Mandatory Pre-Deposit under S. 129E of Customs Act Cannot Be Waived Merely Due to Bank Account Freeze: Madras HC [Read Order]
The Court held that the mandatory pre-deposit requirement under Section 129E cannot be relaxed or waived on grounds of equity, financial hardship, or practical impediments such as the freezing of the appellant’s bank account.
Pre-Deposit - Customs Act - Bank Account Freeze - Madras HC - taxscan
Pre-Deposit - Customs Act - Bank Account Freeze - Madras HC - taxscan
The Madras High Court has ruled that the mandatory pre-deposit required under Section 129E of the Customs Act, 1962 cannot be waived merely because the assessee’s bank account has been frozen by the Department.
The Court said that the right to appeal under the Customs Act is a statutory right and subject to legislative conditions, including pre-deposit requirements, which are not open to judicial relaxation on equitable grounds.
The petitioner, M/s R.R. Overseas, a partnership firm engaged in export operations between 2005 and 2013, had availed duty drawback amounting to ₹13.95 lakh on 55 shipping bills under Section 75(1) of the Customs Act and Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.
Subsequently, the Customs authorities initiated proceedings alleging that the petitioner failed to furnish proof of export realization. After issuing a show-cause notice, the Assistant Commissioner of Customs passed an order on 30 November 2023, confirming recovery of the drawback amount along with interest.
Aggrieved by the order, the petitioner preferred an appeal before the Commissioner of Customs (Appeals-I). However, the petitioner sought a waiver of the mandatory 7.5% pre-deposit required under Section 129E, stating that the firm’s bank account had been frozen by the Department since 2 April 2025, making it impossible to access funds. The frozen amount was ₹6.73 lakh, which exceeded the required pre-deposit of ₹1.04 lakh.
The Appellate Commissioner dismissed the appeal on 20 August 2025, holding that Section 129E provides no discretion to waive the pre-deposit, even in cases where funds are unavailable due to departmental action. This led the petitioner to approach the High Court.
Justice N. Anand Venkatesh examined whether the mandatory pre-deposit under Section 129E could be waived in exceptional situations such as freezing of the assessee’s bank account.
The Court noted that the Finance Act (No. 2 of 2014) introduced a uniform pre-deposit requirement of 7.5% / 10% of the duty or penalty for appeals filed after 6 August 2014, replacing the earlier system where discretion could be exercised by appellate authorities.
The High Court, depending on the precedents, said that the right to appeal is not an inherent or unfettered right but a conditional statutory remedy governed entirely by the provisions of the Customs Act.
It observed that such a right must be exercised strictly in accordance with the conditions prescribed by law. Consequently, the Court held that the mandatory pre-deposit requirement under Section 129E cannot be relaxed or waived on grounds of equity, financial hardship, or practical impediments such as the freezing of the appellant’s bank account.
The court said that “the mandatory pre-deposit cannot be waived only on the ground that the bank account of the petitioner has been frozen.”
After considering the submissions made by both sides, the Court granted the petitioner limited relief by allowing compliance with the statutory pre-deposit requirement within a specified time frame.
The petitioner was directed to deposit 7.5% of the disputed amount on or before 22 October 2025. The Court further directed that upon such compliance, the Commissioner (Appeals) shall revive and hear the appeal on its merits, after affording a fair opportunity of hearing to the petitioner.
However, the Court made it clear that if the pre-deposit was not made within the stipulated period, the appellate order dated 20 August 2025, rejecting the appeal for non-compliance, would automatically stand confirmed.
Accordingly, the writ petition was disposed of without costs, reaffirming the mandatory and non-waivable nature of the pre-deposit requirement under Section 129E of the Customs Act.
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