Complete Case Digest on Pre-Deposits under Customs, Excise, and Service Tax Cases

A pre-deposit is an advance payment required before initiating certain legal or administrative processes. Its primary purpose is to safeguard revenue interests while minimizing the financial burden on taxpayers by requiring only a partial payment—typically 10% or 20%—of the disputed tax. This pre-fixed rate is set by the department to ensure fairness and protect both parties' interests.

SUPREME COURT

Pre-Deposit Mandatory under Section 129E Customs Act, 1962: Supreme Court Chandra Sekhar Jha vs Union of India Citation: 2022 TAXSCAN (SC) 101

The Supreme Court recently held that the benefit of the first proviso to Section 129E of the Customs Act, 1962, allowing Appellate Tribunals to waive penalty deposits during appeals, does not apply to appeals filed after the provision was substituted in 2014. A two-judge bench comprising Justice KM Joseph and Justice Hrishikesh Roy dismissed an appeal against the Calcutta High Court's decision, affirming that the substitution of the provision repealed the older benefit. The appellant, penalised for smuggling gold, failed to deposit 7.5% of the penalty amount as required under the revised Section 129E. The Court noted the change in deposit requirements post-substitution, emphasising that previous benefits did not extend to appeals filed under the new regime.

Payment of Mandatory Pre- Deposit: SC directs to make Payment before Appellate Authority within 2 Weeks M/S CLASSIC DECORATORS vs COMMISSIONER (Appeal-I) Central Excise/GST & ANR CITATION: 2023 TAXSCAN (SC) 232

The Supreme Court of India directed M/s Classic Decorators to make a mandatory pre-deposit payment within two weeks before the Appellate Authority. The petitioner had approached the Delhi High Court, challenging an order dated 04.05.2023, which dismissed their appeal due to the lack of a pre-deposit. The Delhi High Court had noted that the required pre-deposit was 7.5% of the total demand and did not consider it a significant amount. The Division Bench found no grounds to interfere with the order but allowed the petitioner two weeks to make the pre-deposit for the appeal to be considered on merits. The Supreme Court dismissed the special leave petition, granting an additional two weeks from the order date for the pre-deposit.

Interim Relief to Flipkart: Supreme Court stays Patna HC’s Rejection of GST Appeal for Pre-Deposit from ECRL instead of ECL, issues Notice M/S FLIPKART INTERNET PVT. LTD. vs THE STATE OF BIHAR & ORS. CITATION: 2023 TAXSCAN (SC) 302

In a recent development, the Supreme Court has granted a stay on the rejection of appeals by the Patna High Court, which deemed them non-maintainable due to non-payment of a pre-deposit for GST appeals from the Electronic Credit Ledger (ECRL) instead of the Electronic Cash Ledger (ECL). The apex court, comprising Justices B V Nagarathna and Ujjal Bhuyan, has stayed paragraphs 77 and 78 of the impugned order until the current petition filed by Flipkart for special leave to appeal is disposed of. This decision holds significant implications for GST appeals nationwide, as it questions the requirement of pre-deposit exclusively from the Electronic Cash Ledger.

HIGH COURTS

Waiver of Pre-Deposit u/s 35F for Filing Appeal would Destroy the Legislative Intent: Kerala High Court SANTHOSH KUMAR K vs THE COMMISSIONER CENTRAL GST AND CENTRAL EXCISE CITATION: 2022 TAXSCAN (HC) 267

The Kerala High Court ruled that waiving the mandatory pre-deposit under Section 35F for filing an appeal would undermine legislative intent. The petitioner, M/s. Swathi Constructions faced a substantial service tax and penalty. While they deposited Rs. 12,50,000 out of the required Rs. 18,06,057, they sought relief from paying the remaining amount due to financial constraints. The Court, referencing amendments to Section 35F and Supreme Court precedents, stated that it has no discretion to waive the mandatory pre-deposit of 7.5%, even if it appears onerous. Justice Bechu Kurian Thomas dismissed the petition but allowed the petitioner an additional month to complete the pre-deposit.

Delhi HC allows appeal of Daily Wage Earners against Seizure of Agarwood Chips and Oil without Pre-Deposit MOHAMMED AKMAM UDDIN AHMED & ORS vs COMMISSIONER APPEALS CUSTOMS AND CENTRAL EXCISE & ORS CITATION: 2023 TAXSCAN (HC) 762

The Delhi High Court allowed the appeal of poor daily wage earners against the seizure of agarwood chips and oil without requiring a pre-deposit. Petitioners Mohammed Akmam Uddin Ahmed & Ors argued that the goods were wrongly assessed and they couldn't afford the pre-deposit to challenge the levy. They cited an amendment to the Export Policy of Agarwood Oil and Chips. The Department argued agarwood is endangered and covered by international trade restrictions. The court found the penalty was based on incorrect valuation and lacked legal basis. The bench waived the pre-deposit requirement, allowing the petitioners to contest the valuation.

