non-compliance of mandatory requirement of pre-deposit of 7.5% of the duty demanded and declined to pass any order of waiver under Section 35F of the Act. Bombay High Court in Nimbus Communications Limited (supra) upheld the order of the CESTAT dismissing the appeal of the appellant therein for non-compliance of requirement of pre-deposit stipulated under Section 35F(i) of the Act. No doubt, the High Court has a wider jurisdiction under Article 226 of the Constitution but the said jurisdiction has to be exercised only in exceptional cases. Mere fact that the duty demanded by the department is considerably high and the appellant is not in a position to pay the same, cannot be a ground to waive the mandatory requirement of pre-deposit. Delhi High Court in Manoj Kumar Jha (supra) did not notice its earlier two judgments of the same Court in Pioneer Corporation (supra) and Suvidha Signs Studios Pvt. Ltd. (supra), which were delivered by the Benches of equal strength. Earlier jud

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gments would therefore have greater precedential value. Legislative mandate contained in Section 35F of the Act is intended to safeguard the interest of the revenue as the discretion provided in the earlier unamended Section 35F of the Act vested in the Tribunal gave rise to enormous cases where the litigant used to frequently cite the reason of undue hardship, which would consume the adjudicatory time and resources of the Tribunal or, as the case may be, of the Commissioner (Appeals). It was in order to suppress such mischief that the Parliament amended Section 35F of the Act. 10. In view of above discussion, we do not find any good reason to waive the mandatory requirement of pre-deposit, which, in any case, cannot be waived as it is an appeal against the order passed by the Tribunal and not a writ petition under Article 226 of the Constitution of India. There is no merit in this appeal, as it does not raise any question of law, which is accordingly dismissed. However, being cognigant of the fact that pursuant to order of this Court passed on 06.03.2019, the appellant has deposited 50% of the pre-deposit amount, we direct that if the appellant deposits the remaining 50% amount of the pre-deposit now within two months, the appeal shall stand revived for its decision on merits. Stay Application No. 93/2019 also stands dismissed.
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