2015 (11) TMI 959 - HC - Central Excise

Waiver of pre deposit - Amendment to Section 35F of the Central Excise Act, 1944 vide Finance Act, 2014 - Mandatory pre deposit - pre-deposit of 7.5% for first appeal and 10% for second appeal of the total tax demanded as illegal and violative of articles 14, 19(1)(g) and 265 of the Constitution of India - Retrospective or prospective effect - Held that - It is held that in the instant case, the right to file an appeal, which is a substantive right granted under Sections 35 and 35B of the Act has not been amended and remains intact. That Section 35F of the Act as amended, consists of a mandatory requirement of pre-deposit for entertaining an appeal before the Appellate Authority i.e., before the Commissioner (Appeals) or the Appellate Tribunal as the case may be, is a piece of procedural legislation and does not fall within the realm of substantive law. Thus, Sections 35 and 35B do not confer an absolute right to file an appeal, but are subscribed or controlled by Section 35F of the Act. Hence, in the instant case, the right to file an appeal under Section 35 or 35B as the case may be is not an absolute right, but a conditional one. Right to file an appeal under Sections 35 and 35B of the Act is in no way affected by the amendment made to Section 35F of the Act requiring pre-deposit to be made at the time of preferring the appeal. Such a condition regarding pre-deposit is made with a view to regulate the exercise of the right of appeal so as to enforce the order appealed against in case the appeal is ultimately dismissed. - Section 35F of the Act has retrospective operation and is not restricted to only prospective cases. It applies to all lis which have commenced prior to or after the enforcement of the amendment, except to cases covered under the second proviso thereof. In view of the insertion of second proviso to amended Section 35F of the Act, it is held that the same is in the nature of a saving clause, keeping intact the earlier provision of Section 35F to be made applicable to circumstances noted under the second proviso. That in all other cases not covered under the second proviso, the amended Section 35F is applicable as it has a retrospective operation. Such a legislation by amendment having a retrospective operation is a valid piece of legislation - second proviso in amended Section 35F is significant, which was absent in the provisions considered in Hoosien Kasam Dada 1953 (2) TMI 35 - SUPREME COURT OF INDIA and Garikapati Veerayya 1957 (2) TMI 54 - SUPREME COURT . The provisions of law considered by the Hon ble Supreme Court in the aforesaid cases being not in pari materia to Section 35F of the Act under consideration and in view of the later judgments of the Hon ble Supreme Court it is held that the ratio of those decisions are not applicable to the present case. As the amended Section 35F has a retrospective operation and none of the petitioners herein has filed an appeal prior to 6/8/2014 before the appellate authority or if the appeal has been preferred subsequently has not deposited the requisite predeposit before the appellate authority, as the case may be, they are required to comply with the conditions of the amended Section 35F. - Decided against assessee.

Summary

Issues Involved:
1. Validity of the amendment to Section 35F of the Central Excise Act, 1944.
2. Whether the amendment to Section 35F has a retrospective operation.
3. Impact of the amendment on the right of appeal under Sections 35 and 35B of the Act.
4. Interpretation and significance of the second proviso to the amended Section 35F.
5. Validity of the circulars dated 16/9/2014 and 4/10/2014.

Detailed Analysis:

1. Validity of the amendment to Section 35F of the Central Excise Act, 1944:
The petitioners contended that the amendment to Section 35F, which mandates a pre-deposit of 7.5% for the first appeal and 10% for the second appeal, violates Articles 14, 19(1)(g), and 265 of the Constitution of India. They argued that the amendment adversely affects their substantive right of appeal, as it removes the discretion previously vested in appellate authorities to waive or reduce the pre-deposit. The court, however, held that the requirement of pre-deposit is not an unreasonable condition and does not adversely affect the right of appeal. The court stated that the condition of pre-deposit is a procedural requirement meant to regulate the exercise of the right of appeal and ensure the enforcement of the order appealed against if the appeal is ultimately dismissed.

2. Whether the amendment to Section 35F has a retrospective operation:
The court held that the amendment to Section 35F has a retrospective operation, meaning it applies to all cases, irrespective of when the lis (dispute) commenced. The second proviso to the amended Section 35F, which states that the amendment does not apply to stay applications and appeals pending before any appellate authority filed prior to the commencement of the 2014 Act, was interpreted as a saving clause. This proviso ensures that the earlier provision of Section 35F applies to those cases where appeals were already filed and pending as on 6/8/2014. For all other cases, the amended Section 35F applies, indicating its retrospective effect.

3. Impact of the amendment on the right of appeal under Sections 35 and 35B of the Act:
The court clarified that Sections 35 and 35B, which provide the right to file an appeal, remain unaltered and intact. The right to file an appeal is a substantive right, but the conditions prescribed under Section 35F for making a pre-deposit are procedural. The amendment to Section 35F does not affect the substantive right of appeal but regulates the procedure for filing an appeal by mandating a pre-deposit. The court emphasized that the right to file an appeal under Sections 35 and 35B is not absolute but conditional upon compliance with Section 35F.

4. Interpretation and significance of the second proviso to the amended Section 35F:
The second proviso to the amended Section 35F was interpreted as a saving clause, ensuring that the earlier provision applies to appeals and stay applications pending as on 6/8/2014. The court held that this proviso is significant and distinguishes the amended provision from the provisions considered in earlier judgments such as Hoosein Kasam Dada. The second proviso indicates the retrospective operation of the amendment, as it applies the earlier provision only to pending cases, while the amended provision applies to all other cases.

5. Validity of the circulars dated 16/9/2014 and 4/10/2014:
The court upheld the validity of the circulars dated 16/9/2014 and 4/10/2014, which provided guidelines on the procedure and manner of making the pre-deposit as per the amended Section 35F. The circulars were found to be in consonance with the court's interpretation of the amendment and its retrospective operation.

Conclusion:
The court dismissed the writ petitions, holding that the amendment to Section 35F of the Central Excise Act, 1944, is valid and has a retrospective operation. The requirement of pre-deposit is a procedural condition that does not affect the substantive right of appeal. The second proviso to the amended Section 35F serves as a saving clause, applying the earlier provision to pending cases, while the amended provision applies to all other cases. The circulars dated 16/9/2014 and 4/10/2014 were also upheld.