Poor Financial Condition is not a Ground to Waive Pre-deposit for Excise Appeal: Bombay HC dismisses Writ Petition Kim Steel Strips Pvt. Ltd. vs The Commissioner of Central Excise and Customs

Justices Anoop V Mohta and Anuja Prabhudessai dismissed a writ petition seeking waiver of pre-deposit under the Excise Act, stating that financial hardship alone cannot waive the mandatory deposit required for filing an appeal under Section 35 of the Central Excise Act, 1944. The High Court held that alternative remedies are available under excise law to challenge such orders, and financial constraints do not constitute exceptional circumstances to invoke writ jurisdiction or waive pre-deposit. The petitioners' contention that the deposit amount was excessive was also rejected by the bench.

Payment of Pre-Deposit by Parent Company can be treated as ‘Proper Compliance’: Madras HC quashes Tribunal’s Action Dismissing Appeal St. John CFS Part Pvt. Ltd. vs The Commissioner of Central Excise CITATION: 2022 TAXSCAN (HC) 300

The Madras High Court, comprising Justice R. Subramanian and Justice N. Sathish Kumar, overturned a CESTAT (Customs, Excise and Service Tax Appellate Tribunal) decision where an appeal was dismissed due to non-compliance with conditions for granting stay. The Tribunal had required an appellant company to deposit Rs.20,00,000/- as a pre-deposit, but this was done by its parent company due to an ongoing merger process. The Tribunal rejected this deposit, citing separate service tax registrations. The High Court ruled that the deposit by the parent company should be considered compliant with the Tribunal's interim order. Therefore, the Court set aside the Tribunal's decision and directed it to reconsider the appeal on its merits.

Pre-Deposit Paid for First Appeal Adjustable on Filing Second appeal before CESTAT: Delhi HC M/S SANTANI SALES ORGANISATION vs CESTAT

The Delhi High Court ruled that for customs, excise, and service tax appeals, there is no need for separate pre-deposits of 7.5% and 10% for first and second appeals. A two-judge bench, comprising Justice Sanjiv Khanna and Justice Chander Sekhar, quashed a circular from the Delhi CESTAT and clarified that the total pre-deposit required for a second appeal is 10%, inclusive of the 7.5% already paid for the first appeal.

The bench emphasised that Section 35F of the Central Excise Act is clear and unambiguous, requiring a total of 10% pre-deposit for second appeals, not an additional 10% on top of the initial 7.5%. The court rejected the petitioners' argument that Section 35F does not apply to service tax appeals, stating that deposits made during or after the original proceedings should be considered in meeting pre-deposit requirements.

Unaware of RBI Portal to make Pre-Deposit u/s 35F of CEA: Jharkhand HC Grants Relief to Unregistered Dealer M/s Mukesh Kumar Singh vs The Commissioner (Appeals) CITATION: 2023 TAXSCAN (HC) 296

The division bench of Acting Chief Justice Aparesh Kumar Singh and Justice Deepak Roshan provided relief to M/s Mukesh Kumar Singh, an unregistered dealer and government contractor, who had failed to pay service tax and the mandatory pre-deposit under Section 35F of the Central Excise Act, 1944. The petitioner contended that they were exempt from service tax as a government contractor and were unaware of the requirement to pay online through the RBI portal. The court set aside the order of the GST Commissioner (Appeals) and directed the petitioner to remit the mandatory pre-deposit within four weeks.

No Recovery of Central Excise Duty, Interest, and Penalty without service of Adjudication Order: Calcutta HC Haldia Petrochemicals Limited Vs.Assistant Commissioner, CGST & CX, Haldia-II Division, Haldia Commissionerate & Ors. CITATION: 2022 TAXSCAN (HC) 508

The Single Bench of the Calcutta High Court, presided over by Justice Md. Nizamuddin, ruled in favour of Haldia Petrochemicals Limited against the recovery of central excise duty, interest, and penalty without proper service of the adjudication order.  The petitioner argued that despite responding to a show-cause notice and appearing for a personal hearing, they never received the adjudication order dated October 17, 2012, as required under Section 37C of the Central Excise Act, 1944.

Seven years later, the petitioner discovered that a refundable amount was adjusted against the demand from the unserved adjudication order, leading to the attachment of their bank account. The High Court found the recovery actions unsustainable and directed the respondent to refund the excess amount recovered and withdraw the attachment order within seven days, considering that the statutory pre-deposit for filing an appeal had already been made.

Indian citizen working as Travel Agent in Dubai need to Deposit pre-deposit u/s 29E of Customs Act for further proceedings: Gujarat HC AZIZ FAKIRMOHAMED SUMBHANIYA vs UNION OF INDIA CITATION: 2023 TAXSCAN (HC) 314

The Gujarat High Court's Division Bench recently addressed a case involving Aziz Fakirmohamed Sumbhaniya, an Indian travel agent in Dubai, concerning a pre-deposit requirement under Section 129E of the Customs Act. The petitioner's counsel, Amal Paresh Dave, argued against an alleged illegal Order-in-Original (OIO), citing violations of natural justice and reliance on unsubstantiated statements. On the other side, Mitesh R Amin, representing the state, asserted the mandatory nature of the pre-deposit due to accusations of gold smuggling, highlighting opportunities for hearings that were not utilized by the petitioner.

