2026 (2) TMI 1273 - HC - Central Excise

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 ... Statutory pre-deposit u/s 35F - treatment of departmental deposits as compliance with pre-deposit requirement - remand for verification and fresh consideration - setting aside order for non-compliance with pre-deposit condition - HELD THAT:- It is evident that the petitioner’s appeal was dismissed by the Appellate Authority only on the ground of non-fulfillment of the condition of mandatory pre-deposit in terms of Section 35F of the said Act of 1944. Since it is not in dispute that a sum of Rs. 1,80,890/- is already lying with the respondent CGST Authorities which in terms of the report the petitioner was not otherwise liable to pay on account of any demand having been raised against him therefore, for ends of justice it is directed that the respondent CGST Authorities shall treat the aforesaid sum or any portion thereof (as may be required/necessary) as having been paid towards fulfillment of the condition of the statutory pre-deposit in terms of Section 35F of the said Act of 1944. In such view of the matter, the order impugned dated January 14, 2025 passed by the appellate authority is set aside and the matter is remitted to the file of the appellate authority for consideration of the petitioner’s appeal on merits upon verifying and being satisfied that the condition of statutory pre-deposit under Section 35F of the said Act of 1944 has been met by the petitioner by treating the said amount of Rs.1,80,890/- or portion thereof (as may be required or necessary) as having been deposited by the petitioner towards statutory pre-deposit. It is clarified that if despite treating the said sum of Rs. 1,80,890/- as having been put in to meet the condition of statutory pre-deposit, it is found that there is any deficit and further sum is required to be deposited by the petitioner to comply with the condition of mandatory statutory pre-deposit, the petitioner shall be obliged to do so within the time specified by the Appellate Authority for the purpose of maintaining the appeal. WPA stands disposed. 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.