“The Amendments made in Excise and Service Tax Laws requiring Mandatory Pre-Deposit for filing appeal before the CESTAT is Restrospective”: Madras HC [Read Judgment]

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Recently, a writ petition was filed before the Madras High Court, in which the petitioner sought a declaration that Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 would apply only to the show cause proceedings initiated on or after 6.8.2014 i.e, after the date of amendments of the said provision. The Division Bench of the Court refused to grant such a declaration and held that it is retrospective.

The first contention for the petitioner was that inasmuch as the right of appeal available to a person is a vested right, which accrues on and from the date on which the list commences, the date on which such right of appeal accrues should be the date on which the original cause itself arose. Therefore, the right so vested cannot be taken away retrospectively by an amendment. His second contention was that the second proviso to the amended Section 35F cannot be taken to have excluded all other possible alternatives, that could arise out of the amendment of a proviso. The third contention of the learned senior counsel for the writ petitioner is that High Courts of Andhra Pradesh and Telangana and Kerala have already taken a view that the amendment is prospective in nature and that it would apply only to proceedings initiated after 6.8.2014.

The respondents, on the other hand, contended that while interpreting the amendment made to sub-section (3) and (3A) of Section 85 of the Act, the courts have held that they have to be applied only to proceedings initiated after the amendment. The learned counsel further submitted that even the Department had construed the amended provisions in the same manner, as seen from two Circulars issued by the Central Board of Excise and Customs. By Circular No.984/8/2014-CX dated 16.9.2014, the Department issued clarifications with regard to the amended provisions of Section 35F of the Central Excise Act, 1944 and Section 129E of the Customs Act, 1962. This Circular was followed by another Circular No.993/17/2014-CX dated 5.1.2015. In the second Circular, it is stated in para 4 that an Act of Parliament comes into effect on the date it received the assent of the President of India and that therefore the amended provision regarding the filing of appeals along with stipulated percentage of pre-deposit, shall apply to all appeals filed on or after 6.8.2014. The second Circular became necessary in view of a confusion created in para 1.2 of the first Circular to the effect that the amended provisions contain a specific saving clause to the effect that all pending appeals and stay applications will be governed by the erstwhile proceedings.The further contention respondent/assessee in the writ appeal is that by refusing to make a pre-deposit of 7.5%, the assessees do not gain anything. If an assessee is found, after exhausting all channels of remedies, to be liable to pay any amount, the assessee is obliged to pay it along with an exorbitant interest. Therefore, the learned counsel submitted that there was no necessity to curtail the discretion conferred upon the Appellate Authority to grant a total waiver of the pre-deposit condition, at least in respect of cases in which the show cause proceedings were initiated before the amendment, culminating in an Original Order a few days before or after the amendment.

The effect of the amendment is actually two fold, namely (a) the concession granted to those whose goods are in the custody of the Central Excise authorities, not to make any predeposit has been taken away, and (b) that insofar as other cases are concerned, the discretion that was vested with the Appellate Authority has now been taken away, removing thereby the glorious uncertainties of the exercise of discretion by quasi judicial authorities.

The Court expressed an opinion that the said amendment was made for the purpose of removing the possibility of an arbitrary exercise of power and also to avoid the threatof multiplicity of proceedings at the stage of waiver applications.

While dismissing the petition, Hon’ble Justice V. Ramasubramanian added that, “Therefore, if one condition that was already available in the statute for the exercise of a right of appeal, is merely replaced by another condition, the same cannot be said to be retrospective, unless it is definitely shown that the amended condition is more onerous than the unamended condition. When the unamended condition gave only a chance or hope for an assessee to get a total waiver at the discretion of the Appellate Authority, the same cannot be equated to a vested right. A mere chance of convincing the Appellate Authority to exercise the discretion for the grant of a total waiver is no vested right. The amendments, in our considered view, did not take away a right vested, but merely made a chance divested. What has now gone, is not the right , but the chance or hope. Therefore, the first contention of the learned Senior counsel for the petitioner is liable to be rejected.”

Read the full text of the Judgment here.

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