The Bench, consisting of Justice Sonia Gokani and Justice Gita Gopi, acknowledged the non-compliance with the pre-deposit requirement as a procedural hurdle preventing the appellate authority from examining the case on its merits. They permitted the petitioner to proceed to the appellate stage upon fulfilling the pre-deposit obligation, maintaining the integrity of the OIO without interference.

Pre-Deposit Requirement can’t be Waived since Its’ Constitutional Validity is Upheld: Bombay HC Faisal Ahmed Abdul Malik Javeri vs Union of India and ors.

In a recent judgment, a two-judge bench of the Bombay High Court dismissed several petitions challenging orders requiring pre-deposits for filing appeals under the Customs Act, 1962. Justices M S Sanklecha and M S Sonak upheld the constitutionality of Section 129E, citing precedent in Haresh N. Vora vs. Union of India. The petitions contested customs duty and penalties imposed without adequate adherence to natural justice, seeking waivers of pre-deposits.

However, the bench declined to grant such relief, emphasising that waiving pre-deposits would contravene the statutory mandate of Section 129E. They reasoned that while Article 226 empowers the court to review statutory orders, the availability of appeal remedies negated the need for immediate intervention in these cases. The bench concluded that without demonstrating specific hardships, they would not direct the waiver of pre-deposits, affirming the legal framework's integrity under the Customs Act.

Pre-Deposit mandatory for filing Appeal before CESTAT: Delhi High Court DISH TV INDIA LIMITED vs UNION OF INDIA & ORS.

The Delhi High Court recently ruled on a case involving mandatory pre-deposit requirements for appeals before the CESTAT under Section 129E of the Customs Act, 1962. The petitioner, an importer of satellite/viewing cards and set-top box parts, faced a show-cause notice alleging misclassification. The court highlighted amendments made by the Finance Act No.2 of 2014, which stipulate a fixed percentage pre-deposit of duty demanded for CESTAT appeals: 7.5% for lower officer orders and 10% for Commissioner (Appeals) orders, not exceeding Rs.10 crores.

The division bench, led by Chief Justice D.N. Patel, clarified that waivers of pre-deposits are not permissible under the amended law, emphasizing that petitioners must deposit a substantial portion of the duty assessed (either 90% or 92.5% waived) to pursue statutory appeals. The court mandated compliance with these requirements within specified timelines, stressing that CESTAT decisions would proceed only after such deposits are made, preserving the appeal's integrity under legal frameworks and regulations.

Delhi HC dismisses Plea to Waive Pre-Deposit for Appeal against limitation-barred Service Tax Demand Order  M/S CLASSIC DECORATORS vs COMMISSIONER CITATION: 2023 TAXSCAN (HC) 930

The Delhi High Court recently dismissed a plea seeking waiver of pre-deposit for an appeal against a limitation order that was barred by limitation. The petitioner, M/s Classic Decorators, challenged an order-in-original confirming service tax demands and penalties under the Finance Act, 1994. Despite a prior observation by the High Court that the original order might be time-barred, the appeal was not entertained due to non-payment of the 7.5% pre-deposit requirement.

Justices Vibhu Bakhru and Amit Mahajan upheld the requirement, noting it was not prohibitively large and did not render the appellate remedy illusory. The High Court directed the petitioner to make the pre-deposit within two weeks for the Appellate Authority to consider the appeal on its merits.

High Court has Writ Jurisdiction to Waive Statutory Pre-Deposit for filing Appeal before CESTAT: Delhi HC AJAY SAGAR vs PRINCIPAL COMMISSIONER OF CUSTOMS CITATION: 2023 TAXSCAN (HC) 1478

The Delhi High Court clarified its writ jurisdiction under Article 226 of the Constitution to waive the statutory pre-deposit requirement for filing appeals before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The case involved Ajay Sagar, who petitioned the court seeking relief from the pre-deposit mandated by Section 129E of the Customs Act, 1962, citing the removal of provisions allowing discretion for hardship cases.

The High Court acknowledged its authority to intervene despite the amendment, citing precedents that uphold its power to relieve undue financial burden in exceptional cases. However, the Division Bench of Justice Yashwant Varma and Justice Dharmesh Sharma found that the petitioner's case did not meet the threshold of rarity or exceptional circumstances justifying waiver.

