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2015 (11) TMI 959 - KARNATAKA HIGH COURT

2015 (11) TMI 959 - KARNATAKA HIGH COURT - [2016] 89 VST 235 (Kar) - Waiver of pre deposit - Amendment to Section 35F of the Central Excise Act, 1944 vide Finance Act, 2014 - Mandatory pre deposit - pre-deposit of 7.5% for first appeal and 10% for second appeal of the total tax demanded as illegal and violative of articles 14, 19(1)(g) and 265 of the Constitution of India - Retrospective or prospective effect - Held that:- It is held that in the instant case, the right to file an appeal, which i .....

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an appeal, but are subscribed or controlled by Section 35F of the Act. Hence, in the instant case, the right to file an appeal under Section 35 or 35B as the case may be is not an absolute right, but a conditional one. - Right to file an appeal under Sections 35 and 35B of the Act is in no way affected by the amendment made to Section 35F of the Act requiring pre-deposit to be made at the time of preferring the appeal. Such a condition regarding pre-deposit is made with a view to regulate t .....

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ure of a saving clause, keeping intact the earlier provision of Section 35F to be made applicable to circumstances noted under the second proviso. That in all other cases not covered under the second proviso, the amended Section 35F is applicable as it has a retrospective operation. Such a legislation by amendment having a retrospective operation is a valid piece of legislation - second proviso in amended Section 35F is significant, which was absent in the provisions considered in Hoosien Kasam .....

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ers herein has filed an appeal prior to 6/8/2014 before the appellate authority or if the appeal has been preferred subsequently has not deposited the requisite predeposit before the appellate authority, as the case may be, they are required to comply with the conditions of the amended Section 35F. - Decided against assessee. - Writ Petition Nos.10559-10560/2015 (T-TAR), W.P.No.54017/2014 (T-RES), W.P.No.54018/2014 (T-RES), W.P.No.21492/2015 (T-TAR), W.P.Nos.10559-10560/2015, W.P.No.54017/2014, .....

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e sake of brevity), as amended by Section 105 of the Finance Act (No.2) 2014 (hereinafter referred to as '2014 Act', for the sake of convenience) with effect from 6/8/2014, which provides for monetary pre-deposit of 7.5% for first appeals and 10% for second appeals on the total tax or tax and penalty, demanded for entertaining such appeals. 3. In essence, the contention of the petitioners is that the requirement of the pre-deposit is in violation of Articles 14, 19(1)(g) and 265 of the C .....

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ar as petitioners are concerned commenced prior to 6/8/2014, which is the date on which the amendment has been enforced. Background facts: 4. Briefly stated, the facts in W.P.Nos.10559-560/2015, are that petitioner No.1 is a Government of India Company, registered with the Central Excise Department, engaged in the business of refining crude oil and marketing various petroleum products. Petitioners procure Motor Spirit, High Speed Diesel and Superior Kerosene Oil as well as Aviation Turbine Fuel. .....

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notice was replied to by the petitioners as well as by MRPL. Subsequently, the Commissioner of Central Excise and Service Tax passed an order-in-original, confirming the duty and penalty. The petitioner had not yet filed any appeal assailing the order-in-original. 5. In W.P.No.54018/2014 C/w. W.P.No. 54017/2014, the petitioner is a company incorporated under the provisions of the Companies Act, 1956. The petitioner is an assessee in respect of taxable service ('Renting of immovable property& .....

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he Service Tax Commissionerate audited the accounts of the petitioner for the period from April 2008 to March 2013 and a show-cause notice dated 24/10/2013 was issued demanding service tax amount of ₹ 3,97,52,322/- from the petitioner on the premise that it was ineligible for availing Cenvat Credit as well as interest thereon. The Commissioner of Central Excise passed an order-in-original bearing No.24/2014 on 30/5/2014, holding that the petitioner was liable to pay the requisite amount. P .....

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s all services such as maintenance, repairs of systems and also commissioning, installation of the same, as and when required by the customer and is registered with the Service Tax Department for payment of Service Tax in the categories of 'Management, Maintenance and Repair', Commercial Training or Coaching, Business Auxiliary Service, Business Support Service, Information Technology, Software Service, Transport of Goods by GTA with STC No.AAACC9862FST002. Petitioner has opted for regis .....

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ggrieved by that order, petitioner filed an appeal before CESTAT, Bengaluru. That authority after hearing the submissions of the petitioner has passed an order on 9/6/2014 in Order No.21335/2014. In the above background, the Assistant Commissioner, LTU, had by letter dated 27/3/2012, sought details of the cost of spares used in the warranty support service to customers and credit taken on such spare parts for the period from 1/1/2008 to 31/3/2013 with reference to order dated 26.2.2013/6.3.2013, .....

