UNIFORM PRE DEPOSIT FOR APPEAL IS NOT JUSTIFIED

[CA DEV KUMAR KOTHARI]

Requirement of pre deposit of disputed dues a source of litigation and uncertainties:

Requirement of pre deposit of disputed dues, as precondition for admittance of appeal itself has been a very contentious issue. Unless the issue of pre deposit is settled the validity of appeal remains doubtful. Amount of pre deposit may be in  discretion of appellate authorities,  and depending on merits of case requirement may be dispenses with or appellate authority may ask for payment of certain proportion of amount in disputed.  The appellate authority consider the merits of case and decide the pre-deposit to be made. In deserving cases entire pre-deposit requirement could be waived. In case where there was lack of any merit or lack of reasonable merit, appellate authorities could apply discretion in deciding the amount of pre-deposit.

Finance (No.2) Bill  2014:   

Finance (No.2) Bill 2014 proposed to insert a new section that is section 35F in  The Central Excise Act 1944, to prescribe a mandatory fixed pre deposit in case of Appeals.After the initial proposal some changes have been made and  changed proposals have been passed by the Lok Sabha on 25^th July 2014. The changed position will be as follows:

(I)     For filing appeal before the Commissioner (Appeal) or the Tribunal at the first stage, pre-deposit will be

a.    7.5% of the duty demanded if only duty is involved

b.    7.5% of the duty demanded if both duty and penalty is imposed

c.    7.5% of the penalty if only penalty is imposed

 In the original proposal a pre-deposit of 7.5% of the duty and / or  penalty imposed for filing appeal before the Commissioner (Appeal) or the Tribunal at the first stage was proposed. So now in case, there is both duty and penalty are involved, then only 7.5% of duty will be payable as pre-deposit. This provides some relief.

(II)     For filing second stage appeal before the Tribunal, pre-deposit will be:

a.    10% of the duty demanded if only duty is imposed

b.   10% of the duty demanded if both duty and penalty is imposed

c.       10% of the penalty if only penalty is imposed

Here also we find a bit of relief only when duty and penalty both are demanded. 

Maximum amount:

The amount of pre-deposit payable would be subject to a ceiling of ₹ 10 crore. All pending appeals/stay applications would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals.

The provisions of CEA are adopted for  Service Tax also so they will apply in relation to service tax also.

Some exceptions are required:

In fact considering high pitched demands being raised  which get vacated in appeals, it is not desirable to prescribe for a predeposit.

When similar cases have been decided in favor of tax payer, there is no justification for asking prdeposit, merely because the revenue has challenged earlier appeal orders/ judgments or might file appeal against the same.

In case of matters already decided in favor of tax payer, there should not be any requirement of pre-deposit.

When the demands raised are contrary to binding orders/ judgments, there should not be requirement of pre-deposit.

In case it is found that the taxpayer has no case but has indulged into un-necessary litigation, then requirement of higher pre-deposit can be justified.

Though the provision for specified proportion of disputed dues will reduce  arbitrariness in decisions of appellate authorities in deciding the amount of pre deposit.   However, there must be some exceptions to waive pre-deposit when the case of tax payer is supported by appellate authorities/ courts. For this purpose, a status report can be prepared and depending on merits of case, the amount of pre-deposit can be varied,

Therefore, making uniform provision for pre-deposit is not at all proper. In any case there must be some exceptions in this regard.