2025 (8) TMI 1081 - HC - Customs

Appeal dismissed for failure to pay mandatory 7.5% pre-deposit under amended Section 129E; amendment applies retrospectively

Shri Edward George Versus Commissioner Of Customs Mangalore.

HC dismissed the appeal for failure to make the mandatory 7.5% pre-deposit of the penalty under amended Section 129E of the 1962 Act. The court held the ... Rejection of appeal filed by the appellant - failure to deposit 7.5% of penalty as a condition precedent to prefer the appeal - Applicability of amended law to make mandatory pre-deposit where the assessment proceedings were started before the date of amendment - HELD THAT:- The substantial questions of law raised by the appellant is answered by the Hon'ble Apex Court in the case of Chandra Shekar Jha Vs. Union of India and Another [2022 (3) TMI 606 - SUPREME COURT]. The Hon'ble Apex Court has considered an identical fact situation and also amended Section 129E of 1962 Act - The Hon'ble Apex Court has rejected similar contention that the law as applicable prior to the amended provision would be applicable to the proceedings which has already commenced prior to the amended provision of Section 129E of 1962 Act. To the Court query as to whether the appellant is ready to deposit the amount as required under Section 129E of 1962 Act so as to direct the Tribunal to consider the appeal filed by the appellant, the counsel for the appellant, on instruction, submits that the appellant is not in a position to make the pre-deposit. As the appellant is not ready to pre-deposit the amount even today, the question of directing the CESTAT to consider the appeal on merit would not arise - there are no merit in the appeal and accordingly, appeal stands rejected. ISSUES PRESENTED AND CONSIDERED 1. Whether the amended provision of Section 129E of the Customs Act, 1962 (substituted w.e.f. 6.8.2014) requiring pre-deposit of a fixed percentage (7.5%/10%) applies to an appeal filed after substitution where proceedings (show-cause notice) commenced prior to substitution. 2. Whether the appellate authority (CESTAT) erred in dismissing an appeal for failure to make the statutory pre-deposit when the proceedings giving rise to the appeal had already commenced prior to the substitution of Section 129E. 3. Whether the appellate authority ought to exercise any discretionary power to waive or scale down the pre-deposit in circumstances of alleged hardship or on merits of the case, notwithstanding the removal of such discretion by the substituted provision. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of substituted Section 129E to appeals filed after substitution though proceedings commenced before substitution Legal framework: The substituted Section 129E prescribes a limited pre-deposit (7.5% of duty/penalty, subject to other provisos and a cap) as a condition for entertaining appeals; substitution effected by Finance Act and brought into force from 6.8.2014. Substitution of a statutory provision effects repeal of the earlier provision and re-enacts a new regime. Precedent Treatment: The Court followed the reasoning of the Supreme Court in an identical fact situation which considered substitution, the temporal effect and the impact on pending/initiated proceedings; that decision rejected the contention that the pre-amendment regime (with wider appellate discretion) governs appeals originating from pre-amendment incidents but filed post-substitution. Interpretation and reasoning: The Court held that substitution brings into existence a new statutory regime with different contours (reduction in quantum required to be deposited and removal of discretion to dispense with deposit). The statute contains provisos preserving non-application of the substituted provision to stay applications and appeals pending before an appellate authority prior to commencement of the Finance Act, i.e., a specific saving for appeals already pending; but the substituted provision otherwise governs appeals filed after its commencement even if the underlying proceedings commenced earlier. Ratio vs. Obiter: Ratio - Substitution of Section 129E results in repeal and re-enactment; the substituted provision governs appeals filed after its commencement except insofar as specific provisos save appeals/stay applications already pending. Obiter - Observations on legislative policy (ushering in a new era) are explanatory. Conclusion: The substituted Section 129E applied to the appeal filed after 6.8.2014 despite the show-cause notice being dated earlier; therefore the appellant was obliged to comply with the pre-deposit requirement of the substituted provision unless the appeal was already pending before the amendment. Issue 2: Validity of dismissal of appeal for non-compliance with statutory pre-deposit Legal framework: Section 129E post-substitution conditions maintenance of appeal on pre-deposit of prescribed percentage (subject to monetary cap and saving proviso) and removal of prior discretionary provision allowing waiver by appellate authority. Precedent Treatment: The Court applied the Supreme Court's authoritative conclusion that appellants cannot claim the benefit of the prior discretionary regime merely because the underlying cause of action arose earlier; non-compliance with the substituted pre-deposit provision permits dismissal of the appeal. Interpretation and reasoning: The Court observed that the statutory scheme deliberately narrows the appellate body's discretion and prescribes a fixed threshold for pre-deposit. The specific saving clause protects only appeals/stay applications already pending on the amendment date; it does not extend to appeals filed after substitution. Therefore, failure to make the statutory pre-deposit where required justifies dismissal of the appeal by the Tribunal. Ratio vs. Obiter: Ratio - Non-compliance with the substituted Section 129E's pre-deposit condition legitimately grounds dismissal of an appeal filed after the substitution date. Obiter - Remarks on comparative harshness/benefits of the new regime (reduced deposit quantum but loss of discretion) serve explanatory purposes. Conclusion: The Tribunal was correct in dismissing the appeal for failure to make the pre-deposit mandated by the substituted Section 129E when the appeal was filed after the substitution; the dismissal was legally sustainable. Issue 3: Role of appellate discretion to waive or scale down pre-deposit and claim of undue hardship/right to appeal Legal framework: Prior to substitution, Section 129E (and its proviso) conferred discretion on the appellate authority to dispense with deposit or scale it down; substituted Section 129E removed that discretion while fixing a percentage and introducing a cap and a saving for pending appeals/stay applications. Precedent Treatment: The Court relied on Supreme Court authority which (a) recognized the change of regime was deliberate and (b) applied the established test of 'undue hardship' but held that removal of discretion by substitution cannot be circumvented by invoking hardship for appeals filed after substitution. Interpretation and reasoning: The Court noted legislative intent to bring about a 'sweeping change' - lowering the quantum to a fixed percentage but removing discretionary power. The test for undue hardship (out of proportion to benefit derived) does not assist where Parliament has expressly removed the appellate discretion; the statutory saving does not capture appeals instituted after substitution. Ratio vs. Obiter: Ratio - Legislative removal of discretionary power means appellate authorities cannot waive or scale down pre-deposit for appeals filed after substitution; claims of substantive right to appeal cannot override clear statutory pre-conditions. Obiter - Discussion on policy trade-offs (reduced deposit vs loss of discretion) contextualizes the ruling. Conclusion: The Tribunal was not obliged or empowered to waive the pre-deposit in the absence of statutory discretion; a claim of substantial right to appeal does not negate compliance with the statutory procedural prerequisite enacted by substitution. Ancillary finding: Effect of appellant's present inability/unwillingness to make pre-deposit Legal framework and reasoning: An appellate remedy that is statutorily conditioned on pre-deposit cannot be entertained if the appellant declines or is unable to make the deposit; courts cannot direct Tribunal to decide merits where statutory condition precedent remains unfulfilled. Conclusion: Because the appellant expressly declined/was unable to make the pre-deposit required by the substituted Section 129E, the Court declined to remand or direct consideration on merits; dismissal for non-compliance stands.