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intends to file an appeal before the CESTAT. Under the amended provision, the mandatory predeposit of 7.5% of the demand of duty, interest and penalty has to be made by the petitioner, which is assailed in this writ petition. 7. Sections 35 and 35B of the Act provide for filing an appeal before the commissioner (Appeals) or before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru, as the case may be. Section 35F of the Act deals with the deposit to be made i.e., pre-dep .....

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hich the monetary pre-deposit of 7.5% for first appeals before the Commissioner (Appeals) and 10% for second appeals is prescribed. The petitioners being aggrieved by the amendment have filed these petitions. 8. Thus, in all these cases, the grievance of the petitioners is with regard to the validity of the amendment made to Section 35F of the Act, by which, discretion vested with the appellate authorities to waive or reduce the pre-deposit with conditions has been taken away and instead is subs .....

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dment, had stipulated that, where an appeal was filed in respect of the demand made under the Act the appellant had to deposit with the appellate authority the duty demanded or the penalty levied. The proviso stipulated that the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, could dispense with such deposit, subject to such conditions as the authority may deem fit to impose, so as to safeguard the interests of the revenue. Provided that, where such an application was filed .....

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ny appeal, unless 7.5% of the duty or penalty in dispute is deposited. The first proviso states that the said deposit of 7.5% of the duty and penalty shall not exceed ₹ 10.00 crore, which is an upper limit. But the second proviso states that the amended section shall not apply to stay applications and appeals pending before any appellate authority filed prior to the commencement of the 2014 Act. As a result, the discretion vested with the appellate authority has been taken away and in its .....

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35F would apply, particularly the first proviso thereof. It was, therefore, contended that in respect of those cases, where the matter had commenced long prior to the impugned amendment to Section 35F of the Act, it is the original and un-amended provision which would apply, irrespective of the fact as to whether the appeal was filed prior to 6/8/2014, on which date the amended provision took effect, or subsequent to that date. b) Referring to various decisions of the Hon'ble Supreme Court, .....

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decision of the Hon'ble Supreme Court in Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh and others (AIR 1953 SC 221) (Hoosein Kasam Dada) to contend that the preexisting right of appeal, which was vested with the petitioners has not destroyed by the amendment made to Section 35F of the Act. It was contended that the right of appeal from the decision of an inferior authority to a superior authority or Tribunal becomes vested in a party when proceedings are first initiated in, .....

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ailing at the date of institution of the suit or proceeding and not by the law that prevails on the date of its decision or on the date of filing of the appeal. d) Reliance was placed on State of Bombay v. Supreme General Films Exchange Ltd. (AIR 1960 SC 980) to contend that an impairment of the right of appeal by putting a new restriction thereon or imposing a more onerous condition is not a matter of procedure only; it impairs or imperils a substantive right and an enactment which does so is n .....

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ns to contend that, by virtue of the amendment made to Section 35F of the Act, which stipulates a mandatory deposit of 7.5% of the duty or penalty in dispute, discretion granted to the Commissioner (Appeals) or Appellate Tribunal, as the case may, to relax the deposit has been taken away, which amendment would cause undue hardship to the assessees. It was further contended that the second proviso of amended Section 35F states that the amended provision would not apply to appeals filed prior to t .....

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e is violation of doctrine of equality, was the submission. g) Placing reliance on certain other decisions, which shall be referred to, later, it was contended that the amendment to Section 35F of the Act must be interpreted in such a manner that where the lis had commenced prior to the amendment of 6/8/2014, the un-amended provision must be applied, irrespective of the date of filing the appeal. 10. Per contra the submission made on behalf of the respondents is as follows: a) Learned Addl. Soli .....

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nt. Section 35F only deals with the conditions to be complied with by an appellant in order that his appeal is entertained by the appellate authority. It is only those conditions which have been altered by the amendment. The conditions required to be complied with, by filing an appeal are not part and parcel of "the right to file an appeal" by an aggrieved party. It only regulates the filing of an appeal by an aggrieved party. The right to file an appeal is no doubt a substantive right .....

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ly 7.5% of the disputed amount has to be deposited at the time of filing an appeal by the aggrieved party. This amendment in no way affects the substantive right of the petitioners herein to prefer an appeal. It was also contended that under the earlier provision, in case the appellate authority rejected the application filed under the un-amended proviso, then the entire demand of duty or penalty had to be deposited. But in the instant case, only 7.5% of the amount in dispute has to be deposited .....