Payment of Pre-Deposit is allowable when Assessee was Unaware of the Mandatory Payment: Jharkhand HC  M/s Mukesh Kumar Singh vs The Commissioner (Appeals) CITATION: 2023 TAXSCAN (HC) 296

In a recent judgment, the Jharkhand High Court ruled in favour of Mukesh Kumar Singh, a non-registered government contractor, regarding the payment of mandatory pre-deposit for his service tax liability. Initially unaware of the requirement due to his exemption belief, Mukesh faced a show-cause notice for non-payment. His appeal before the Commissioner (Appeals), CGST & C. Ex was dismissed solely for non-payment of the pre-deposit. Mukesh argued that being an unregistered dealer, he couldn't make online payments and was unaware of alternative payment methods.

Justice Deepak Roshan found no intent to evade the pre-deposit and set aside the Commissioner's order, directing Mukesh to deposit the pre-deposit within four weeks. This decision allows Mukesh's appeal to proceed and be heard on its merits before the authorities.

Payment of Pre-deposit through Form GST DRC-03 for Service Tax / Excise Matters: Bombay HC directs CBIC to Issue Guidelines Sodexo India Services Pvt. Ltd vs The Union of India and Ors CITATION: 2022 TAXSCAN (HC) 791

The Bombay High Court directed the CBIC to issue guidelines for pre-deposit through Form GST DRC-03 in Service Tax and Excise matters due to the absence of specific legal provisions. Sodexo India Services Pvt. Ltd. challenged the non-acceptance of pre-deposits via Form GST DRC-03 for appeals under Service Tax law, seeking validation for such payments. The petitioner's appeals before the Commissioner (Appeals) were dismissed citing improper pre-deposits, with Sodexo India arguing lack of guidance during the personal hearing. The High Court instructed CBIC to issue guidelines and ordered a fresh hearing by the Commissioner of Appeals on the case's merits, ensuring due notice to the petitioner.

Non-compliance of Section 35-F CETA on Pre-Deposit to Maintain Statutory Appeal: Allahabad HC Directs to Pre-Deposit Amount M/S Madhyamik Shiksha Parishad vs Customs Excise And Service Tax Appellate And Another CITATION: 2023 TAXSCAN (HC) 935

In a recent ruling, the Allahabad High Court directed M/s Madhyamik Shiksha Parishad to comply with Section 35-F of the Central Excise Act, 1944 by making a pre-deposit to maintain their statutory appeal. The appeal arose from CESTAT Allahabad order rejecting their appeal against the Commissioner (Appeals), CGST and Central Excise, Allahabad.

The Tribunal dismissed the appeal solely due to non-compliance with the mandatory pre-deposit requirement. The appellant, a statutory board constituted by the Government of U.P., sought time to make the pre-deposit, which was granted. Counsel for the revenue agreed to set aside the order if the appellant deposited the required amount within one month. The Division Bench of Justices Saumitra Dayal Singh and Rajendra Kumar-IV disposed of the appeal with the condition that the appellant must make the deposit by June 30, 2023, to revive the appeal before the Tribunal for consideration on its merits.

Pre-Deposit for CESTAT Appeal: Chhattisgarh HC grants 3 months due to COVID related Financial Crisis, says No to Waiver M/s Nava Raipur Atal Nangar Vikas Pradhikaran vs Union Of India CITATION: 2023 TAXSCAN (HC) 816

In a recent decision, the Chhattisgarh High Court granted Nava Raipur Atal Nangar Vikas Pradhikaran (NRANVP) a three-month extension to deposit the mandatory pre-deposit before the CESTA). NRANVP, a special development authority, had sought relief due to financial difficulties exacerbated by the COVID-19 pandemic. However, the court rejected their plea for a waiver of the deposit, ruling that only an extension of time for depositing the pre-deposit under Section 35F of the Central Excise Act, 1944 was permissible. The petitioner's counsel argued that pandemic-related financial constraints justified a waiver, citing actions such as waiving delayed interest on lease payments.

The court, represented by Justice Parth Prateem Sahu, allowed the extension but upheld the requirement for NRANVP to make the pre-deposit within the extended timeframe, setting a precedent that could impact other taxpayers similarly affected by the pandemic seeking extensions for pre-deposit requirements.

Provision Mandating Pre-deposit for Filing Appeal under Customs Act is Constitutional: Bombay HC Haresh Nagindas Vora vs Union Of India

The division bench of the Bombay High Court upheld the constitutionality of Section 129E of the Customs Act, 1962, which mandates pre-deposit for filing appeals. The petitioners challenged the amended Section 129E, arguing it was discriminatory and violated constitutional rights. The case arose from a search by the DRI at m/s Bright International, revealing discrepancies in exported goods invoices. The petitioners contended that the provision removed the appellate authority's discretion to waive pre-deposit, causing hardship. However, the bench, comprising Justice S.V. Gangapurwala and Justice G.S. Kulkarni, upheld the amendment, emphasizing its aim to expedite appeal processes and citing precedents that uphold the conditions on appellate rights as reasonable.

