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2016 (5) TMI 672 - HC - Central ExciseWhether the amendment to Section 35F of Central excise Act, 1944 could be prospective or retrospective in nature - Condition to make a pre-deposit of a fixed percentage of the tax demanded or penalty levied or both - Petitioner contended that inasmuch as the right of appeal available to a person is a vested right, which accrues on and from the date on which the lis commences, the date on which such right of appeal accrues should be the date on which the original cause itself arose. Therefore, the right so vested cannot be taken away retrospectively by an amendment. Held that - the right of appeal is neither an absolute right, nor an ingredient of natural justice, and that it is only a statutory right which can be circumscribed by the conditions in the grant. Therefore, it is well settled that the right of appeal is a creature of statute and the legislature is well within its competence to impose conditions for the exercise of such a right subject only to the restriction that the conditions so imposed are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory. Therefore, if one condition that was already available in the statute for the exercise of a right of appeal, is merely replaced by another condition, the same cannot be said to be retrospective, unless it is definitely shown that the amended condition is more onerous than the unamended condition. When the unamended condition gave only a chance or hope for an assessee to get a total waiver at the discretion of the Appellate Authority, the same cannot be equated to a vested right. A mere chance of convincing the Appellate Authority to exercise the discretion for the grant of a total waiver is no vested right. The amendment, did not take away a right vested, but merely made a chance divested. What has now gone, is not the right , but the chance or hope. Therefore, the first contention of the petitioner is liable to be rejected. Legal effect of a proviso - Petitioner contended that the second proviso to the amended Section 35F cannot be taken to have excluded all other possible alternatives, that could arise out of the amendment of a proviso - Held that - on the first contention of the writ petitioner, we have independently come to a conclusion that even the substantive provision of Section 35-F, after its amendment, is not capable of any other interpretation. Our conclusions on the first contention was not on the basis of the second proviso. Therefore, we need not even find out whether the second proviso is exhaustive about the exclusions, or whether the second proviso is a substantive provision in itself or the extent to which the second proviso would control the substantive provision. Hence, the second contention of the petitioner is also rejected. Petitioner contended that the High Courts of Andhra Pradesh and Telungana and Kerala have already taken a view that the amendment is prospective in nature and that it would apply only to proceedings initiated after 6.8.2014 - Held that - the decision of the High Court of Andhra Pradesh relied upon by the learned Senior Counsel in K.Rama Mohanarao is only a prima facie view. We have already analysed this decision while dealing with the first contention. Similarly, the decision of the Kerala High Court in Muthoot Finance Limited has also been analysed in great detail by us. With great respect to these Courts, we have not agreed with the view taken by them, for the reasons that we have indicated in great detail while dealing with the first contention. Therefore, the third contention is also rejected. Therefore, the writ petition seeking a declaration that the amended Section 35-F of the Central Excise Act 1944, is applicable only to show cause proceedings initiated on or after 6.8.2014 is liable to be dismissed. Accordingly it is dismissed. Alternative remedy of appeal - In the course of hearing of writ petition, the assessee seems to have agreed to go before the Appellate Authority and sought a clarification that the amendment would not apply to his case - Learned Single Judge agreed with the said contention and allowed the assessee to file an appeal along with an application for waiver without making a pre-deposit of 7.5% as per the amendment - Held that - the interpretation given by the learned Judge to the amendment, is not correct. - Decided in favour of appellant
Issues Involved:
1. Whether the amendment to Section 35F of the Central Excise Act, 1944, requiring a pre-deposit of 7.5% of the tax amount, is prospective or retrospective in nature. 2. Whether the right of appeal is a substantive right that accrues on the date of the original cause or the date of the amendment. 3. Interpretation of the provisos to the amended Section 35F. Issue-wise Detailed Analysis: 1. Prospective or Retrospective Nature of the Amendment: The central issue in both the writ appeal and the writ petition was whether the amendment to Section 35F, which mandates a pre-deposit of 7.5% of the tax amount, applies retrospectively or prospectively. The Court examined various precedents and statutory interpretations to determine the nature of this amendment. The Court concluded that the amendment is not retrospective and applies to all appeals filed on or after 6.8.2014. The Court highlighted that the amendment did not take away a vested right but merely replaced a discretionary condition with a fixed condition, thus not making it more onerous. 2. Right of Appeal as a Substantive Right: The Court discussed the nature of the right of appeal, citing several landmark judgments, including Garikapatti Veeraya v. N. Subbiah Choudhury and Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh. The Court reiterated that the right of appeal is a substantive right that accrues from the date of the original cause and cannot be taken away retrospectively unless explicitly stated by the legislature. However, the Court distinguished between taking away a right and altering the conditions for exercising that right, concluding that the amendment to Section 35F merely altered the conditions without taking away the right itself. 3. Interpretation of the Provisos to Section 35F: The Court analyzed the two provisos to the amended Section 35F. The first proviso caps the pre-deposit amount at ?10 Crores, while the second states that the amended provisions do not apply to stay applications and appeals pending before any appellate authority prior to the commencement of the Finance Act 2 of 2014. The Court agreed with the Allahabad High Court's interpretation in Ganesh Yadav v. Union of India that the second proviso indicates that the amendment applies to all appeals filed after 6.8.2014, thus supporting the prospective application of the amendment. Conclusion: The Court dismissed the writ petition seeking a declaration that the amended Section 35F applies only to show cause proceedings initiated on or after 6.8.2014. It upheld the amendment's applicability to all appeals filed on or after the amendment date. The Court also allowed the writ appeal filed by the Commissioner of Service Tax, setting aside the learned Judge's order that permitted the assessee to file an appeal without making the pre-deposit. The Court emphasized that the new provision standardizes the pre-deposit requirement, removing the discretionary power previously vested in the appellate authorities, thus ensuring uniform application and reducing arbitrary decisions.
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