2025 (6) TMI 1877 - HC - Central Excise

Requirement of pre-deposit for preferring appeal - Prayer for acceptance of appeal filed by the petitioner under Section 35B of the Central Excise Act 1944 without payment of pre deposit - HELD THAT - Having regard to the clear mandate provided for in Section 35F of the said Act and also having regard to the judgment delivered by the Hon ble Division Bench of this Court presided over by the Honb le the Chief Justice in Somnath Ray proprietor of M/s Makloyed Electrical Enterprises vs- Additional Commissioner of Central Tax CGST CX Commissionerate Howrah Ors. 2024 (4) TMI 1282 - CALCUTTA HIGH COURT there is no scope for this Court to entertain this writ petition it is held that the Tribunal cannot be directed to hear out the appeal in contravention of the statutory provision. Although by referring to the judgment in the case of Mohammed Akman Uddin Ahmed 2023 (5) TMI 23 - DELHI HIGH COURT petitioner has attempted to make out a case that the High Court is competent in a fit case to waive the pre condition or grant a right to prefer an appeal it is however found that the issue that fell for consideration in the said judgment was the Constitutional validity of Section 129E of the Customs Act 1962 and for a direction upon the respondents in the said case to admit the appeal filed by the petitioner without the pre deposit of mandatory duty as stipulated under Section 129E of the Customs Act 1962. It is amply clear that the direction to admit the appeal under Section 129E of the Customs Act 1962 was sought for as and by way of a consequential relief. The High Court in the said case did not hold that the provisions of Section 129E of the Customs Act 1962 to be ultra vires the Constitution of India and having regard thereto the grant of consequential relief in a case where the principal relief is disallowed cannot be construed as a right conferred on the petitioner to seek similar benefit. In view thereof the aforesaid judgment does not assist the petitioner. Conclusion - i) The writ petition seeking waiver of the mandatory pre-deposit under Section 35F is dismissed. ii) The Tribunal cannot be directed to admit or hear the appeal without compliance with the statutory pre-deposit requirement. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the petitioner can be exempted or granted waiver from the mandatory pre-deposit requirement under Section 35F of the Central Excise Act, 1944, so as to enable the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) to entertain the appeal without payment of the stipulated pre-deposit.

(b) Whether the High Court has jurisdiction or power to relax or waive the pre-deposit condition mandated by statute before admission of an appeal under Section 35B of the Central Excise Act, 1944.

(c) The applicability and binding nature of the statutory provisions under Section 35F of the Central Excise Act, 1944, vis-`a-vis the petitioner's claim of financial hardship and closure of business.

(d) The relevance and applicability of the precedent judgment from the Delhi High Court concerning waiver of pre-deposit under Section 129E of the Customs Act, 1962, to the present matter.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Waiver of Mandatory Pre-Deposit under Section 35F of the Central Excise Act, 1944

Relevant legal framework and precedents:
Section 35F of the Central Excise Act, 1944, mandates that before filing an appeal to the Tribunal or Commissioner (Appeals), a certain percentage (7.5% in this case) of the duty demanded or penalty imposed must be deposited. The statute explicitly states that the appellate authority shall not entertain any appeal unless this pre-condition is fulfilled. The provision also caps the maximum deposit at Rupees Ten crores and excludes stay applications and appeals pending before the Finance (No. 2) Act, 2014.

In addition, the Division Bench of the Calcutta High Court in a recent judgment (MAT 1126 of 2023) has reaffirmed the mandatory nature of this statutory pre-condition and held that neither the writ court nor the Tribunal can entertain appeals in contravention of this statutory mandate.

Court's interpretation and reasoning:
The Court emphasized the clear and unambiguous language of Section 35F, which imposes a mandatory pre-deposit condition. It held that the statutory provision leaves no scope for the Tribunal or the High Court to waive or relax this requirement, even in cases of financial hardship or closure of business. The Court reasoned that the pre-deposit condition is a statutory pre-requisite for entertaining an appeal and unless complied with, the appellate authority is not authorized to proceed on merits.

Key evidence and findings:
The petitioner's claim that it had ceased business operations and was struggling financially was noted. However, the Court found that such circumstances do not override the statutory mandate. The petitioner's failure to deposit the required 7.5% pre-deposit on duty and penalty as stipulated under Section 35F was determinative.