Jharkhand HC Orders to Pay Mandatory Pre-deposit under 35F of Central Excise Act for an Appeal Hearing M/s Amar Enterprises vs The Commissioner CITATION: 2023 TAXSCAN (HC) 292

The Jharkhand High Court recently ruled that Amar Enterprises, registered with CPWD, SAIL, MECON, and AAI for electrical repair and maintenance contracts, must pay a mandatory pre-deposit under Section 35F of the Central Excise Act for an appeal hearing. The petitioner, under the impression of service tax exemption, faced a demand and penalty totaling Rs. 7,66,636. Their appeal was dismissed for non-payment of the 7.5% mandatory pre-deposit. Amar Enterprises, unaware of online payment options, sought to rectify this to proceed with the appeal. Justice Deepak Roshan set aside the Commissioner's order and allowed four weeks for the pre-deposit.

Pre-deposit of 7.5% of disputed Demand Duty is Mandatory to file appeal u/s 35-G of Central Excise Act: Allahabad HC Shri Amit vs Commissioner Of Central Goods And Service Tax CITATION: 2023 TAXSCAN (HC) 601

The Allahabad High Court held that a pre-deposit of 7.5% of the disputed demand duty is mandatory to file an appeal under Section 35-G of the Central Excise Act, 1944. Sri A.P. Mathur represented the assessee appellant, while Sri Amit Mahajan represented the revenue. The petitioner had filed an appeal challenging the order of the Customs, Excise & Service Tax Appellate Tribunal, which dismissed the appeal due to non-payment of the mandatory pre-deposit. The High Court noted that under Section 35-G, an appeal can only be maintained upon fulfilling the pre-deposit requirement. The Court granted the appellant two weeks to make the pre-deposit and set aside the Tribunal's order, allowing the appeal to proceed.

Delhi HC refuse to allow Duty Drawback against Pre-deposit u/s 129E of Customs Act COLOUR COTTEX PVT LTD vs COMMISSIONER OF CUSTOMS CITATION: 2023 TAXSCAN (HC) 319

The Delhi High Court recently ruled that duty drawback cannot be used to offset the pre-deposit requirement under Section 129E of the Customs Act, 1962. Colour Cottex Pvt Ltd, engaged in exporting readymade garments, had claimed duty drawback of approximately ₹10.16 crores. Despite claiming the duty drawback, it remained unpaid due to allegations of wrongful claims under the Focus Market Scheme. The petitioner's appeal before the CESTAT was not entertained due to non-payment of the required pre-deposit.

The court held that duty drawback and pre-deposit serve different purposes under the law, denying the request to adjust duty drawback against the pre-deposit obligation. The petitioner was granted permission to use received funds to fulfill the pre-deposit requirement for pursuing an appeal before CESTAT.

Pre-Deposit Mandatory for Excise Appeal u/s 35 F: Calcutta HC Allows to Pay Default Pre Deposit M/s Active Ads vs The State of West Bengal & Ors. CITATION: 2023 TAXSCAN (HC) 778

The Calcutta High Court allowed M/s Active Ads to pay the mandatory pre-deposit required for their appeal under Section 35F of the Central Excise Act, 1944. The petitioner had filed an appeal before the Commissioner, Central Goods and Services Tax (CGST) and CX (Appeal), which required a pre-deposit of 7.5% of the duty demanded. The Commissioner rejected the appeal solely because the petitioner had failed to make this mandatory pre-deposit. Responding to the CGST Authorities' submissions that the petitioner had disregarded multiple reminders to deposit the amount, Justice Arindam Mukherjee set aside the dismissal order.

The court directed the petitioner to deposit Rs. 2,30,949/-, representing 7.5% of the demand, by May 12, 2023. Failure to comply would result in the revival of the dismissal order dated March 28, 2023. If deposited as ordered, the Commissioner of Appeal would proceed to hear the appeal on its merits.

Bank Attachment not justified on Remittance of pre-deposit: Madras HC V. R. S. Traders vs The Commissioner of State Taxes CITATION: 2022 TAXSCAN (HC) 367

The Madras High Court held that bank attachments on remittance of pre-deposit are unjustified. M/s V R S Traders filed a writ petition under Article 226 seeking the release of their bank account attachment by the Commissioner of State Taxes. The petitioner faced an assessment order and intended to file an appeal within a week, requiring remittance of statutory pre-deposit. The court acknowledged that pre-deposit provisions in GST prevent frivolous appeals and grant automatic stay upon compliance.

Justice Anita Sumanth noted that the petitioner had filed the appeal and remitted the pre-deposit as per Section 107 of the Tamil Nadu Goods and Service Tax Act, 2017. Consequently, the court ordered the lifting of the bank attachments.

Delhi HC restores appeal to CESTAT on Compliance of Condition of Pre deposit ANKIT MADAN vs REGISTRAR, CUSTOMS, EXCISE CITATION: 2024 TAXSCAN (HC) 1046

The Delhi High Court restored an appeal before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) after compliance with the deposit condition. Ankit Madan, the petitioner, challenged a CESTAT order dismissing their appeal for non-compliance with deposit requirements. The High Court initially directed compliance within 12 weeks, but CESTAT dismissed the appeal when the deposit wasn't acknowledged due to representation issues. An application for restoration was filed, asserting compliance, but CESTAT dismissed it with a fine. Justices Yashwant Varma and Purushaindra Kumar Kaurav of the Delhi HC set aside this decision, allowing the appeal's restoration pending a deposit of INR 2 lakhs within two weeks.

