2025 (1) TMI 318 - HC - Customs

Court Upholds 7.5% Pre-Deposit Requirement u/s 129-E of Customs Act; No Waiver for Undue Hardship Allowed.

The court dismissed the writ petitions, affirming that the mandatory pre-deposit requirement of 7.5% under Section 129-E of the Customs Act, 1962, cannot ... Waiver of mandatory pre-deposit of 7.5% of the disputed amount for maintaining an appeal - amendment to Section 129-E of the Customs Act, 1962 - Jurisdiction of High Court to waive the mandatory pre-deposit requirement under Article 226 of the Constitution of India. HELD THAT:- It appears that the issue was also considered in the context of the provisions of the Finance Act, 1994 by a learned Single Judge of this court in SANTHOSH KUMAR K, PROPRIETOR, M/S. SWATHI CONSTRUCTIONS VERSUS THE COMMISSIONER CENTRAL GST AND CENTRAL EXCISE, THE CHIEF COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL [2022 (4) TMI 134 - KERALA HIGH COURT], where this court held 'When the Statute does not provide for waiver of a predeposit, it is impermissible for this Court to act contrary to the legislative intention merely on the plea of financial hardships. If such pleas are entertained, and directions are issued for waiving the pre-deposit, there will be no end to such demands. Further if orders are issued, contrary to the Statute the same will destroy the very scheme of the Statute including the consequent amendment.' The petitioner in these cases cannot be granted any relief in exercise of jurisdiction vested in this court under Article 226 of the Constitution of India - Petition dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the amendment to Section 129-E of the Customs Act, 1962, which requires a mandatory pre-deposit of 7.5% of the disputed amount for maintaining an appeal, can be waived on grounds of undue hardship.Whether the High Court has the jurisdiction to waive the mandatory pre-deposit requirement under Article 226 of the Constitution of India.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Mandatory Pre-deposit Requirement under Section 129-ERelevant Legal Framework and Precedents: The amendment to Section 129-E of the Customs Act, 1962, effective from 06-08-2014, requires appellants to deposit 7.5% of the disputed amount to maintain an appeal. The Supreme Court in Chandra Sekhar Jha v. Union of India upheld this provision as beneficial, reducing the pre-deposit from 100% to 7.5%.Court's Interpretation and Reasoning: The court interpreted the amendment as a legislative intent to streamline the appeal process by reducing the financial burden on appellants while removing the discretion previously available to appellate bodies to waive the pre-deposit.Key Evidence and Findings: The court noted that the amendment aims to prevent undue hardship by scaling down the deposit requirement, thus facilitating access to justice without compromising revenue interests.Application of Law to Facts: The court applied the amended Section 129-E, emphasizing that the provision does not allow for waiver based on financial hardship, aligning with the legislative intent to make the pre-deposit mandatory.Treatment of Competing Arguments: Petitioners argued undue hardship due to financial constraints, seeking waiver of the pre-deposit. However, the court, referencing the Supreme Court's decision and legislative intent, concluded that such waivers are impermissible.Conclusions: The court concluded that the mandatory pre-deposit requirement under Section 129-E cannot be waived on grounds of undue hardship, as it aligns with legislative intent and Supreme Court precedents.Issue 2: Jurisdiction of High Court under Article 226Relevant Legal Framework and Precedents: Article 226 of the Constitution empowers High Courts to issue certain writs. However, the court referenced the Supreme Court's stance that statutory mandates must be respected.Court's Interpretation and Reasoning: The court reasoned that it cannot exercise its jurisdiction under Article 226 to contravene statutory mandates, as this would undermine legislative intent and statutory schemes.Key Evidence and Findings: The court cited previous judgments, including Oil and Natural Gas Commission vs. Gujarat, emphasizing that statutory mandates should not be disregarded.Application of Law to Facts: The court applied the principle that judicial intervention should respect statutory provisions, concluding that it cannot waive the pre-deposit requirement under Article 226.Treatment of Competing Arguments: Petitioners sought judicial intervention to waive the pre-deposit, citing financial hardship. The court, however, adhered to the statutory mandate, refusing to entertain such pleas.Conclusions: The court concluded that it lacks jurisdiction under Article 226 to waive the mandatory pre-deposit requirement, affirming the primacy of statutory mandates.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: The court highlighted, 'It is a sharp departure from the previous regime that the new provision has been enacted. Under the new regime, the amount to be deposited to maintain the appeal has been reduced from 100% to 7.5% but the discretion which was made available to the appellate body to scale down the pre-deposit has been taken away.'Core Principles Established: The judgment reinforces the principle that statutory mandates, such as the mandatory pre-deposit requirement, must be upheld, and judicial discretion cannot override legislative intent.Final Determinations on Each Issue: The court dismissed the writ petitions, holding that the mandatory pre-deposit requirement under Section 129-E cannot be waived on grounds of undue hardship, and that the High Court does not have jurisdiction under Article 226 to contravene statutory mandates.In conclusion, the judgment underscores the importance of adhering to statutory mandates and legislative intent, emphasizing that judicial discretion should not undermine statutory schemes designed to balance access to justice with revenue protection. The court's decision aligns with Supreme Court precedents, reinforcing the mandatory nature of the pre-deposit requirement under the amended Section 129-E of the Customs Act, 1962.