Pre-deposit- reduction of amount earlier directed - consideration of humanitarian and other grounds

[DEV KUMAR KOTHARI]

Summary: While considering the amount of pre deposit the appellate authority/ court can consider all aspects including interalia merits of the case, difficulties of the appellant, balance of convenience and interest of revenue. An order passed for pre deposit has generally to be followed for admittance of the appeal. However, the appellant can appeal against such order or can file a request for reduction of amount or allowing further time. Developments during intervening period can also be grounds for seeking reduction of the amount of pre deposit directed. 

Humanitarian ground and recovery of tax

There cannot be any doubt that arrear of tax are to be recovered dutifully by the revenue officers.  However, sometimes humane factors have also to be considered while enforcing recovery of tax.  Tax payer may be faced with several difficult situations in which he cannot pay the tax dues, some such situations in life of a person can be as follows:-

Accident and illness causing great hardship to the taxpayer.

Accident and extensive damages of business assets causing hardship to the taxpayer.

Accident and / or severe illness to the family members of tax payer causing great hardship to the taxpayer.

Individual taxpayer being out of job for considerable time.

Substantial loss suffered in business of taxpayer due to trade cycle, force measures, closure of business etc.

In the above circumstances and also in several other situations, it may be extremely difficult for the taxpayer to deposit tax demanded by the tax authorities. Therefore, some sort of arrangements like payment in easy installment, waiver of interest etc. are considered.

Provision of appeal is to render justice:

Opportunity of seeking redressal of grievances by way of appeal is provided for achieving and rendering justice. In case, when the tax payer is in difficult situation and he has been further burdened with demands of tax or other levies and he is forced to pay the same even for admittance of appeal, it may be impossible for the tax payer to get an opportunity to seek relief. In such situations, if the taxpayer is asked to make pre deposit for admittance of appeal, it may amount to shutting the doors of justice. Therefore, in such situations discretion needs to be exercised with sympathy and off course with caution.

Appeals requiring pre-deposit

In case under legal provisions, pre-deposit is to be made for admittance of an appeal.  The Appellate Authority can also consider such type of difficulties on humanitarian grounds also and waive or reduce the requirement of pre-deposit.  In such a case taking a sympathetic view for reducing the amount of pre-deposit or exempting the appellant from pre-deposit, will go a long way in administration and delivery of justice.  If without considering such situations, a rigid view is taken to force the maximum amount of pre-deposit and thereby deny opportunity to appeal to the taxpayer and avail justice that will not be given in the interest of justice.

Pre-deposit amount earlier directed can also be revised:

As per usual practice and procedure the appellate authority directs the amount of pre deposit, which is to be deposited and reported on or before fixed date. In case of non- compliance, the appeal may be dismissed. In case during the period allowed for compliance the tax payer is unable to deposit the amount, or find it difficult to deposit the same or some force measure takes place causing further difficulty, the tax payer can make an application for modification of order of pre deposit.

Similarly suppose during intervening period, any co-ordinate court or authority or any higher authority or court passes order according to which the merits of the appeal are improved. In such a case also the taxpayer can make an application for reducing or waiving the amount of pre deposit. Suppose during intervening period the Supreme Court / any high court renders a judgment according to which assessee becomes entitled to relief. In such a case there would be no purpose of asking heavy amount of pre deposit from taxpayer. Therefore, the appellant can approach the court / authority to reduce or fully waive the amount of pre deposit. The authority / court can consider and revise the amount of pre deposit and other conditions for admittance of the appeal.

Recently reported decision of CESTAT:

CITY TRAVELS V. CCE, COIMBATORE  [2007] 8 STJ 323 (CESTAT - Chennai):

The Hon'ble CESTAT(Chennai) had shown commendable spirit of rendering justice and providing opportunity to the appellant to appeal at a reduced amount of pre-deposit.  The case is in respect of City Travels.  In this case, in fact, the Tribunal has earlier directed the appellant to make a pre-deposit of Rs.5 lakhs as pre-condition for admittance of the appeal.  However, subsequently, one of the bus operated by the appellant was gutted in a fire and two members of the crew died in that accident.  In these circumstances, the appellant prayed for modification of the requirement of pre-deposit.  The counsel of the appellant requested for reduction of the amount of pre-deposit and offered to pay the amount of Rs.1 lakh and for allowing four weeks time to pay the same. The Honorable Members agreed to the prayer and held as follows: -

"We are inclined to be humane". Accordingly, the appellants shall pre-deposit only an amount of Rs. 1 lakh (Rupees one lakh only) within 4 weeks from today. Report compliance on 18-10-2006. The stay order will stand modified to the above extent."

Commendable zeal shown by the CESTAT:

Commendable zeal shown to render justice to people in difficulty:

The Tribunal took humanitarian grounds and reduced the amount of pre-deposit earlier directed.  This is highly appreciable and commendable and such orders will go a long way in administration and delivery of justice and also in improving respect and regard to appellate authorities. Suppose in this case the Tribunal took a rigid view and dismissed appeal for failure of the tax payer to deposit the amount directed to be deposited by the due date, perhaps the taxpayer would have lost chances of seeking justice.

It is hoped that the revenue authorities will not appeal against such orders, which are to promote rendering of justice even to people in difficult times.