Protective demand in case of filing appeals in refund matters

[Aruldas Chettiar]

Whether Protective demand is to be issued in case of filing appeals in refund matters

[Rajagopalan Ranganathan]

Sir,

Unless the operation of order-in-original passed in respect of a show cause notice is stayed by the high Court or Supreme court under Article 226 or Article 32 of the Constitution of India, the department is not debarred in issuing protective show cause notices for subsequent period. OR

If an injunction is granted by the High Court against issue of show cause notice then the department is debarred from issuing protective demands for subsequent period.

Commissioner (Appeals) and CESTAT are empowered only to stay payment of pre-deposit of duty demanded and penalty imposed under Section 35F of Central Excise Act, 1944 when appropriate application for stay is moved. This is prior to 6.8.2014 (date of enactment of Finance (No.2) Bill 2014). After this date you have to compulsorily make pre-deposit @ 7.5% (when appeal is preferred to Commissioner (Appeals)) and 10% when further appeal is preferred to CESTAT. Commissioner (Appeals) and CESTAT, being the creature of Central Excise Act, 1944, they cannot stay issue of show cause notice. Only High Court and Supreme Court can do that in exercise of their extra=ordinary jurisdiction only, that too in extreme situations.

AI Summary

Protective show cause notices remain permissible unless stayed by extraordinary writ; appellate bodies can only stay pre-deposit obligations. Protective show cause notices may be issued by the department in refund appeals unless the underlying order is stayed by courts via extraordinary writ; an injunction against issuance prevents protective demands. Commissioner (Appeals) and the appellate tribunal can stay only pre-deposit obligations of duty and penalty when moved, and cannot stay the issue of show cause notices. A legislative amendment mandates compulsory pre-deposits on filing appeals, with specified pre-deposit percentages at successive appellate stages.