2026 (2) TMI 562 - AT - Service Tax

Validity of pre-deposit through DRC-03 recognized as valid; appeal remanded for fresh merits adjudication and reasons required

Pre-deposit made through DRC-03 by debiting the electronic cash/credit ledger constitutes a valid pre-deposit and must be accepted as compliance with the ... Validity of pre-deposit through DRC-03 by debiting electronic cash/credit ledger - acceptance of pre-deposit made in any form as compliance with Section 35F of the Central Excise Act - requirement to decide appeals on merits with reasons u/s 35A(4) - remand for de novo hearing where appellate order lacks determination on merits - HELD THAT:- This Bench to the judgment passed by Hon'ble Bombay High Court in the case of M/s. In Net India Private Limited & Another’s Vs. Commissioners of Central Excise [2024 (12) TMI 223 - BOMBAY HIGH COURT], wherein clear finding is available to the effect that pre-deposit made in one form or another is to be accepted as valid pre-deposit instead of placing hyper-technical contention by the Respondent that would require refund of the amount of pre-deposit made in one form and depositing again the same amount in another form in the same account maintained by the Government of India for depositing tax. Therefore deposit made through cash in DRC-03 form is a valid deposit and since learned Commissioner (Appeals) had not passed any order on the merit of the appeal as required under Rule, 35A(4) of the Central Excise Act, 1944, equally applicable to Service Tax matters in view of operation of Section 85(5) of the Finance Act 1994, in stating the points for determination, the decision thereon and the reasons for such decision, the matter is required to be remanded back to the Commissioner (Appeals) for hearing afresh. Appeal is allowed by way of remand to the Commissioner (Appeals) with an observation that valid pre-deposit has been made before filing of appeal before the Commissioner (Appeals). Issues: (i) Whether a pre-deposit made by debiting the electronic cash/credit ledger through form DRC-03 constitutes a valid pre-deposit for purposes of preferring an appeal; (ii) Whether the appeal requires remand to the Commissioner (Appeals) for de novo hearing because the Commissioner (Appeals) did not decide the merits as required under Section 35A(4) of the Central Excise Act, 1944 read with Section 85(5) of the Finance Act, 1994.Analysis: Deposits made through form DRC-03 by debiting the electronic cash or credit ledger, when made prior to 28.10.2022, are to be treated as valid pre-deposits under the statutory scheme governing pre-deposit requirements. The statutory framework applicable to Service Tax matters recognises Section 35F as governing pre-deposit obligations, and Section 35A(4) of the Central Excise Act, 1944 (read with Section 85(5) of the Finance Act, 1994 as applicable) requires the appellate authority to state points for determination, decisions thereon and reasons in its order; where this has not been done, the appellate process is procedurally defective and merits reconsideration. Established judicial decisions accept pre-deposits made in alternate prescribed forms as valid and require that appeals not be dismissed on hyper-technical grounds where a pre-deposit in substance has been made.Conclusion: (i) The deposit made through DRC-03 by debiting the electronic cash/credit ledger is a valid pre-deposit. (ii) The matter is remanded to the Commissioner (Appeals) for de novo hearing and fresh decision on merits in accordance with Section 35A(4) of the Central Excise Act, 1944 as applied to Service Tax matters under Section 85(5) of the Finance Act, 1994.