No Requirement of Attachment of Bank Account on Deposit of Pre-Deposit, and after Numbering of Service Tax Appeals: Kerala HC CARMEL BUILDERS AND FIBROTECH INDUSTRIES PVT.LTD vs THE COMMISSIONER OF CENTRAL EXCISE CITATION: 2023 TAXSCAN (HC) 1611

The Kerala High Court observed that attachment of bank accounts is unnecessary after the deposit of pre-deposit and numbering of service tax appeals. Carmel Builders and Fibrotech Industries filed appeals before CESTAT against service tax demands upheld by authorities. The court noted amendments under the Finance Act (No.2), 2014, which mandate pre-deposits based on disputed duty or penalty. Justice Dinesh Kumar Singh's Single Judge Bench lifted the attachment/freezing of petitioner's bank accounts, directing submission of property lists and prohibiting coercive actions during appeal pendency at CESTAT.

P&H HC reprimands CESTAT for Decade-Long Stay on Pre-Deposit to Tobacco Company Commissioner of Central Excise & Service vs A.K.Singh CITATION: 2023 TAXSCAN (HC) 1896

The Punjab and Haryana High Court rebuked the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) for effectively allowing a decade-long stay on the pre-deposit by Pelican Tobacco Co. Ltd. The company and its directors faced penalties following a 2008 search, leading to appeals and stay applications. Despite various orders directing deposits and dismissals for non-compliance, subsequent appeals and SLPs were unsuccessful in reducing the required deposits. The High Court criticised the Tribunal for exceeding its jurisdiction by condoning delays and restoring appeals improperly.

Electronic Credit Ledger can’t be Debited for making Payment of Pre-Deposit: Orissa High Court M/s. Jyoti Construction vs Deputy Commissioner of CT & GST CITATION: 2021 TAXSCAN (HC) 513

The Orissa High Court ruled that the Electronic Credit Ledger (ECRL) cannot be debited for making payments towards pre-deposits. M/s. Jyoti Construction, a partnership firm in works contracts, challenged orders by the Additional Commissioner of Sales Tax rejecting their appeal under the Odisha Goods and Services Tax Act, 2017. The court upheld that debiting ECRL for pre-deposit payments violated Section 49(3) of the OGST Act and Rule 85(4) of the OGST Rules, 2017, which mandate such payments from the Electronic Cash Ledger (ECL).

The division bench, led by Chief Justice Dr. S. Muralidhar and Justice B.P. Routray affirmed the appellate authority's decision, stating that any reversal of the ECRL debit must be separately addressed by the petitioner through appropriate legal remedies. The court clarified that fulfilling the pre-deposit requirement does not hinge on reversing the ECRL debit entry.

Karnataka High Court allows Adjustment of Excess Amount paid as Pre-deposit under SLVDR Scheme M/S. BRAHMANANDA SAGAR JAGGERY INDUSTRIES vs THE MINISTRY OF FINANCE GOVERNMENT OF INDIA CITATION: 2021 TAXSCAN (HC) 472

The Karnataka High Court allowed the adjustment of excess amount paid as pre-deposit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SLVDRS). The petitioner, engaged in the production of jaggery powder and khandasari sugar and registered with the Central Excise Department, sought relief in quashing form No. SVLDRS-3 issued by the respondent. The petitioner requested permission to adjust excess amounts deposited and to receive a discharge certificate for another case without further payments.

Justice S.R. Krishna Kumar, in a single bench ruling, emphasized that mutual adjustment of disputed amounts deposited by the same assessee for different periods and cases under SVLDRS is permissible. The court directed the respondent to adjust the excess deposit towards the demanded amount and issue a discharge certificate promptly for the petitioner's second case from 16.09.2015 to 30.06.2015.

Securing Release of Consignment by Furnishing Bank Guarantee: Delhi HC directs to dispose Pre-Deposit Refund Application M S BHARAT UDYOG vs UNION OF INDIA & ORS. CITATION: 2024 TAXSCAN (HC) 1128

The Delhi High Court directed the disposal of a pre-deposit refund application where the release of a consignment was secured by a bank guarantee. The petitioner challenged the rejection of their refund request for Rs. 22,35,800 as premature. The Tribunal's final order set aside the original order and remitted the matter for re-adjudication. The respondent countered that the bank guarantee was for securing provisional release, not as a pre-deposit.

However, the Tribunal permitted its encashment towards the pre-deposit. Justices Sanjeev Sachdeva and Ravinder Dudeja ruled that since the order-in-original was set aside, the petitioner should be restored to the prior position, where a bank guarantee secured the consignment's release. For a refund, the petitioner must furnish a new bank guarantee of the same amount to maintain the department's position.