Application of law to facts:
Given the petitioner's non-compliance with the mandatory pre-deposit, the Court found no legal basis to direct the Tribunal to admit and hear the appeal. The statutory bar was held to be absolute and non-negotiable.

Treatment of competing arguments:
The petitioner's counsel relied on the hardship faced by the petitioner and sought judicial discretion to waive the pre-deposit. The Court rejected this, holding that the statutory provision does not confer discretion to waive the pre-deposit. The argument was found unsustainable in law.

Conclusions:
The Court concluded that the writ petition seeking waiver of the pre-deposit condition must fail. The Tribunal cannot be directed to entertain the appeal without compliance with Section 35F.

Issue (c): Jurisdiction and Power of the High Court to Waive Pre-Deposit

Relevant legal framework and precedents:
The petitioner sought to invoke the High Court's writ jurisdiction to waive the pre-deposit requirement. The Court examined whether such power exists in light of the statutory mandate.

Court's interpretation and reasoning:
The Court held that the High Court cannot override or relax a statutory pre-condition for filing an appeal. The pre-deposit requirement is a substantive condition precedent to the exercise of appellate jurisdiction and not merely a procedural formality. Therefore, the writ jurisdiction cannot be used to circumvent the statutory bar.

Application of law to facts:
The petitioner's plea for waiver was found to be beyond the scope of the High Court's jurisdiction. The statutory scheme does not permit judicial relaxation of the pre-deposit condition.

Conclusions:
The High Court lacks jurisdiction to waive the mandatory pre-deposit under Section 35F, and the writ petition on this ground must be dismissed.

Issue (d): Applicability of Delhi High Court Judgment on Section 129E of the Customs Act, 1962

Relevant legal framework and precedents:
The petitioner relied on a judgment from the Delhi High Court concerning Section 129E of the Customs Act, 1962, where the Court had allowed admission of an appeal without pre-deposit as a consequential relief while considering the constitutional validity of the provision.

Court's interpretation and reasoning:
The Court distinguished the present case from the Delhi High Court judgment. It observed that the Delhi High Court's direction to admit the appeal without pre-deposit was incidental to the principal issue of constitutional validity of Section 129E. The Delhi High Court did not hold the provision ultra vires the Constitution, nor did it establish a general right to waive pre-deposit. Therefore, the precedent was not applicable to the present case.

Application of law to facts:
Since the principal relief was not granted in the Delhi case and the waiver was a consequential relief, the petitioner cannot rely on that judgment to claim waiver of pre-deposit under Section 35F of the Central Excise Act.

Conclusions:
The Delhi High Court judgment does not assist the petitioner's case and does not justify waiver of the mandatory pre-deposit.

3. SIGNIFICANT HOLDINGS

"Having regard to the clear mandate provided for in Section 35F of the said Act... there is no scope for this Court to entertain this writ petition... the Tribunal cannot be directed to hear out the appeal in contravention of the statutory provision."

"The argument that the writ Court can waive the condition and relax the condition for payment of pre deposit, is unsustainable in law, having regard to the specific statutory pre condition provided for entertaining an appeal and unless such condition is met, the same does not authorize the Tribunal to hear out such appeal on merits."

"The direction to admit the appeal under Section 129E of the Customs Act 1962 was sought for as and by way of a consequential relief... the aforesaid judgment does not assist the petitioner."

Core principles established include:

• The mandatory pre-deposit under Section 35F of the Central Excise Act, 1944, is a substantive statutory pre-condition for entertaining appeals and cannot be waived or relaxed by the Tribunal or the High Court.
• The writ jurisdiction of the High Court cannot be exercised to override or circumvent clear statutory mandates regarding pre-deposit conditions.
• Precedents involving different statutory provisions and contexts (such as Section 129E of the Customs Act) are not automatically applicable or binding where the statutory scheme and facts differ materially.

Final determinations:

• The writ petition seeking waiver of the mandatory pre-deposit under Section 35F is dismissed.
• The Tribunal cannot be directed to admit or hear the appeal without compliance with the statutory pre-deposit requirement.