2015 (10) TMI 2533 - HC - Service Tax

Whether under the unamended provision of Section 35F, it was obligatory for the appellants to deposit the entire amount covered by the demand or penalty order unless waiver is sought for and granted by the Appellate Tribunal for reasons in terms of the statutory provisions as it then stood - Held that - we have bestowed our anxious consideration to the different aspects of the matter and are of the firm view that the question whether an appeal is to be entertained or whether the appeal fails on account of non-compliance of any statutory prescription is, at the first instance, with the statutory Appellate Authority. Therefore, the question whether the appeals by the writ petitioners against the tax demanded or penalty, would be governed under the substituted Section 35F with effect from 6-8-2014 or under the earlier provision is a matter to be considered after hearing the necessary parties by the Appellate Tribunal. The Appellate Tribunal ought to take up the appeals which have been instituted by the writ petitioners and hear them and the Revenue on the issue regarding deposit. What will be required to be considered as the first question would be as to whether the provision for deposit will be governed by Section 35F before its substitution with effect from 6-8-2014 or such deposit has to be governed by the substituted provision in terms of the substitution made as per Finance (No. 2) Act, 2014. The question whether the second proviso to the substituted Section 35F has any bearing on such question is also for the Tribunal to decide at the first instance. If it is held that the provisions of Section 35F before its substitution would govern the appeals, the Tribunal will take up any application for waiver of part or whole of the pre-deposit and also any application for stay. The directions contained in the impugned judgment are modified to the aforesaid extent and it is directed that the Appellate Tribunal shall not reject any of the appeals of the writ petitioners without deciding the aforesaid issue. The Tribunal will ensure that it decides the matter untrammelled by anything stated in the judgment of the learned Single Judge. Let this be done within a period of one month from the date of receipt of a copy of this judgment. - Appeals disposed of

Summary

Issues:
Interpretation of Section 35F of the Central Excise Act before and after amendment - Applicability of pre-deposit requirement - Jurisdiction of Appellate Tribunal

Analysis:
The judgment by the High Court of Kerala involved writ appeals by the Union of India concerning the interpretation of Section 35F of the Central Excise Act before and after its amendment. The appeals stemmed from writ petitions challenging orders confirming demand of service tax and penalty. The Single Judge had opined that the writ petitioners had the option to appeal before the Customs, Central Excise and Service Tax Appellate Tribunal. One of the writ petitions raised the constitutional validity of Section 72 of the Finance Act, 1994, left undecided by the Single Judge. The Union of India appealed due to the Single Judge's view that appeals filed before the Tribunal should follow the pre-amendment provisions of Section 35F, requiring full deposit unless waived. The central issue revolved around whether the pre-amendment Section 35F mandated full deposit unless waived, or the post-amendment provision requiring a uniform 7.5% deposit applied.

The Court noted that the amendment to Section 35F on August 6, 2014, introduced a uniform 7.5% deposit requirement, replacing the previous full deposit requirement. The second proviso to the amended Section 35F excluded its application to pending stay applications and appeals. The Single Judge had directed the Tribunal to entertain appeals without insisting on pre-deposit as per the amended provision. The writ petitioners had already filed their appeals before the Tribunal while the issue of which provision, pre or post-amendment, should apply was not raised before the Single Judge. The Court held that the determination of which provision applied, pre or post-amendment, was within the Tribunal's jurisdiction after hearing all parties.

In light of the circumstances, the Court directed the Tribunal to consider the appeals by the writ petitioners and decide on the deposit requirement. The Tribunal was tasked with determining whether the pre-amendment or post-amendment Section 35F governed the appeals and whether the second proviso had any relevance. If the pre-amendment provision applied, the Tribunal could consider waiver applications for the deposit. The Court modified the directions of the Single Judge, instructing the Tribunal not to reject any appeals without deciding on the applicable provision. The Tribunal was given one month to make this determination. Consequently, the writ appeals were ordered accordingly by the Court.