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encement of the 2014 Act. By this, the Parliament has clearly ensured that the amendment is effective in respect of all those appeals filed subsequent to 6/8/2014 irrespective as to when the lis commenced but to those appeals pending as on that date, original Section 35F would apply. Therefore, the second proviso saves all those appeals, which are pending before the Tribunal or the appellate authority and the amended provision would not apply to them. The second proviso is in the nature of a sav .....

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s contended that the amendment was assented to by the Hon'ble President of India on 6/8/2014 and notified on the same day and therefore, would commence from midnight of 5th and 6th August of 2014. It was further contended by the Addl. Solicitor General that the original Section 35F is wiped out from the statute book, except to the extent that has been saved in the second proviso of the amended section. It was also contended that the second proviso is declaratory in nature. That the presumpti .....

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amendment. e) Referring to Hoosein Kasam Dada, it was contended, that the said decision turned on its own facts and the amendment of the relevant provision considered in that case. The said judgment is not applicable to the present case as the provisions in the present case and that case are not in pari materia. It was submitted that reference made to other decisions of various High Courts by placing reliance on Hoosein Kasam Dada by petitioners' counsel was unnecessary and not binding and t .....

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submitted that there is no merit in these petitions and the same may be dismissed. 11. In reply, learned counsel for the petitioners contended that the second proviso is not declaratory in nature and that the judgments of the other High Courts relied upon by them would squarely apply to the present case. It was reiterated that the right to file an appeal would continue to apply to a lis as it would have accrued to the appellant on the date the lis commenced before the inferior court or Tribunal .....

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eration: 1) Whether Section 35F of the Act as amended, is a piece of substantive or procedural law, prescribing a mandatory pre-deposit at the time of filing an appeal, is an unreasonable condition? 2) Whether amendment made to Section 35 F of the Act has a retrospective operation? 3) What order? Legal Frame work: 13. At this stage, it would be useful to extract the relevant provisions of the Act, which have a bearing on the issues raised in these petitions. a) Section 35 of the Act provides the .....

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Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days. (1A) The Commissioner (Appeals) may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing: Provided that no such .....

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l against such order- (a) a decision or order passed by the Commissioner of Central Excise as an adjudicating authority; (b) an order passed by the Commissioner (Appeals) under section 35A; (c) an order passed by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) (hereafter in this Chapter referred to as the Board) or the Appellate Commissioner of Central Excise under section 35, as it stood immediately before the appointed day; (d) an .....

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om one warehouse to another, or during the course of processing of the goods in a warehouse or in storage, whether in a factory or in a warehouse; (b) a rebate of duty of excise on goods, exported to any country or territory outside India or on excisable materials used in the manufacture of goods which are exported to any country or territory outside India; (c) goods exported outside India (except to Nepal or Bhutan) without payment of duty; (d) credit of any duty allowed to be utilised towards .....

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on having a relation to the rate of duty of excise or to the value of goods for purposes of assessment is in issue or is one of the points in issue, the difference in duty involved or the duty involved; or (ii) the amount of fine or penalty determined by such order, does not exceed fifty thousand rupees. (1A) Every appeal against any order of the nature referred to in the first proviso to sub-section (1), which is pending immediately before the commencement of Section 47 of the Finance Act, 1984 .....

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venue Act, 1963 (54 of 1963) may by notification in the Official Gazette, constitute such Committees as may be necessary for the purposes of this Act. (ii) Every Committee constituted under clause (i) shall consist of two Chief Commissioners of Central Excise or two Commissioners of Central Excise, as the case may be." c) Section 35F deals with the deposit of duty demanded or duty and penalty levied at the time of filing an appeal and during the pendency of the appeal as it stood prior to t .....

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enalty levied: Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue. Provided further that where an application is filed before the Com .....

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mount payable under rule 6 of CENVAT Credit Rules, 2001 or CENVAT Credit Rules, 2002 or CENVAT Credit Rules, 2004; (v) interest payable under the provisions of this Act or the rules made thereunder." d) The amendment effected from 6/8/2014 to Section 35F is as follows: "SECTION 35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal. - The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal- (i) under sub-sectio .....

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ed seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against; (iii) against the decision or other referred to in clause (b) of subsection (1) of Section 35B, unless the appellant has deposited ten per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance or order appealed against: P .....

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able under rule 6 of the Cenvat Credit Rules, 2001 or the Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004." e) Subsequent to the amendment dated 6/8/2014, a Circular was issued by the Department i.e., Circular No.984/08/2014-CX, dated 16/9/2014, which inter alia deals with the procedure and manner of making pre-deposit and such other matters. On 14/10/2014, another Circular was issued by the respondent-department as certain parties had claimed exemption from the applicability of .....

