2024 (9) TMI 1743 - AT - Customs

Compliance with the mandatory pre-deposit requirement under section 35F of the Central Excise Act 1944 in respect of the disputed service tax demands raised through two Show Cause Notices dated 07.03.2008 and 28.11.2008 - HELD THAT - The calculation provided by the DR shows the demand of the impugned period was Rs. 13, 66, 31, 566/- i.e. Rs. 8, 35, 86, 570/-in SCN dated 07.03.2008 and Rs. 5, 30, 44, 996/- in SCN dated 28.11.2008. After deducting the amount paid respectively for both the SCN. Hence the proposed demand under SCN dated 07.03.2008 was Rs. 4, 28, 08, 029/- and that under SCN dated 28.11.2008 was Rs. 4, 01, 44, 996/- totaling to Rs. 8, 29, 53, 025/-. This amount is the amount under challenge. As per section 35 F the amount of pre-deposit has to be certain percentage of duty confirmed or penalty imposed. Since the duty demanded already excluded the amount already paid the said payment is not the subject matter of section 35 F of Central Excise Act 1944. The only amount which can be set off against the amount of pre-deposit of section 35F is Rs. 45 Lakhs. From the calculation given by the Department it is apparent that the amount of pre-deposit is Rs. 62, 21, 477/- (7.5% of the demand of duty under dispute). Resultantly the balance amount is yet to be paid by the appellant for the impugned defect to be removed. One month time is given to the appellant to make good the deficiency of the said amount. Matter be now listed on 13.11.2024.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the appeal filed with two volumes and a detailed index complies with procedural requirements.

- Whether the documents filed in the appeal are legible and whether the appellant has a better copy of the documents.

- Whether the undertaking required under appeal Form No. ST-3 is properly included in the appeal.

- Whether the appellant has complied with the mandatory pre-deposit requirement under section 35F of the Central Excise Act, 1944, in respect of the disputed service tax demands raised through two Show Cause Notices dated 07.03.2008 and 28.11.2008.

- Determination of the correct amount of pre-deposit payable by the appellant for the appeal to proceed, considering amounts already paid voluntarily during investigation and the percentage mandated by law.

2. ISSUE-WISE DETAILED ANALYSIS

Compliance with procedural requirements regarding appeal filing and documents

The appellant filed the appeal in two volumes, with the impugned Order-in-Original (OIO) dated 05.01.2024 running over 100 pages and filed as Volume 2. The index was properly numbered and specified the two-volume filing. The Tribunal accepted this arrangement as compliant with procedural norms.

Regarding the legibility of documents, the appellant submitted that all pages are legible but did not possess better copies, as the documents were received from the Department. This was accepted, and the presence of court fee stamps was noted. The undertaking required under appeal Form No. ST-3 was confirmed to be part of the appeal at page 4, satisfying that procedural defect.

Compliance with mandatory pre-deposit under section 35F of the Central Excise Act, 1944

The core legal framework applicable is section 35F of the Central Excise Act, which mandates a pre-deposit of a specified percentage (7.5%) of the duty confirmed or penalty imposed before an appeal can be entertained by the Appellate Tribunal.

The appellant challenged two Show Cause Notices (SCNs): one dated 07.03.2008 demanding Rs. 8,35,86,570/- and another dated 28.11.2008 demanding Rs. 5,30,44,996/-, totaling Rs. 13,66,31,566/-. However, the impugned Order confirmed the demand of Rs. 8,29,53,025/-, after adjusting amounts already paid voluntarily by the appellant during investigation.

The appellant contended that it had already deposited Rs. 3,62,78,541/- against the first SCN and Rs. 1,29,00,000/- against the second SCN, which together exceeded 7.5% of the total disputed demand. Hence, no further pre-deposit was necessary.

The Department, through the Learned Departmental Representative (Ld. DR), disputed this, arguing that only Rs. 45 Lakhs had been appropriated as voluntary payment during investigation, which was less than 7.5% of the duty confirmed. The Department filed a calculation chart asserting that the proper pre-deposit amount is Rs. 62,21,477/- (7.5% of the duty under dispute).

Upon examination, the Tribunal noted that the confirmed demand after adjusting voluntary payments was Rs. 8,29,53,025/-. The voluntary payment of Rs. 45 Lakhs is the only amount that can be set off against the pre-deposit requirement under section 35F. The amounts paid earlier but not appropriated in the impugned order cannot be considered for pre-deposit calculation.

Therefore, the Tribunal concluded that the appellant was required to deposit the balance amount of Rs. 62,21,477/- as pre-deposit to remove the defect in the appeal. The appellant was granted one month to comply with this requirement.

Treatment of competing arguments

The appellant's argument that the total amount already paid exceeded the pre-deposit threshold was rejected because the impugned order only appropriated Rs. 45 Lakhs as voluntary payment. The Tribunal emphasized that only amounts appropriated in the impugned order can be set off against pre-deposit under section 35F.

The Department's calculation was accepted as accurate and in line with statutory requirements. The Tribunal relied on the impugned order's findings and the statutory mandate of section 35F to determine the correct pre-deposit amount.

3. SIGNIFICANT HOLDINGS

"As per section 35 F the amount of pre-deposit has to be certain percentage of duty confirmed or penalty imposed. Since the duty demanded already excluded the amount already paid, the said payment is not the subject matter of section 35 F of Central Excise Act, 1944. The only amount which can be set off against the amount of pre-deposit of section 35F is Rs. 45 Lakhs."

"From the calculation given by the Department it is apparent that the amount of pre-deposit is Rs. 62,21,477/- (7.5% of the demand of duty under dispute). Resultantly, the balance amount is yet to be paid by the appellant for the impugned defect to be removed."

The Tribunal established the principle that pre-deposit under section 35F must be calculated on the duty confirmed in the impugned order after deducting only those amounts actually appropriated as paid. Voluntary payments not appropriated in the order cannot be set off against the pre-deposit requirement.

The final determination was that the appellant must deposit Rs. 62,21,477/- within one month to cure the defect in the appeal filing, failing which the appeal cannot proceed. The procedural compliance regarding indexing, legibility, and undertaking was found satisfactory.