2019 (8) TMI 1809 - HC - Central Excise

Central Excise Act: Pre-deposit Rule Upheld, Extension Granted for Compliance

The court upheld the mandatory pre-deposit requirement under the amended Section 35F of the Central Excise Act, 1944 for appeals filed after 6th August ... Applicability of substituted Section 35F to appeals filed on or after commencement - mandatory pre-deposit under Section 35F of the Central Excise Act - prohibition on entertaining appeals without statutory pre-deposit - doctrine of merger of judgments - court cannot direct authority to act in violation of statuteApplicability of substituted Section 35F to appeals filed on or after commencement - mandatory pre-deposit under Section 35F of the Central Excise Act - Amended Section 35F applies to appeals filed on or after 6th August, 2014, and such appeals are entertainable by the CESTAT only after the stipulated pre-deposit is made. - HELD THAT: - The Court held that the substituted provision is unambiguous in requiring the specified percentage deposit as a condition for entertaining appeals filed on or after its commencement. Reliance on decisions holding otherwise was negatived by subsequent authoritative pronouncements. The Court followed earlier division-bench reasoning that the second proviso preserves only appeals/stay applications pending prior to commencement; hence the relevant date is filing of the appeal and not the date of issuance of the show-cause notice or the date of the dispute. Consequently, appellants filing appeals on or after 6th August, 2014 must comply with the mandatory pre-deposit requirement before the CESTAT can entertain their appeals. [Paras 6, 11, 12, 15]Amended Section 35F applies to appeals filed on or after 6th August, 2014; mandatory pre-deposit must be made for such appeals to be entertained.Doctrine of merger of judgments - court cannot direct authority to act in violation of statute - High Court cannot, in exercise of its writ jurisdiction, permit prosecution of an appeal before the CESTAT in contravention of the statutory pre-deposit requirement; prior contrary decisions were overruled by binding precedent through merger. - HELD THAT: - The Court observed that the Division Bench decision in Anjani Technoplast, having been the subject of dismissal of the civil appeal, merged with and was elevated by the Supreme Court's order and is therefore binding under Article 141. Lower decisions permitting waiver or partial deposit were held inconsistent with the binding precedent. Further, the Court reiterated the well-settled principle that a court cannot direct an authority to act in violation of a statutory mandate where the statute uses peremptory language. Applying these principles, the Court refused to permit prosecution of the appeal without compliance with Section 35F. Separately, exercising discretion on facts, the Court extended the time to make the statutory deposit until 15th November, 2019 and conditioned restoration of the appeals to the CESTAT upon timely deposition and compliance with the CESTAT order. [Paras 26, 28, 33, 35]Writ relief permitting prosecution of appeal without pre-deposit refused; time to comply with CESTAT's pre-deposit direction extended to 15th November, 2019 and upon deposit the appeals will be restored and heard on merits.Final Conclusion: Writ petitions dismissed; binding precedent requires mandatory pre-deposit for appeals filed on or after 6th August, 2014; time for making the prescribed pre-deposit extended to 15th November, 2019, failing which the statutory consequences follow. Issues Involved:1. Validity of the pre-deposit requirement under Section 35F of the Central Excise Act, 1944.2. Applicability of amended Section 35F to appeals filed after 6th August 2014.3. Jurisdiction of the High Court under Article 226 to waive the pre-deposit requirement.Detailed Analysis:1. Validity of the Pre-Deposit Requirement Under Section 35F of the Central Excise Act, 1944:The petitions challenged the order by CESTAT directing the petitioners to deposit 7.5% of the service tax demand. The court examined Section 35F of the Central Excise Act, both pre and post-amendment (effective from 6th August 2014). The pre-amendment Section 35F required full pre-deposit of duty, penalty, and interest, with the possibility of waiver in cases of undue hardship. The amended Section 35F mandates a pre-deposit of 7.5% or 10% of the duty or penalty, capping the amount at Rs. 10 crores, and does not apply to appeals pending before 6th August 2014.2. Applicability of Amended Section 35F to Appeals Filed After 6th August 2014:The court referenced the case of Anjani Technoplast Ltd. v. Commissioner of Customs, which held that the amended Section 35F applies to all appeals filed on or after 6th August 2014, irrespective of when the dispute period or show cause notice occurred. This interpretation was reinforced by decisions from other High Courts, including the Allahabad High Court in Ganesh Yadav v. U.O.I. and the Jharkhand High Court in Sri Satya Nand Jha v. Union of India. The court concluded that the mandatory pre-deposit requirement applies to all appeals filed post-amendment, dismissing the petitioners' argument that the amendment should not apply to their case.3. Jurisdiction of the High Court Under Article 226 to Waive the Pre-Deposit Requirement:The petitioners argued that the High Court, under Article 226, could allow their appeal without the mandatory pre-deposit due to financial hardship. They cited cases like Pioneer Corporation v. Union of India, Shubh Impex v. Union of India, and Manoj Kumar Jha v. DRI, where partial waivers were granted. However, the court noted that these decisions did not consider the precedent set in Anjani Technoplast, which mandates pre-deposit for appeals filed after 6th August 2014. The court emphasized that it could not direct any authority to act in violation of the law, referencing several Supreme Court judgments, including Vice-Chancellor, University of Allahabad v. Dr. Anand Prakash Mishra and A.B. Bhaskara Rao v. C.B.I.Conclusion:The court dismissed the writ petitions, affirming the requirement for mandatory pre-deposit under the amended Section 35F. However, it extended the time for the petitioners to comply with the CESTAT order until 15th November 2019, allowing the appeals to be restored and heard on merit if the deposit is made within the extended timeframe. The related stay applications were also disposed of in light of the main order.