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it the entire duty and penalty levied as the case may be, but only 7.5% or 10% thereof as the case may be. Secondly, prior to the amendment, the appellant could seek dispensation of deposit of the entire duty demanded or penalty levied as the case may be, but under the amended provision, such a discretion granted to the Commissioner (Appeals) or the Appellate Tribunal has been taken away. Thirdly, there is a cap on the predeposit amount, as 7.5% or 10% as the case may be, of the disputed amount .....

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hat the amendment would not apply to the stay applications and appeals pending before the Appellate Authority prior to the commencement of 2014 Act. The implication is that the proviso has distinguished between two categories of lis namely, a lis which has commenced from 6/8/2014 i.e., on the date, on which 2014 Act commenced and a lis which had commenced prior to that date. In respect of the lis which had commenced prior to 6/8/2014, the second proviso states that if prior to 6/8/2014, an appea .....

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er the first proviso to Section 35F as it stood prior to 6/8/2014. But in respect of those cases, where the lis though commenced prior to 6/8/2014 and where the appeals had not been filed prior to that date, the amendment does not expressly say anything in that regard and is silent. Thus, the proviso declares that the amended provision would not apply to stay applications or appeals pending before the appellate authority, prior to commencement of the amendment. The intention of insertion of the .....

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18. Before venturing to unravel this conundrum, it is necessary to take note of the concept of right of appeal, as the entire controversy in this case centers on that right, which according to petitioners, has been adversely affected on account of the impugned amendment. It is also necessary to distinguish between substantive law and procedural law and the decisions of the Hon'ble Supreme Court in that regard keeping in mind the same while considering the principles of statutory interpretat .....

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tter of procedure, but is a substantive right. The institution of the suit carries with it the implication that the right of appeal then in force is preserved to the parties thereto till the rest of the career of the suit. The right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the lis commences, although it may be actually exercised when the adverse judgment is pronounced. Such right is to be governed by the l .....

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tion. If there is no such amendment made to the right of appeal, then it shall continue to be available to a party to a lis. b) But in Ganga Bai v. Vijay Kumar [(1974) 2 SCC 393] (Ganga Bai), it has been held as under:- "There is a basic distinction between the right of suit and the right of appeal. There is an inherent right in every person to bring a suit of civil nature and unless the suit is barred by statute one may, at one's peril, bring a suit of one's choice. It is no answer .....

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o be made to a later judgment of the Hon'ble Supreme Court in James Joseph Vs. State of Kerala [(2010) 9 SCC 642], wherein the Hon'ble Supreme Court has formulated the following principles with reference to appeals. "(i) An appeal is a proceeding where an higher forum reconsiders the decision of a lower forum, on questions of fact and questions of law, with jurisdiction to confirm, reverse, modify the decision or remand the matter to the lower forum for fresh decision in terms of it .....

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Legislature's intention is to limit the jurisdiction in an appeal, it may indicate such limits in the provision providing for appeal. Alternatively, it may expressly or impliedly incorporate the provisions of Section 100 of the Code, into the provision for appeals. (v) Generally statutory provisions for appeals against original orders or decrees (that is, first appeals) will not have any limitations and therefore rehearing on both law and fact is contemplated; and statutory provisions for ap .....

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rovides a right of rehearing on law as well as facts. If the Legislature enacts a self-contained provision for second appeals, without any limitation upon the scope of the second appeal and excludes the possibility of reading the provision of Section 100 of the Code, into such provision, then, it will not be permissible to read the limitations of Section 100 of the Code into the special provision." d) In the instant case, it can be assumed that the right to file an appeal, which was availab .....

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This contention was countered by learned Addl. Solicitor General by contending that conditions stipulated for filing an appeal have no nexus to the right to file an appeal. That in the instant case, all that has been done is to mandatorily deposit 7.5% of duty demanded or penalty levied at the time of filing an appeal and the discretion vested with the Tribunal or appellate authority with regard to pre-deposit has been taken away. Re: Hoosein Kasam Dada: 19. Learned counsel for the petitioners p .....

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ting on the amendment made to Section 35F of the Act, it would be necessary to refer to that decision in detail. a) The aforesaid case arose under the provisions of the Central Provinces and Berar Sales Tax Act, 1947 ('1947 Act') and the amendment made to that Act in the year 1950. Sub-section (1) of Section 22 of the said Act was the bone of contention between the parties therein. Sub-section (1) of Section 22 was originally expressed in the following terms: "22. (1) Any dealer agg .....

