Statutory pre-deposit treated as deposited when undisputed funds lie with tax authorities; appeal remitted for verification.

The petition addresses whether sums lying with CGST can be treated as meeting the statutory pre-deposit under Section 35F of the Central Excise Act, 1944 to permit admission of an appeal under Section 85 of the Finance Act, 1994. The court concluded that where deposited monies are undisputedly held by tax authorities but not recorded as payment of a declared liability, the appellate authority may, after verification, treat such amounts or an appropriate portion as satisfying the pre-deposit requirement. The appellate order dismissing the appeal solely for non-compliance is set aside and the matter remitted for verification and decision on merits, with any shortfall to be paid by the appellant within a directed period.

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Issues: Whether the sums of Rs. 1,52,046/- and Rs. 28,844/- (total Rs. 1,80,890/-) already lying with the CGST authorities can be treated as having been deposited by the petitioner for the purpose of fulfilling the statutory pre-deposit condition under Section 35F of the Central Excise Act, 1944 so as to enable the Appellate Authority under Section 85 of the Finance Act, 1994 to entertain the petitioner's appeal.

Analysis: The petition challenges an appellate order which dismissed the petitioner's appeal solely on the ground of non-compliance with the mandatory pre-deposit requirement under Section 35F of the Central Excise Act, 1944. A departmental affidavit established that a total sum of Rs. 1,80,890/- deposited by the petitioner was not shown as payment against any outstanding declared liability in the petitioner's service tax returns and the department could not identify the purpose for which those sums were accepted. Given that the amount is lying with the CGST authorities and was not paid in discharge of any recorded liability, it is open to the appellate authority to treat such amount, or such portion thereof as may be necessary, as satisfying the statutory pre-deposit condition. The appellate authority's dismissal on the sole ground of non-fulfillment of pre-deposit is therefore susceptible to correction by treating the undisputed deposited sums as compliance with Section 35F, subject to verification and direction for any shortfall to be made good by the petitioner.

Conclusion: The appellate order dated January 14, 2025 is set aside and the matter is remitted to the Appellate Authority under Section 85 of the Finance Act, 1994 to decide the petitioner's appeal on merits after verifying and being satisfied that the condition of statutory pre-deposit under Section 35F of the Central Excise Act, 1944 has been met by treating the amount of Rs. 1,80,890/- or such portion thereof as may be necessary as having been deposited towards pre-deposit; if a deficit remains the petitioner shall pay the shortfall within the time specified by the Appellate Authority.

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