2023 (7) TMI 544 - AT - Service Tax

Validity of adjustment of pre-deposit with Cenvat Credit - Amount adjusted through debit of DRC-03 account maintained in the present GST regime - non-compliance of Section 83 of the Finance Act 1994 read with Section 35F of the Central Excise Act 1944 - HELD THAT - The basic main objective of pre-deposit being prevention of filing of frivolous appeals by putting financial burden on the Appellant and the same being deposited in the Government account we find no reason to dispute it on the ground that the same is taken out from the cash balance or credit balance (which was accrued through payment of cash only) and it is questioned so seriously. In the instant case what is observed is that in two appeals pre-deposits were adjusted against payment made during investigation and in two other appeals it is made from the credit ledger to which Appellants surplus CENVAT Credit were transited into. Now going by the close reading of the Section 174 sub-Section 1(f) repeal of Central Excise Act or amendment of Finance Act 1994 would not affect any proceeding relating to an appeal instituted after the commencement of GST Act and a deeming friction is brought into service by stating that to continue such proceedings under the Amended Act (Finance Act) or Repealed Act (Central Excise Act) it would be taken as if the CGST Act had not come into force and such amendment or repeal had not taken place. This being the dictate of the Statute CENVAT Credit that was available with Appellant on 01.07.2017 would be treated to have been in existence during filing of the appeal as if no transition to TRAN-1 had taken place. Reliance placed in the judicial precedent set by the Hon ble Supreme Court in the case of Commissioner of Central Excise Bangalore Vs. M/s. Mysore Electricals Industries Ltd. 2006 (11) TMI 202 - SUPREME COURT wherein it has been clearly mentioned that a beneficial Circular has to be applied retrospectively while oppresive circular has to be applied prospectively. This Circular/Instruction being issued after filing of the appeals by these Appellants enforcement of the same can only have prospective effect. Pre-deposit made by the Appellants from electronic credit ledgers are in compliance to Section 35F of the Central Excise Act and the registration of appeals made by the Registry is valid. The appeals are admitted for hearing and early hearing applications be listed on 30.08.2023 for a decision on out of turn hearing.

Summary

Issues Involved:
1. Legality of admission and registration of appeals after pre-deposit through debit of DRC-03 account.
2. Compliance with Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944.
3. Validity of pre-deposit made through the electronic credit ledger under the GST regime.

Summary:

Issue 1: Legality of Admission and Registration of Appeals
The Tribunal addressed the preliminary issue of whether the appeals could be admitted and registered after the pre-deposit was made via the DRC-03 account under the GST regime. The learned Authorised Representative argued that this method did not comply with Section 83 of the Finance Act, 1994 and Section 35F of the Central Excise Act, 1944, which are prerequisites for entertaining any appeal.

Issue 2: Compliance with Section 83 of the Finance Act and Section 35F of the Central Excise Act
The Tribunal examined Rule 11 of the CESTAT (Procedure) Rules, 1982, which allows the Tribunal to accept a memorandum of appeal even if it is defective, provided the appellant rectifies the defects within a specified time. The Tribunal emphasized that the acceptance or rejection of an appeal memorandum requires a judicial order, not an administrative instruction. The Tribunal noted that the admission and registration of appeals do not preclude deciding their fitness for hearing on merit.

Issue 3: Validity of Pre-deposit through Electronic Credit Ledger
The Respondent-Department argued that pre-deposits made via the electronic credit ledger (DRC-03) were invalid, citing judgments and a CBIC Circular clarifying that such pre-deposits do not comply with Section 35F of the Central Excise Act. The Appellant countered that the pre-deposit mode was proper under Section 174 of the CGST Act, which preserves rights and obligations under the old Acts. The Tribunal noted that the pre-deposit aims to prevent frivolous appeals and should not be disputed based on whether it is from cash or credit balance.

The Tribunal observed that the pre-deposits in question were either adjusted against payments made during investigations or from credit ledgers with surplus CENVAT Credit. The Tribunal concluded that the CGST Act's commencement does not affect proceedings under the old Acts, and thus, the pre-deposit mode was valid. The Tribunal also highlighted that the restrictive provision in Section 41(2) of the CGST Act had been deleted, and the CBIC Circular issued post-appeal filing should not apply retrospectively.

Order:
The Tribunal ruled that pre-deposits made from electronic credit ledgers comply with Section 35F of the Central Excise Act. The registration of appeals by the Registry was deemed valid, and the appeals were admitted for hearing. The Tribunal scheduled early hearing applications for 30.08.2023.

(Order pronounced in the open court on 07.07.2023)