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der of assessment, with or without penalty shall be admitted by the said authority unless such appeal is accompanied by a satisfactory proof of the payment of the tax, with penalty, if any, in respect of which the appeal has been preferred." From the language of the proviso as it stood prior to the amendment, an aggrieved assessee had to pay only such amount of tax as he might admit to be due from him, whereas under the aforesaid amended proviso before an appeal could be admitted, it had to .....

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ad no jurisdiction or power to reject it on the ground that the appeal had not been accompanied by any proof of payment of tax assessed against the appellant therein as required under the amended proviso. That the Board of Revenue and the High Court were in error in not directing the Commissioner to admit the appeal, was the contention of the appellant therein, before the Hon'ble Supreme Court. b) In order to understand that contention, it would be necessary to narrate the relevant facts of .....

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nd on 8/4/1950 made a best judgment assessment. Being aggrieved by the order of assessment, the assessee on 10/5/1950 perferred an appeal to the Sales Tax Commissioner, Madhya Pradesh, under sub-section (1) of Section 22 of the aforesaid 1947 Act. The appeal, not having been accompanied by any proof of tax in respect of which the appeal had been preferred, the authorities declined to admit the appeal. The assessee moved the Board of Revenue, Madhya Pradesh, by a revision application contending t .....

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he time the appeal was actually filed and that the law as it existed before the filing of the appeal could not be applied to the case. The assessee thereafter moved the High Court of Madhya Pradesh under Articles 226 and 227 of the Constitution of India. The High Court dismissed the writ petition. The assessee thereupon approached the Hon'ble Supreme Court, which considered the effect of the amendment made to Section 22 of the 1947 Act on the lis therein. The Hon'ble Court noted that the .....

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rving [(1905) AC 369 (PC)] (Colonial Sugar Refining Company), it held that a right of appeal is not merely a matter of procedure, it is a substantive right. The right of appeal from the decision of an inferior tribunal to a superior tribunal is vested in a party when the proceedings are first initiated in, and before a decision is given by, the inferior court. Such a vested right cannot be taken away, except by express enactment or necessary intendment. An intention to interfere with or to impai .....

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ght of appeal must also exist to support the continuation of that right. As the old law continued to exist for the purpose of supporting the pre-existing right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can be no question of the amended provision preventing the exercise of that right. e) According to the Hon'ble Supreme Court, the argument that the authority had no option or jurisdiction to admit the appeal unless it be accompanied by th .....

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been rejected on the ground that it was not accompanied by satisfactory proof of the payment of the assessed tax. As the appellant in that case did not admit any amount was due by it, it was held that under the section as it stood previously, it was entitled to file its appeal without depositing any sum of money. f) In Vithalbhai Naranbhai Patel vs. The Commissioner of Sales Tax, M.P., Nagpur (AIR 1967 SC 344) (Vithalbhai Naranbhai patel), the Hon'ble Supreme Court reiterated the decision i .....

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d. Therefore, such an amendment is always prospective in nature. But the amendment can affect the right of appeal of a party if it is made retrospective, by an express provision or by necessary implication. Thus, what follows is that there can be an amendment of a provision dealing with right of appeal at any point of time after a lis has commenced between the parties concerned, but the amended provision concerning the right of appeal must always be applied prospectively i.e., from the date the .....

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of its enforcement and applied to all lis, which commenced on or subsequent to that date. It saved all lis, which commenced prior to that date from its applicability. Hence, relief was granted to the appellants therein. The same view was reiterated in Vithalbhai Naranbhai Patel. But no relief was granted in the latter case as the records did not disclose as to when the lis had commenced and unless it was proved as to whether the lis had commenced prior to the amendment, the dictum in Hoosein Ka .....

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law from the law of procedure as it has been persistently contended by the learned counsel for petitioners that the right to file an appeal is a substantive right and that right cannot be altered with retrospective effect when it has already vested with the parties on the date the lis commenced. Also when conditions with regard to filing an appeal are altered, it would affect the right to file an appeal, which is a substantive right. The aforesaid distinction has been enunciated by the Hon' .....

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remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other." John Salmond, Jurisprudence 476 (Glanville L. Williams ed., 10th ed. 1947)'. Procedural law: The rules that prescribe the steps for having a right or duty judicially enforced, as opposed to the law that defines the specific rights or duties themselves.- Also termed adjective law." b) The law of procedure or adjective law may be defined as that branch of th .....

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o be attained. The latter regulates the conduct and relation of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated. What facts constitute a wrong is determined by the substantive law; what facts constitute proof of a wrong is a question of procedure. The first relates to the subject-matter of the litigation, the second relates to the process merely. c) So far as the administration of justice is concerned .....

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u Thakur), the Hon'ble Supreme Court in the context of substantive and procedural law has laid down the ambit and scope of an amending Act and its retrospective operation in the following terms: "(i) A statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective .....

