Provision Mandating Pre-deposit for Filing Appeal under Customs Act is Constitutional: Bombay HC [Read Judgment]

Delhi High Court - Commissioner - taxscan

In a recent ruling, the division bench of the Bombay High Court upheld the constitutional validity of Section 129E of the Customs Act, 1962 mandating pre-deposit for filing 7.5% of demand on first appeal and 10% on second appeals.

The petitioners, in the instant case, challenged the vires of Section 129E of the Customs Act, as amended by the Finance Act, 2014 prescribing a mandatory pre-deposit for filing an appeal before the Tribunal or the Commissioner (Appeals).

Coming to the facts of the case, a search conducted by the Director of Revenue Intelligence (DRI) in the premises of m/s bright International unearthed several doubtful invoices. The petitioners, i.e, the partners of the said Firm given statement under section 108 admitted recovery of parallel invoices for the same goods exported by them. They also admitted that also conceded that invoices of higher value were submitted to the Customs at the time of export to avail higher duty drawback and the actual invoice is the one with the lesser value. Consequently, Fine was levied on the Firm and the partners separately.

Challenging the provisions of section 129E, the petitioners submitted that it is discriminatory and violative of Articles 14, 19 and 21 of the Constitution. They urged that Section 129E as amended has taken away the powers earlier conferred on the appellate authority to waive the pre-deposit, upon forming an opinion that a pre-deposit would cause undue hardship. They further pointed out that the provision is rendered discriminatory as it creates two different classes when it mandates pre-deposit of duty demanded or penalty imposed or both, and more particularly when penalty cannot be considered to be a revenue as it is not a tax requiring it to be safeguarded, also cannot be accepted.

As seen from a plain reading of the provision, Section 129E provides for deposit of certain percentage of duty demanded or penalty imposed or both, as a condition precedent for the appellate authority to entertain an appeal.

The bench noted that the intention of the Parliament while amending the provision was to provide speedy disposal of the appeals before the appellate authorities and to save the valuable time of the tribunal delaying the adjudication of the appeals.

If such is the aim and insight behind the provision, it certainly cannot be held to be unreasonable, onerous, unfair or discriminatory for two fold reasons. Firstly, the object of a public policy sought to be achieved by the amendment, namely speedy disposal of the appeals before the appellate authorities is a laudable object and cannot be overlooked, so as to label the provision as unreasonable and onerous and violative of Article 14 of the Constitution. Secondly that the amount which is required to be deposited is not unreasonable from what the earlier (pre amended) regime provided,” the bench said.

Overruling the arguments of the petitioners, the division bench comprising of Justice S.V Gangapurwala and Justice G.S Kulkarni observed that even the pre-amended provision stipulated for a deposit in case of appeals from orders levying penalty. Relying on the Apex Court ruling in the case of Vijay Prakash D.Mehta and Jawahar D.Mehta Vs. Collector of Customs (Preventive), Bombay, the bench noted that right to appeal is a statutory right and not an absolute right, which can be circumscribed by the conditions in the grant.

Read the full text of the Judgment below.

taxscan-loader