2018 (6) TMI 249 - HC - Central Excise

Requirement of Additional pre-deposit on second appeal - Section 35F of the CEA 1944 - whether as per Section 35F of the CEA 1944, the petitioner-assessee on filing of second appeal before the CESTST is required to make an additional pre-deposit of 10% of the duty and penalty in dispute, over and above 7.5% pre-deposit made for filing of first appeal before the Commissioner (Appeals)? Held that - It is clear that a graded scale of pre-deposit has been provided. In case of first appeal, whether before the Tribunal or before the Commissioner (Appeals), 7.5% of the duty and penalty in dispute must be deposited. In case of second appeal before the Tribunal, the amount gets enhanced from 7.5% to 10%. Language of Section 35F of the C.E. Act is unchallenging and meaning of words and conditions placed is plain and lucid. Requirement is to pre-deposit 7.5% of the duty and penalty in dispute; and in case of the second appeal pre-deposit of 10% of the duty and penalty in dispute is mandated - Section 35F of the C.E. Act should not be construed by adding or substituting words to clarify and ironout assumed doubts. Intent as cogently reflected in simple words is that the assessee on second appeal should pre-deposit 10% of the total tax and penalty subject matter of the appeal. It is not to ignore the pre-deposit of 7.5% already made to file first appeal. There is logic in increasing pre-deposit by 2.5% when second appeal is filed, but we would be adding words to the plain and unambiguous provision if we stipulate that 10% pre-deposit will be over and above 7.5% pre-deposit made at the time of the first appeal - Deposits made during the pendency of the proceedings, or even after the order-in-original is passed, have to be taken into consideration for determining and deciding whether condition of pre-deposit of 7.5% or 10% has been satisfied. Earlier deposits do not get obliterated and are not to be treated as inconsequential. Equally pertinent is the second sentence in paragraph 3.1, which states that any shortfall from the amount stipulated in the Section shall have to be paid before filing of an appeal before the appellate authority. Inapplicability of section 35F of the CEA to appeals preferred before the Tribunal under Section 86 of the Finance Act - Held that - The contention of the petitioner relating to inapplicability of section 35F of the C.E. Act, i.e. Central Excise Act, to appeals preferred before the Tribunal under Section 86 of the Finance Act, is without merit and has to be rejected. Section 35F of the CEA refers to appeals under Section 35(1) or Section 35 of the C.E. Act but this quotation and reference is to the C.E. Act. In the context of service tax appeals, Sections 85 and 86 of the Finance Act apply, albeit by virtue of Section 83 of the Finance Act stipulations and requirements of Section 35F of the C.E. Act will get attracted and apply. Maintainability of refund/rebate claim - Section 35EE of the CEA - Held that - Reference to Section 33 EE of the C.E. Act in Section 83 of the Finance Act would not make any difference and the Tribunal continues to possess jurisdiction vide Section 86 of the Finance Act to decide matters relating to rebate or refund - decided against petitioner. The direction of the Tribunal that the petitioner must deposit additional 10% of the duty and penalty in dispute for the second appeal to be heard and adjudicated set aside - petition allowed.

Issues Involved:
1. Additional pre-deposit requirement for second appeal under Section 35F of the Central Excise Act, 1944.
2. Validity of the circular dated 27th April 2017 issued by the Tribunal.
3. Applicability of Section 35F of the Central Excise Act to service tax appeals under Sections 85 and 86 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Additional Pre-Deposit Requirement for Second Appeal:
The primary issue raised was whether the petitioner-assessee, on filing a second appeal before the Tribunal, is required to make an additional pre-deposit of 10% of the duty and penalty in dispute, over and above the 7.5% pre-deposit made for filing the first appeal before the Commissioner (Appeals). The petitioner argued that they should only be required to deposit the balance 2.5% to reach the total 10% mandated for the second appeal. The respondent-Revenue contended that a fresh and separate deposit of 10% is required, making the total pre-deposit 17.5%. The court analyzed Section 35F of the Central Excise Act, which mandates a graded scale of pre-deposit: 7.5% for the first appeal and 10% for the second appeal. The court concluded that the language of Section 35F is clear and unambiguous, requiring only a total of 10% pre-deposit for the second appeal, inclusive of the 7.5% already deposited for the first appeal.

2. Validity of the Circular Dated 27th April 2017:
The petitioner challenged the validity of the circular dated 27th April 2017, which stipulated that appellants must deposit 10% of the duty and penalty separately and over and above the 7.5% pre-deposit for the first appeal. The court found that the circular and the Larger Bench decision of the Tribunal, which required an additional 10% deposit, were incorrect. The court emphasized that the statutory provision does not support the requirement of an additional 10% deposit. The circular was quashed, and it was clarified that the total pre-deposit for the second appeal should be 10%, inclusive of the 7.5% already made for the first appeal.

3. Applicability of Section 35F to Service Tax Appeals:
The petitioner contended that the pre-deposit requirement under Section 35F of the Central Excise Act does not apply to service tax appeals under Sections 85 and 86 of the Finance Act, 1994. The court examined Sections 83, 85, and 86 of the Finance Act, which incorporate certain provisions of the Central Excise Act, including Section 35F, as applicable to service tax. The court concluded that Section 35F of the Central Excise Act applies to service tax appeals by virtue of Section 83 of the Finance Act. The court rejected the petitioner's argument, affirming that the pre-deposit requirement under Section 35F is applicable to service tax appeals as well.

Conclusion:
The court allowed the writ petition, setting aside the Tribunal's order requiring an additional 10% deposit for the second appeal and quashing the circular dated 27th April 2017. It was directed that the petitioner and others are required to deposit a total of 10% of the duty/penalty confirmed by the first appellate authority, inclusive of the 7.5% pre-deposit made for the first appeal. The court also held that Section 35F of the Central Excise Act applies to service tax appeals, and the pre-deposit requirement is mandatory for such appeals. No order as to costs was made.

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