2019 (8) TMI 676 - HC - Central Excise

Waiver of pre-deposit - case of petitioner is that in view of its poor financial condition, appellant was not in a position to pay the huge amount of pre-deposit - section 35F of CEA, 1944 - HELD THAT - Section 35F of the Act, as it earlier stood, invested the Tribunal with the discretion to dispense with the requirement of pre-deposit, if it was of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, however, subject to such conditions as the Tribunal may deem fit to impose so as to safeguard the interests of the revenue. However, Section 35F of the Act, amended vide the Finance (No.2) Act, 2014, which came into force w.e.f. 01.04.2014, has done away with that discretion - Section 35F(i) of the Act provides that unless the appellant has deposited 7.5% of the duty in case where the duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Commissioner of Central Excise, the Tribunal or the Commissioner (Appeals), as the case may be, appeal shall not be entertained. Legislative mandate contained in Section 35F of the Act is intended to safeguard the interest of the revenue as the discretion provided in the earlier unamended Section 35F of the Act vested in the Tribunal gave rise to enormous cases where the litigant used to frequently cite the reason of undue hardship, which would consume the adjudicatory time and resources of the Tribunal or, as the case may be, of the Commissioner (Appeals). It was in order to suppress such mischief that the Parliament amended Section 35F of the Act. There is no good reason to waive the mandatory requirement of pre-deposit, which, in any case, cannot be waived as it is an appeal against the order passed by the Tribunal and not a writ petition under Article 226 of the Constitution of India. Application dismissed.

Summary

Issues:
1. Appeal against the order dismissing the application for waiver of pre-deposit.
2. Interpretation of Section 35F of the Central Excise Act, 1944 regarding pre-deposit requirements.
3. Jurisdiction of the High Court under Article 226 of the Constitution to waive pre-deposit conditions.
4. Comparison of judgments from various High Courts on the issue of pre-deposit waivers.
5. Dismissal of the appeal and the direction for depositing the remaining pre-deposit amount.

Analysis:
1. The appellant challenged the order of the Customs, Excise and Service Tax Appellate Tribunal dismissing their application for waiver of pre-deposit of 7.5% of the duty demanded. The Tribunal had based its decision on the lack of a specific direction from the High Court to waive the pre-deposit condition.

2. The amended Section 35F of the Central Excise Act, 1944, now mandates pre-deposit requirements for entertaining appeals. The Tribunal's discretion to waive pre-deposit has been curtailed post the Finance Act, 2014. The High Court analyzed the legislative intent behind this amendment and upheld the constitutional validity of the section.

3. The High Court clarified that while it retains jurisdiction under Article 226 of the Constitution to waive pre-deposit in exceptional cases, such power should be sparingly used. The Court emphasized that the mere inability to pay the duty demanded does not warrant a waiver of the pre-deposit requirement.

4. Various High Court judgments were cited to support the position that the discretion to waive pre-deposit has been limited post the amendment to Section 35F. Judgments from Delhi, Allahabad, Madhya Pradesh, and Bombay High Courts were referenced to highlight the consistent approach in upholding the pre-deposit requirements.

5. Ultimately, the High Court dismissed the appeal as it did not raise any substantial legal question. However, considering that the appellant had already deposited 50% of the pre-deposit amount, the Court directed the appellant to pay the remaining 50% within two months for the appeal to be revived and decided on its merits. A stay application was also dismissed in this regard.