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would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. (v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication." b) Referring to the aforesaid decision in Shyam Sunder vs. Ramkumar [(2001)8 SCC 24] (Shyam Sunder), it has been held that when a repeal of an enactme .....

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t, the above position in law would be different in matters which relate to procedural law, but so far as substantive rights of parties are concerned, they remain unaffected by the amendment in the enactment. Thus, while there is a presumption against retrospective operation of a statute dealing with substantive rights; where an amendment affects procedure, it is presumed to be retrospective, unless the amending Act provides otherwise. In that case, the Hon'ble Supreme Court was dealing with .....

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ction between substantive law and procedural law in the context of the operation of an amending statute or provision. If a piece of substantive law is amended, then such a law would have prospective operation unless made retrospective, either expressly or by necessary intendment. But when it comes to the procedural law, the position is contrary. In the case of an amendment of a procedural law, the amendment is always retrospective in operation, unless by a contra indication it is made only prosp .....

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visions dealing with the right to file an appeal i.e., Sections 35 and 35B and the right to file a revision under Section 35EE are, though dealing with the right to seeking redressal of an impugned decision or order from the superior authority or forum, is in fact, a piece of substantive law. Thus, the right to file an appeal and the forum prescribed to lay an appeal are substantive rights given to an aggrieved person. 24. However, the right to file an appeal must be distinguished from the proce .....

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cumscribed by certain conditions to be complied with by an aggrieved party at the time of filing an appeal, it would be in the realm of procedural law. Thus, while Sections 35 and 35B of the Act are substantive law providing the forum and the circumstances under which an appeal could be filed by an aggrieved party, the conditions to be followed for the purpose of exercising the substantive right as prescribed in Section 35F is a piece of procedural law. Section 35F, which is the centre of contro .....

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pplicable in the instant case. Further, a litigant has a vested right in substantive law, but no such right exists in procedural law. This aspect becomes clearer on consideration of the judicial precedents on pre-deposit on preferring appeals, wherein the Hon'ble Supreme Court has dealt with the condition of pre-deposit to be made by the appellant at the time of preferring an appeal. Judicial precedents on pre-deposit at the time of preferring appeals: 26. The relevant citations on the pre-d .....

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o the appellate Judge that the deposit of the amount would cause him undue hardship, arising out of his own omission or default. While considering the said provision, the Hon'ble Supreme Court held that the requirement about the deposit of the amount claimed as a condition precedent to the entertainment of the appeal which seeks to challenge the imposition or the quantum of tax, did not have the effect of nullifying the right of appeal, especially keeping in view the fact that discretion was .....

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was held that the right of appeal being creature of a statute without a statutory provision creating such a right, an aggrieved person is not entitled to file an appeal. It was also observed that the legislature while granting the right of appeal could impose conditions for the exercise of such right. For example, it was permissible to prescribe a condition in criminal cases that, unless a convicted person is released on bail, he must surrender to custody, before his appeal against the sentence .....

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is open to the Legislature to impose an accompanying liability upon a party upon whom a legal right is conferred or to prescribe conditions for the exercise of the right. Any requirement for the discharge of that liability or the fulfillment of that condition in case the party concerned seeks to avail of the said right is a valid piece of legislation. b) In Seth Nand Lal and another vs. State of Haryana and others [1980 (supp) SCC 574], a Constitution Bench of the Supreme Court held that the ri .....

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e in respect of the disputed area "i.e., the area or part thereof which is declared surplus by the prescribed authority", (emphasis supplied) after leaving the permissible area to the appellant. In the above circumstances, it was also found that even in the absence of a discretion conferred on the Appellate Authority to waive or reduce the amount of pre-deposit, it was considered to be valid. c) In Vijay Prakash D.Mehta and another vs. Collector of Customs (Preventive), Bombay [(1988) .....

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ense with such deposit unconditionally or subject to such conditions, in case of undue hardship as was the proviso prior to the amendment in the instant case. The Hon'ble Supreme Court held that the observations made in Hossen Kasam Dada and Vittal Bhai Narang Bhai Patel, had no application as the right to file an appeal was granted with a condition in Section 129-E of the Customs Act, 1962 and the Parliament in its wisdom had imposed the condition. The Hon'ble Supreme Court also held th .....

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f a pre-deposit was to act in terrorem to make the people comply with the provisions of law. On the facts of that case, the Hon'ble Supreme Court held that the rejection of the appeal for noncompliance of Section 129-E of the Customs Act, 1962 was proper and justified. d) In Shyam Kishore and others vs. Municipal Corporation of Delhi and another [(1993) 1 SCC 22], judicial dicta on right of appeal was considered in extenso. Reference was made to Ganga Bai, wherein it was observed that there .....

