The Kerala High Court has held that waiver of pre-deposit u/s 35F for filing appeal would destroy the legislative intent.
The Petitioner is a proprietor of M/s. Swathi Constructions, engaged in laying of power lines on behalf of persons, who had executed contracts with the Power Grid Corporation of India.
The Assessing Officer issued an order levying penalty and service tax upon the petitioner under five different heads, imposing a huge liability upon the petitioner. The petitioner challenged the order of the Adjudicating Authority before the CESTAT. As per the provisions of Section 86 of the Finance Act, 1994 r/w Section 35F of the Central Excise Act, 1944, petitioner was bound to pay as pre-deposit an amount equivalent to 7.5% of the quantum of tax under dispute. It is contended that the pre-deposit payable as contemplated under law, in the instant case was Rs.18,06,057/- and that with all bonafides, petitioner deposited an amount of Rs.12,50,000/- leaving Rs.5,56,057/- as balance unpaid towards the pre-deposit. Since the petitioner found it financially impossible to make the balance of the mandatory pre-deposit, he has approached the Honorable High Court seeking relief from such a pre-deposit. It was submitted that the huge quantum of pre-deposit due from the petitioner is too onerous and makes it practically impossible for the petitioner to pursue its statutory remedy.
The Counsel for the respondent Sri.Rajesh Raj, submitted that after the amendment in 2014 to Section 35F of the Central Excise Act 1944, the power to waive the mandatory pre-deposit is no longer available and in several decisions the Supreme Court has categorically held that the High Court should not interfere with the mandate of the Statute.
The High Court observed that a perusal of the statutory provisions will reveal that the amendment to section 35F of the Central Excise Act r/w Section 86 of the Finance Act, 1994, clearly manifest the intention of the legislature that the waiver of pre-deposit, which was being resorted to, quite often by the courts of law, needed to be amended to make the pre-deposit mandatory. Thus, after the Amendment Act came into force, no discretion is available with the courts of law to waive the mandatory requirement of pre-deposit of 7.5% even if it is assumed to be onerous in the circumstances of the case.
The single bench of Justice Bechu Kurian Thomas by relying the Supreme Court decision in Oil and Natural Gas Commission vs. Gujarat, has held that “I find no merit in this writ petition and the same is dismissed. However, liberty is granted to the petitioner to make the balance of the pre-deposit within a period of one month from the date of a receipt of a copy of this judgment”.
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