2024 (6) TMI 188 - AT - Service Tax

Appeal dismissal for wrong pre-deposit form DRC-03 instead of prescribed format denies substantial justice under Section 35F

M/s Shri Krishna Road Carrier, (Proprietor Vijay Kumar Gupta) Versus Commissioner of Central Excise & CGST, Meerut

CESTAT Allahabad held that dismissing an appeal solely for making pre-deposit through DRC-03 instead of prescribed form amounts to denial of substantial ... Maintainability of appeal - appeal rejected for failure to make mandatory pre-deposit in terms of Section 35F of the Central Excise Act, 1944, as made applicable to service tax cases vide Section 83 of Finance Act, 1994 - HELD THAT:- Hon’ble High Court in the case of SODEXO INDIA SERVICES PVT. LTD. VERSUS THE UNION OF INDIA AND ORS. [2022 (10) TMI 264 - BOMBAY HIGH COURT] held that 'it does appear that the confusion seems to be due to there being no proper legal provision to accept payment of pre-deposit under Section 35F of the Central Excise Act, 1944 through DRC-03. Some appellants are filing appeals after making pre-deposit payments through DRC-30/GSTR-3B. In our view, this has very wide ramifications and certainly requires the CBI & C to step in and issue suitable clarifications/guidelines/ answers to the FAQs.' The learned Commissioner (Appeals) could have granted the refund of amount of pre-deposit wrongly made by DRC-03 to the Appellant and given an opportunity to deposit the said amount on its Integrated Portal instead of dismissing the appeal in limine. Because dismissing the appeal filed by the Appellant, even after making the pre-deposit, merely on the ground that it has not been deposited in the prescribed manner or by the prescribed Form, amounts to denial of substantial justice and the Commissioner (Appeals) has erred in shirking from its responsibility of deciding the appeal on merits - From perusal of paragraph 3 of the Instruction dated 28.10.22, it is evident that the tax under the existing law (Service Tax) shall be recovered as an arrear of tax under the CGST Act and the pre-deposit is neither in the nature of duty nor can be treated as arrears under the Service Tax law. Thus, when the service tax could be recovered as an arrear of Service Tax under CGST Act, after commencement of the CGST Act, then pre-deposit made through DRC-03 prior to 28.10.22 has to be treated as sufficient compliance, in view of the subsequent Instruction dated 18.4.23. It is found appropriate to remand the matter to the learned Commissioner (Appeals) to decide the appeal on merits without further visiting the aspect of pre-deposit - appeal allowed by way of remand. Issues:1. Failure to make mandatory pre-deposit under Section 35F of the Central Excise Act, 1944 in a service tax case.2. Acceptance of pre-deposit through DRC-03 under the CGST Act for appeals under service tax law.3. Confusion regarding the proper legal provision for accepting pre-deposit under Section 35F of the Central Excise Act, 1944 through DRC-03.4. The retrospective nature of clarificatory provisions and their applicability.5. Denial of substantial justice by dismissing appeals for not depositing pre-deposit in the prescribed manner.Analysis:1. The Appellate Tribunal found that the Commissioner (Appeals) rejected the appeal due to the failure to make a mandatory pre-deposit under Section 35F of the Central Excise Act, 1944. The Appellant had deposited the required amount and submitted the necessary proof, but the appeal was dismissed without considering the merits of the case. The Tribunal noted the discrepancy in the decision and allowed the appeal to be heard based on the submissions made by the Appellant's advocate.2. The Tribunal highlighted the issue of accepting pre-deposit through DRC-03 under the CGST Act for appeals under service tax law. It referenced a circular clarifying that DRC-03 is not a valid mode of payment for pre-deposits under the Central Excise Act and Finance Act. However, a subsequent circular clarified that DRC-03 is an accepted mode for pre-deposit under the GST Act. The Tribunal emphasized the need for proper clarification and guidelines on this matter to avoid confusion.3. The confusion regarding the legal provision for accepting pre-deposit under Section 35F of the Central Excise Act, 1944 through DRC-03 was addressed in a case before the High Court. The Court highlighted the absence of a clear provision for such payments and urged the Central Board of Indirect Taxes and Customs to provide suitable clarifications and guidelines to resolve the issue promptly.4. The Tribunal discussed the retrospective nature of clarificatory provisions, citing various judgments to support the principle. It emphasized that clarificatory provisions are meant to clarify existing laws and can have retrospective application to prevent the frustration of the government's objectives. The Tribunal referred to specific cases where retrospective application was deemed appropriate.5. The Tribunal criticized the Commissioner (Appeals) for denying substantial justice by dismissing appeals solely based on the method of pre-deposit, rather than considering the merits of the case. It highlighted the importance of deciding appeals on their merits and ensuring that procedural issues do not overshadow the substantive aspects of the dispute. The Tribunal remanded the matter to the Commissioner (Appeals) to decide the appeal on its merits without further emphasis on pre-deposit issues, keeping all other issues open for consideration.