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f the appeal altogether, where the tax was not paid had been upheld. In fact, in the decision of the Bombay High Court, the validity of Section 217, as amended by Bombay Municipal Corporation Act, 1988, wherein the right to appeal was similarly restricted, that too, retrospectively, was upheld. In Chatter Singh Baid, Section 183(3-A) of the Calcutta Municipal Act, 1951 was considered. It was held that merely because that section impairs the right of appeal by imposing an onerous condition of dep .....

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r Section 39(5) of the Haryana General Sales Tax Act, 1953. The said section along with the proviso dealt with payment of the admitted amount and stay of recovery of the balance amount at the time of filing of appeal. It was held that only when the conditions specified under Section 39(5) were complied with, the appeal was born for being disposed of on merits after hearing both sides. f) The expression "shall not entertain an appeal" as inserted Section 35F of the Act is of significanc .....

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it is filed or it is 'entertained' when it is admitted and the date is fixed for hearing or is it finally 'entertained' when it is heard and disposed of? After distinguishing the word "entertain" from the words "file" or "receive", it was held that the correct view of the word "entertain", was "admit to consideration." This would be when the case is taken up by the court for the first time also or the first occasion on which the .....

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it meant that the appeal shall not be admitted for consideration, unless there was satisfactory proof available of the making of the deposit of admitted tax. Referring to Section 39(5) of the aforesaid Act, it was held that it regulated the exercise of right of appeal conferred upon an assessee, the object being to keep in balance the right of the aggrieved person and the right of the State to speedy recovery of tax. Approving the opinion of the Full Bench of the Punjab and Haryana Court in Emer .....

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herent to litigation and such a right neither exists nor can be assumed, unless expressly given by the statute. g) In Narayan Chandra Ghosh v. UCO Bank and Others [(2011) 4 SCC 548] the Hon'ble Supreme Court, while dealing with Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which requires making of a deposit in terms of second proviso of that Section, before entertaining an appeal against the order passed by the Debts R .....

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nt of Section 35F in light of judgments of the Hon'ble Supreme Court subsequent to Hoosein Kasam Dada, it is held that Section 35F of the Act is not in the realm of right to file an appeal and thus, not a piece of substantive law. It is a condition to be complied with by an aggrieved party while instituting an appeal, which is in the realm of procedure. As held by the Hon'ble Supreme Court in subsequent decisions, a party does not have a vested right in procedural matters. 27. Thus, what .....

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d 7.5% of duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute….". It is held that the requirement of deposit of 7.5% as stated supra, is not an onerous condition precedent for the filing of an appeal by an aggrieved party. This is particularly so, when there is a cap on the pre-deposit amount, where 7.5% of the disputed amount exceeds ₹ 10.00 crore. In which event, only ₹ 10.00 crore has to be deposited as a pre-deposi .....

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onsidered is as to whether amended Section 35F of the Act is prospective and thus, the rule against retrospectivity applies. While answering that question the applicability of the ratio of Hoosein Kasam Dada and other decisions of the Hon'ble Supreme Court would have to be considered. In this regard, the relevant principles of statutory interpretation would have to be adverted to at this stage. Relevant principles of Statutory Interpretation: a) It is noted that in the instant case, Section .....

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rtain relevant principles of statutory interpretation by placing reliance on "Principles of Statutory Interpretation" by Justice G.P.Singh - Ninth Edition (Reprint) on which, the Hon'ble Supreme Court has relied upon in the case of Zile Singh Vs. State of Haryana [(2004)8 SCC 1] (Zile Singh). b) In the instant case, Section 35-F as it stood on the statutory book has been repealed by 2014 Act, the repeal is by way of substitution of the earlier provision. Therefore, what has to be c .....

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of a provision may be by express words in a later enactment made by way of an amendment or, may be implied on considerations of inconsistency or irreconcilability of an earlier provision with those of a later provision. Normally, there is no real distinction between repeal and amendment. The legislative practice in India is that when a provision is omitted from the statute book, it is a case of repeal. But there can be a repeal by way of an amendment of the existing provision and the said provi .....

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ent notification, 'substituting' the list of places specified in the original notification. The Hon'ble Court in its judgment at paragraph 15, considered the word substitute and observed thus : "15. The word "substitute" ordinarily would mean "to put (one) in place of another", or "to replace". In Black's Law Dictionary, 5th Edn., at p.1281, the word "substitute" has been defined to mean "to put in the place of another person or t .....