CESTAT Competent to Reject Customs Appeal for Non-Compliance of Pre-Deposit u/s 129E: Delhi HC G & S INTERNATIONAL vs COMMISSIONER OF CUSTOMS CITATION: 2024 TAXSCAN (HC) 591

The Delhi High Court has held that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) can reject Customs Appeals for non-compliance with the pre-deposit condition. The appellants, M/s. G.S. International and M/s. A’s Raj International, had appealed against an order requiring them to make pre-deposits under Section 129E of the Customs Act, 1962. CESTAT dismissed their stay applications and directed the appellants to deposit specific amounts within four weeks. When the appellants failed to comply, CESTAT dismissed the appeals for non-compliance.

The High Court, however, upheld CESTAT's decision, stating that the right to appeal is conditional upon fulfilling the pre-deposit requirement. The court noted that Section 129E of the Customs Act, prior to its 2014 amendment, allowed CESTAT discretion to waive the pre-deposit in cases of undue hardship. However, since the appellants did not fulfil the pre-deposit condition, their right to appeal was not exercisable.

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

The Madras High Court recently addressed the issue of retrospective application of amendments to Excise and Service Tax laws, particularly regarding mandatory pre-deposit for appeals before CESTAT. The court dismissed a writ petition seeking a declaration that these amendments applied only to proceedings initiated after August 6, 2014. The court held that the amendments are retrospective, rejecting arguments that they violate vested rights of appeal. It emphasized that the amendments aim to standardize pre-deposit requirements and prevent arbitrary exercise of power by authorities.

Mandatory Condition of Pre-Deposit u/s 35F of CEA to file Appeals before CESTAT cannot be Waived in Writ Jurisdiction: Allahabad HC Ram Kishan Bairwa vs Central Excise Service Tax Appellate Tribunal And 2 Others CITATION: 2024 TAXSCAN (HC) 876

In a recent ruling, the Allahabad High Court held that the mandatory pre-deposit condition under Section 35F of the Central Excise Act, 1944 cannot be waived in writ jurisdiction. The petition filed under Article 226 challenged an order by the Commissioner, Central Goods and Service Tax, Ghaziabad.

The Court emphasised that the High Court cannot modify or waive the pre-deposit requirement, as per established judicial precedents and legislative amendments. Justice Shekhar B. Saraf noted that alternative remedies are available and dismissed the writ petition, stating that the petitioner cannot avoid the mandatory pre-deposit required by law.

Pre-Deposit Paid for First Appeal Adjustable on Filing Second appeal before CESTAT: Delhi HC

The Delhi High Court recently ruled that separate payments of 7.5% and 10% as pre-deposit for first and second appeals in customs, excise, and service tax matters are unnecessary. The Court quashed a 2017 circular by the Delhi CESTAT and clarified that for the second appeal, a total of 10% of the duty or penalty must be deposited, which includes the 7.5% already paid for the first appeal. The Court, however, rejected the petitioners' argument that Section 35F of the Central Excise Act does not apply to service tax appeals. The bench emphasised that the provision's language is clear and unambiguous, requiring a 10% pre-deposit in the second appeal, inclusive of the 7.5% from the first appeal.

Pre-Deposit Requirement can’t be Waived since Its’ Constitutional Validity is Upheld: Bombay HC

A two-judge bench of the Bombay High Court dismissed several petitions challenging the requirement of a pre-deposit to file an appeal before the authorities and Tribunal under the Customs Act, 1962. The bench, consisting of Justices M.S. Sanklecha and M.S. Sonak, upheld the necessity of the pre-deposit, referencing the earlier decision in Haresh N. Vora vs. Union of India, which confirmed the constitutionality of the provision. The petitioners had argued that the orders against them were passed without fulfilling natural justice and sought a waiver of the pre-deposit. However, the Court ruled that granting such a waiver would contradict the statutory mandate of Section 129E of the Customs Act.

The bench emphasized that while the Court has jurisdiction under Article 226 of the Constitution to examine such matters, in this case, the petitioners did not demonstrate why they could not pursue the alternative remedy of appeal. The Court concluded that the constitutional validity of the pre-deposit requirement eliminates the possibility of issuing a writ to waive this obligation.

Inability to pay Full Amount for VAT & CST Appeal : Gujarat HC reduces Pre-Deposit form 20% to 15% VINOD KUMAR DUGAR, PROPRIETOR OF ARIHANT ENTERPRISE Vs STATE OF GUJARAT CITATION: 2023 TAXSCAN (HC) 265

A Division Bench of the Gujarat High Court recently reduced the required pre-deposit for an appeal from 20% to 15% of the tax amount, considering the financial difficulties of the petitioner, Vinod Kumar Dugar. The petitioner, represented by Tushar Hemani and Hiren J. Trivedi, was involved in trading various goods and faced tax assessments under the Gujarat Value Added Tax Act, 2003, and the Central Sales Tax Act, 1956. After a search and seizure, a notice was issued alleging that the petitioner was involved in billing activities only, leading to a tax demand. The petitioner’s appeal was dismissed after failing to pay the initial 20% pre-deposit due to financial constraints and health issues. The Gujarat High Court, acknowledging these hardships, directed the petitioner to deposit 15% of the tax amount instead.

