CESTAT Erred in Ignoring Existing Deposits: Delhi HC Rules Deposits already with Customs Bar Dismissal of Appeals
The Court ruled that amounts earlier deposited or recovered during investigation must be considered toward mandatory pre-deposit, allowing the appellants’ appeals to be heard.
The Delhi High Court has held that appeals cannot be dismissed for non-payment of pre-deposit when significant sums already lie with the Customs Department, ruling that such existing deposits must be considered before rejecting appeals.
The petitions were filed by Anoop Kumar Garg and Rahul Aggarwal, who challenged the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which refused to entertain their appeals for alleged non-payment of the mandatory pre-deposit. The dispute originated from a Show Cause Notice issued by the Commissioner of Customs, Inland Container Depot, Tughlakabad, following intelligence received from the Directorate of Revenue Intelligence, Delhi Zonal Unit.
The case arose from allegations of undervaluation of imported sanitary and bathroom fittings by three business entities linked to the appellants. Searches were conducted at business and residential premises, resulting in seizure of ₹34 lakhs in cash and a deposit of ₹2 crore under protest. Subsequent adjudication led to an Order-in-Original imposing substantial penalties on the appellants. Appeals were then filed before the CESTAT, which were dismissed on the ground that the pre-deposit had not been made.
Counsel for the petitioners Chinmaya Seth, A.K. Seth, and Palak Mathur submitted that a total of ₹2.58 crore had already been deposited along with the seized cash of ₹34 lakhs with the Customs Department during investigation. The appellants contended that the statutory scheme does not exclude amounts deposited under protest or recovered during investigation from being counted toward pre-deposit. Therefore, the Tribunal erred in dismissing the appeals despite being apprised of the existing deposits.
Counsel for the Department Anushree Narain, Naman Chouls and Yamit Jetley submitted on instructions that the amount of ₹34 lakhs seized during search proceedings had been confiscated under Section 121 of the Customs Act, 1962, as alleged sale proceeds of smuggled goods, and therefore could not be treated as pre-deposit. Further, submitted that Section 129E of the Customs Act, 1962 required a specific statutory pre-deposit, and the petitioners could not rely on earlier investigation-related deposits to fulfill this requirement.
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The Bench of Justice Prathiba M. Singh and Justice Shail Jain held that the statutory requirement of pre-deposit under Section 129E of the Customs Act,1962 does not contain any exclusion preventing adjustment of amounts paid under protest or recovered during investigation. Relying on the Supreme Court’s judgment in VVF (India) Limited v. State of Maharashtra (2022), the Court observed that deposits made prior to adjudication cannot be ignored unless the statute expressly excludes them. Subsequently, the Court also relied on the decision in Rajesh Tanwar v. Commissioner, CGST, Delhi West (2025), where investigation stage deposits were permitted to be treated as pre-deposit.
Therefore, the Court held that substantial sums already remained with the Customs Department, and requiring fresh deposits would deprive the appellants of their statutory right of appeal. The Court ruled that it would be inequitable and contrary to the scheme of the Customs Act, 1962 to insist on additional payment when significant amounts were already held by the Department.
Accordingly, the Court set aside the CESTAT order and disposed of the petitions.
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