Financial Hardship During COVID-19 Lockdown Constitutes Valid Ground for Waiver of Pre-Deposit Under Section 35F

The HC set aside the dismissal of the petitioner's appeal, acknowledging extreme financial hardship during COVID-19 lockdown as valid grounds for failure to make the mandatory 7.5% pre-deposit of duty and penalty. Despite the respondent's argument that Section 35F of Central Excise Act (as amended in 2014) does not permit waiver of pre-deposit, the court distinguished this case from prior precedent due to exceptional pandemic circumstances. The petition was disposed of with direction to restore the appeal if petitioner deposits the required amount within two weeks, failing which the dismissal would stand.

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Issues involved:
Appeal dismissal due to failure to make pre-deposit of 7.5% of duty and penalty during lockdown period; Plea of extreme financial hardship for not making pre-deposit; Interpretation of Section 142(7)(a) and 142(7)(b) of the CGST Act, 2017 read with Section 85(4) of the Finance Act, 1994; Applicability of Section 35F of the Central Excise Act, 1944 and its amendment in 2014; Reference to judgment of Delhi High Court in a similar case; Consideration of extreme financial hardship during the covid period; Alternative remedy of appeal and compliance with pre-deposit requirement.

Analysis:
The petitioner approached the High Court after the dismissal of a statutory appeal (Appeal No. 23/RAN/2021) by the Commissioner (Appeals), Central GST & CX-, Ranchi, solely based on the failure to make a pre-deposit of 7.5% of the duty and penalty. The impugned proceedings began with a demand cum show cause notice in 2018 and ended with an order in original in 2020 during the country's lockdown period.

The petitioner contended that due to financial difficulties during the relevant time, they were unable to make the pre-deposit, leading to the dismissal of the appeal in February 2021. The petitioner expressed willingness to pursue the alternative remedy of appeal and make the necessary pre-deposit if given an opportunity based on extreme financial hardship.

The Respondent Department opposed the petitioner's plea, citing the provisions of Section 142(7)(a) and 142(7)(b) of the CGST Act, 2017, along with Section 85(4) of the Finance Act, 1994. The respondent argued that the dismissal was justified as the petitioner failed to fulfill the mandatory pre-deposit requirement of 7.5% of the duty and penalty. Reference was made to the amendment in Section 35F of the Central Excise Act, 1944, in 2014, which does not allow for a waiver of pre-deposit. The respondent also relied on a judgment of the Delhi High Court in a similar case where a waiver request was denied.

Upon considering the submissions, the High Court found that the grounds of extreme financial hardship during the period were valid, especially considering the challenges faced during the covid period. The court noted that the judgment of the Delhi High Court from 2016, cited by the respondent, was not applicable in the exceptional circumstances of the pandemic. Consequently, the court directed that the appeal would be restored before the Commissioner (Appeals) if the petitioner complied with the condition of depositing 7.5% of the duty and penalty within two weeks. Failure to meet this condition would uphold the impugned order.

In conclusion, the writ petition was disposed of, with the court emphasizing the importance of considering extreme financial hardship and exceptional circumstances, such as those experienced during the covid period, in matters of statutory appeals and pre-deposit requirements.

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