Application for Waiver of Pre deposit u/s 129 E of Customs Act rejected as assessee Fails to Deposit Amount: Delhi HC G & S INTERNATIONAL vs COMMISSIONER OF CUSTOMS CITATION: 2024 TAXSCAN (HC) 603

The Delhi High Court upheld the dismissal of appeals by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) due to the appellant's failure to comply with the pre-deposit requirement under Section 129E of the Customs Act, 1962. G & S International, the appellant, had challenged the CESTAT's order after being directed to deposit specific amounts as a condition for hearing their appeal against a ruling related to alleged fraudulent exports. The court emphasized that the right to appeal under Section 129E is conditional upon fulfilling the pre-deposit requirement, and failure to do so justifies the dismissal of the appeal. The court found no error in CESTAT's decision to reject the appeals for non-compliance with the deposit order, affirming that the tribunal acted within its powers under the law.

Refund of Interest on pre-deposit to be determined from expiry of 3 months from date of communication of order: Andhra Pradesh HC M/s.Maithan Ceramics Limited vs The Commissioner of Central Tax CITATION: 2021 TAXSCAN (HC) 324

The Andhra Pradesh High Court ruled that interest on a pre-deposit refund is to be calculated starting three months after the appellate order is communicated, not from the date of deposit. M/s. Maithan Ceramics Limited had challenged a Customs order imposing duty and penalty, which they paid during the appeal. After winning the appeal, they sought a refund with interest. The Commissioner initially granted interest from the deposit date, but the Commissioner of Appeals removed the interest, claiming it wasn't a pre-deposit under the law. The Tribunal later restored the interest but limited it to post-appeal communication. The High Court upheld this, aligning with the pre-amended Section 129EE of the Customs Act.

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

The Madras High Court recently addressed the retrospective application of Section 35F of the Central Excise Act, 1944, amended by Section 83 of the Finance Act, 1994. The petitioner argued that the provision should apply only to proceedings initiated after the amendment date (August 6, 2014), asserting that appeal rights are vested and cannot be retrospectively altered. They also contended that other High Courts had interpreted the amendment as prospective and that the amendment excluded alternative provisions.

The court dismissed the petition, finding that the amendment was not retrospective but instead replaced an existing condition with a new one. The court held that the amendment aimed to prevent arbitrary discretion and multiple proceedings for waivers. Justice V. Ramasubramanian stated that the amendment did not remove a vested right but merely altered the conditions for appeal. The court emphasised that a mere chance to obtain a waiver is not a vested right, and thus rejected the petitioner's contention.

No Retrospective effect for Customs Notification increasing Duty on Peas: Madras High Court

The Madurai Bench of the Madras High Court dismissed an appeal by the Commissioner of Customs, Tuticorin, challenging a CESTAT order favoring M/S. Shadi Ram & Sons Pvt. Ltd. The dispute involved a consignment of yellow peas imported by the respondent. A notification increasing the basic customs duty to 50% was issued on 08.11.2017, after the Bills of Entry for the consignment were filed and the inward entry granted. The Directorate of Revenue Intelligence (DRI) seized the goods for non-payment of the new duty. The Commissioner allowed provisional release of the goods with conditions, leading to an appeal by the respondent.

The CESTAT found that the duty notification had no retrospective effect and the Bills of Entry had been filed before the notification was issued. The tribunal ordered the release of the goods with a bond and a 7.5% pre-deposit of the duty. The High Court upheld CESTAT’s decision, confirming that there was no malafide intent and dismissing the Commissioner’s appeal.

Kerala HC allows to make Mandatory Deposit of 7.5 % Service Tax to file Appeal before Commissioner of Central Excise (Appeals) u/s 35F of Central Excise Act KAVIYOOR SERVICE CO OPERATIVE BANK LTD vs COMMISSIONER OF CENTRAL TAX CITATION: 2023 TAXSCAN (HC) 1559

The Kerala High Court, led by Justice Dinesh Kumar Singh, allowed a writ petition filed by Kaviyoor Service Co-operative Bank Ltd. under Article 226 of the Constitution. The petition challenged the dismissal of their appeal by the Commissioner of Central Excise (Appeals) due to non-compliance with the mandatory deposit requirement of 7.5% of the assessed tax under Section 35F of the Central Excise Act.

The original order, dated 28.10.2021, had confirmed service tax and penalties. The petitioner, who had failed to deposit the required amount, was given ten days to comply with the 7.5% deposit requirement. Upon making the deposit, the appeal would be considered on its merits, and any delay in filing the appeal would be addressed as per law.

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