DISMISSING THE APPEAL FOR NON COMPLIANCE OF PRE DEPOSIT DOES NOT PERMIT THE APPELLATE AUTHORITY TOREFUSE TO RESTORE THE APPEAL UPON COMPLIANCE BEING SHOWN

[Mr. M. GOVINDARAJAN]

      In indirect tax matters appeal may be filed before Commissioner (Appeals) against the order of Adjudicating Authority.   Appeal may also be filed before CESTAT against the order of Commissioner (Appeals).  Sec. 35F of the Central Excise Act, 1944 and Sec. 129E of the Customs Act, 1962 provide for the deposit of duty/tax and interest demanded or penalty levied pending appeal.  These sections further provide that the Commissioner (Appeals) or the Appellate Tribunal, in any particular case, may dispense with such deposit subject to such conditions, by granting stay order.

      The tribunal in many a case dispensed with the deposit of tax and interest demanded or penalty levied in entirety if it is satisfied that there is a prima facie case.  In some cases the tribunal directed to deposit the appellants either fully or partly.  In 'Jaypee Rewa Plant V. Commissioner of Central Excise, Bhopal' - 2008 -TMI - 31060 - CESTAT NEW DELHI the tribunal held that the appellants failed to make out a prima facie case for waiver of pre-deposit of entire amount of tax.  The tribunal in this case directed the appellant to deposit Rs.50,000/- and Rs.30,000/- out of the demand of Rs.2,55,909/- and Rs.1,24,559/- respectively within six weeks.   Upon deposit of the said amounts, the balance amount of tax is waived till the disposal of the appeals.

      In 'Shaji Thomas V. Commissioner of Central Excise, Trivandrum' - 2008 -TMI - 31070 - CESTAT BANGLORE  the appellant is required to pre-deposit service tax of Rs.84,56,280/- and Education Cess of Rs.1,17,402/-.   A huge penalty of Rs.1,71,47,382/- has been imposed.  The tribunal in the application for stay petition considered the submissions and perused the impugned order.   The impugned order has analyzed the activity carried on by the appellant in detail and has found the activity to come within the ambit of Business Auxiliary Services.   At this stage, there is no serious contest to this point, as the appellant is undertaking to pre-deposit of Rs.40 lakhs.   The tribunal is of the considered opinion that the appellant shall pre-deposit an amount of Rs.45,00,000/- within a period of three months.   On such deposit, the balance of service tax and penalty stands waived and recovery stated.   There shall be no recovery during the pendency of the appeal.   Failure to comply will entail dismissal of the appeal.

      In the above case failure on the part of the appellant to deposit as directed by the tribunal within the time stipulated would amount to dismissal of the appeal.   Whether there is remedy for the appellants in such cases?   Whether he can deposit the amount as directed by the tribunal in later dates?  If the appellant pays the pre-deposit as directed by the tribunal in the later dates whether his appeal will be restored?  Whether there is provision for such a situation in indirect laws?  Even if it is allowed whether the limitation would come across to restrict the appeal? 

      In 'Hussain Haji Harun @ Hussain Kabiju V. Union of India' - 1995(77) ELT 803 (Guj) the Supreme Court has given a verdict to answer the above questions.  In this case the tribunal had dismissed the appeal for want to compliance with the order of pre-deposit.   The order of pre-deposit was made on 15.4.1985 granting the petitioner therein two months time to deposit the sum as directed.   The appeal came to be dismissed on 20.12.1985.   The petitioner preferred Miscellaneous Application No.36 of 1986 seeking setting aside the order of dismissal of appeal and for restoring the appeal to file.   The petitioner had not even made deposit before approaching the Court and only after filing the petition,  by way of a Miscellaneous Civil Application, a direction was sought to the effect that the Tribunal should accept the sum of pre-deposit and restore the appeal.  Even though a period of more than two years had lapsed since the order of directing pre-deposit and also dismissal of the appeal the Supreme Court allowed the petition.   The Court observed that the rules did not permit tribunal to restore the appeal in a case where appeal was dismissed for default in relation to non deposit of the amount as directed, laid down.  The mere absence of such a provision regarding the amount of duty demanded cannot be construed on the basis that the Tribunal had no power to restore the appeal, which was dismissed for non deposit of the penalty amount or duty demanded.

      In 'Collector, Land Acquisition, Anantnag V. Ms. Katijui, 1987 (28) ELT 185 (SC) the Supreme court laid down when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. 

      In 'Scan Computer Consultancy V. Union of India'- 2006 (204) ELT 43 (Guj) the excise duty liability to the tune of Rs.3,90,363/- was fastened on the petitioner for the period from 22.1.1995 to 1.9.1995 by Order-in-Original dated 30.10.2000 with equal amount of penalty on the petitioner firm coupled with personal penalties on the partners of the firm.   The said order came to be challenged by way of appeal accompanied by an application seeking stay.  It is the case of the petitioner that a copy of the Order in Appeal was handed over personally by an Officer of the Central Excise Department sometime in August 2005 at their new premises.   That, after filing the appeal, the petitioner firm had moved and  hence, possibly the order directing pre-deposit of an amount of Rs.1,70,000/- made on the stay application had not been served on the petitioner.   However the said amount was deposited on26.12.2005 and 27.12.2005, a restoration application, seeking restoration of appeal was filed before the Commissioner (Appeals).

      On 10.1.2006 the petitioner received a communication from the office of Commissioner (Appeals) stating that since the appeal had been finally disposed the appeal could not be restored at the level of Commissioner (Appeals) and the petitioner was advised to approach the higher judicial forum.   Thereupon the petitioner wrote on 13.1.2006 to Commissioner (Appeals) again requesting for restoring the appeal for hearing the same on merits.  In response to the communication of the petitioner, the Commissioner (Appeals) wrote to the petitioner reiterating the direction to file appeal before higher forum.

      In this petition before the High Court the Revenue submitted that the Court must ensure that the amount of pre-deposit is made within a reasonable period from the date of dismissal of the appeal even if such a course was permissible, because otherwise, according to him, the period of limitation for preferring an appeal to a higher forum would lost its sanctity.  It was also urged that any person may seek restoration within period of limitation prescribed for filing further appeal, as that could be termed to be a reasonable period within which compliance can be accepted.

      It is further contended that restoration of the appeal would amount to reviewing the earlier order of dismissal.  The Court observed that it is not possible to regard the order of dismissal on the ground that penalty amount was not deposited in time to be a final order.   It is also, therefore, not possible to accept the view that restoring such an appeal would amount to reviewing the earlier order of dismissal.   The whole fallacy lies in the approach that if such an appeal was to be restored, it would amount to reviewing its earlier final order.

      The Court held that it is apparent that the Commissioner (Appeals) has committed an error in law when he came to the conclusion that he could not restore the appeal and the only remedy was by way of preferring appeal before higher forum.   Needless to say that, by mere default in making deposit as directed, the appellant does not stand to gain anything and only delays his rights to have his case adjudicated.   Nor does such a delay in making pre-deposit cause any prejudice to the revenue, in absence of any stay operating in favor of the petitioner.   It cannot be lost sight of that right of appeal is statutorily granted and it is hedged in by the requirement to make pre-deposit as directed by the appellate authority, as being a condition of hearing of the appeal on merits.   However, that condition cannot be used by the appellate authority for the purposes of denying an appellant the right of adjudication which is otherwise statutorily granted.   The court held that in a given case, even if no pre-deposit is made, the appeal may not be heard, but having dismissed the appeal for non compliance of pre-deposit does not permit the appellate authority to refuse to restore the appeal upon compliance being shown.