2015 (4) TMI 813 - HC - Central Excise

High Court Questions Constitutionality of Central Excise Act Amendment

The High Court directed notice to respondents to show cause why a writ petition challenging the constitutionality of Section 35F of the Central Excise ... Validity of statutory pre-deposit for appeals - Retrospective operation of amendment - Accrual of right to appeal on initiation of proceedings - Interim relief directing consideration of waiver of pre-deposit - Ultra vires of administrative circularValidity of statutory pre-deposit for appeals - Ultra vires of administrative circular - Whether the amendment to Section 35F prescribing mandatory pre-deposit and the impugned Circular are liable to be struck down - HELD THAT: - The Court noted that the vires of the amendment to Section 35F of the Central Excise Act, 1944 read with the Finance Act provision, and the constitutionality of Circular No.984/08/2014-CX require examination by the High Court. The petition raises substantial questions on the lawfulness of imposing a mandatory pre-deposit as a condition for entertaining appeals and on the validity of administrative directions issued under that amendment. The Court has directed issuance of notice and sought detailed responses from the respondents, indicating that these matters are to be adjudicated on merits after hearing. No final determination on the constitutionality or validity of the amendment or the Circular has been made at this stage.Notice issued and the vires of the amendment and the Circular relegated to full hearing; no final adjudication on validity at this stage.Retrospective operation of amendment - Accrual of right to appeal on initiation of proceedings - Whether the amendment prescribing pre-deposit operates retrospectively to affect proceedings initiated before its commencement - HELD THAT: - On prima facie consideration the Court observed that the right to appeal accrues on the date of initiation of proceedings because an appeal is in continuation of the original proceedings. The show cause proceedings in the present matter commenced in 2013, prior to the amendment coming into force on 06.08.2014. Accordingly, the Court took the view, for the purposes of interim relief, that the amended pre-deposit requirement may not be applicable to proceedings initiated before the amendment. This finding is provisional and was made to shape interim relief; the substantive question of retroactivity will be subject to fuller consideration after issuance of notice and hearing.Prima facie view recorded that the amendment does not apply to lis initiated before its commencement; question reserved for final hearing.Interim relief directing consideration of waiver of pre-deposit - What interim relief should be granted pending adjudication of the challenge to the amended pre-deposit requirement - HELD THAT: - The Court moulded interim relief to preserve the petitioner's opportunity to seek appellate remedy without being immediately impeded by the amended pre-deposit requirement. It directed that the petitioner may prefer an appeal to the appellate authority within fifteen days of receipt of this order and make an application for waiver of pre-deposit. Pending consideration of that application, the appellate authority shall, for the time being, refrain from insisting upon the pre-deposit as prescribed by the amended provision and shall consider the waiver application in accordance with law. The liberty to file the appeal and seek waiver is conditioned upon timely filing; failure to do so will vacate the interim order. The Court also ordered filing of counter-affidavits and fixed the matter for further hearing.Interim relief granted: appellate authority directed to consider waiver application without insisting on amended pre-deposit, subject to petitioner preferring appeal within fifteen days; order to lapse on non-compliance.Final Conclusion: Notice issued on challenges to the amended pre-deposit requirement and related Circular; on a prima facie view the amendment may not apply to proceedings initiated before its commencement, and interim relief was granted directing the appellate authority to consider an application for waiver of pre-deposit without insisting on the amended requirement, subject to the petitioner preferring an appeal within fifteen days; substantive questions reserved for full hearing. Issues:Challenge to the constitutionality of the amendment to Section 35F of the Central Excise Act, 1944 and Circular No. 984/08/2014-CX as ultra vires the Act.Analysis:The petitioner filed a writ petition challenging the constitutionality of Section 35F of the Central Excise Act, 1944, and Circular No. 984/08/2014-CX as ultra vires the Act. The High Court directed issuance of notice to the respondents to show cause why the writ petition should not be admitted. The points under consideration were the vires of the amendment and the retroactivity of the amendment from 06th August 2014. The Court found these points necessitated examination.Regarding the retroactivity of the amendment, the Court noted that the proceedings had commenced with a show cause notice in 2013, predating the amendment. The Court opined that the right to appeal accrues on the date of initiation of proceedings, as an appeal is a continuation of the original proceedings. Although the amendment was made during the pendency of the matter, it may not be applicable to proceedings initiated prior to its enactment.The Court granted interim relief, allowing the petitioner to approach the appellate authority with an application for waiver of pre-deposit. The appellate authority was directed to consider such applications without insisting on pre-deposit as per the amended provision. This order would be effective if the petitioner lodged an appeal within fifteen days from receiving a copy of the order and submitted the application. Failure to comply would result in the vacating of the interim order.The High Court ordered the respondents to file counter affidavits within four weeks and directed the petitioner to file an affidavit in reply within two weeks thereafter. The matter was scheduled for a hearing six weeks from the date of the order.