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Supreme Court in Zile Singh while dealing with the amendment by way of substitution in paragraph 25 of the judgment: "….Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p.565)………In West U.P.Sugar Mills Assn. case a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to ke .....

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such a way as to incorporate itself, or a part of itself, into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all." f) 'Commencement', used with reference to an Act, means the day on which an Act comes into for .....

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ion made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the Legislature to affect existing rights, it is deemed to be prospective only 'nova constitutio futuris formam imponere debet non praeteritis ' - a new law ought to regulate what is to follow not the past. (See :Prin .....

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according to Craies (Statute Law, Seventh Edition), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the Courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the Courts .....

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not amount to accrued right (p.392) (emphasis supplied) g) In contrast to statutes dealing with substantive rights, statutes dealing with merely matters of procedure are presumed to be retrospective unless such a construction is textually impermissible, Gardner vs. Lucas [(1878) 3 AC 582 (HL)]. According to Lord Denning: "The rule that an Act of Parliament is not to be given retrospective effect applies only to statutes which affect vested rights. It does not apply to statues which only alt .....

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ribed for the time being by or for the Court in which the case is pending, and if, by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode". h) Thus, in deciding the question of applicability of a particular statute to past events, the language used is a crucial factor to be taken into account; but it cannot be stated as an inflexible rule. The real issue in each case is as to the dominant intention of the Legislature to .....

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r the petitioners is that the said amendment does not have a retrospective operation and therefore, cannot be applied to a lis, which has commenced prior to the date on which the amendment came into effect i.e., 6/8/2014. Interpretation of Second proviso of amended Section 35F: 29. While considering the aforesaid submission, it is now relevant to take note of the significance of second proviso to amended Section 35F. That proviso categorically states that Section 35F would not apply to stay appl .....

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rpretation to be given to the second proviso of amended Section 35F would have to be considered in light of the main proviso of Section 35F of the Act. But prior to that, it would be necessary to understand the scope of a proviso vis- àvis the main provision in a section in the context of the decisions of the Hon'ble Supreme Court and in light of the principles of interpretation of proviso. a) The normal function of a proviso is to except something out of the enactment or to qualify s .....

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n enactment. Further, a proviso cannot be construed as nullifying the enactment or as taking away completely a right conferred by the enactment. b) In this regard, learned Author, Justice G.P.Singh has, in "Principles of Statutory Interpretation", enunciated certain rules collated from judicial precedents. Firstly, a proviso is not to be construed as excluding or adding something by implication i.e., when on a fair construction, the principal provision is clear, a proviso cannot expand .....

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ion or qualification. Sometimes, a proviso is used as a guide to construction of the main section. Thirdly, when there are two possible construction of words to be found in the section, the proviso could be looked into to interpret the main section. However, when the main provision is clear, it cannot be watered down by the proviso. Thus, where the main section is not clear, the proviso can be looked into to ascertain the meaning and scope of the main provision. c) The proviso should not be so c .....

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object of a proviso sometimes is only by way of abundant caution, particularly when the operative words of the enactment are abundantly clear. In other words, the purpose of a proviso in such a case is to remove any doubt. There are also instances where a proviso is in the nature of an independent enactment and not merely, an exception or qualifying what has been stated before. In other words, if the substantive enactment is worded in the form of a proviso, it would be an independent legislativ .....

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hat a proper function of a proviso is to except or qualify something enacted in the substantive clause, which but for the proviso, would be within that clause. (b) In Kaviraj Pandit Durga Dutt Sharma v. Navaratna Pharmaceutical Laboratories [AIR 1965 SC 980], while considering proviso to Section 6 of Trade Marks Act, 1940, it was observed that it would not be a reasonable construction for any statute, if a proviso which in terms purports to create an exception and seeks to confer certain special .....

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e "Craies" on Statute Law - 6th Edition - P.217]. In this case, the Court was considering Section 5(2) (a) (ii) of Bengal Finance Sales Tax Act, 1941 and Rule 27-A of Bengal Sales Tax Rules. (d) In Dattatraya Govind Mahajan and Others v. The State of Maharashtra and another [AIR 1977 SC 915], a Constitution Bench of the Apex Court, while considering the amendment made to Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961, in the context of Article 31B of the Constitution an .....

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thing enacted therein which, but for the proviso, would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment, nor can it be used to nullify or set at naught the real object of the main enactment. Sometimes, a proviso may exceptionally have the effect of a substantive enactment. After referring to several legal treatises and judgments, the Apex Court held in the above judgment as under:- "43. We need not multiply authorities after au .....

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ent and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. (f) The approach to the construction and interpretation of a proviso are enunciated in the following cases:- (a) In M.Pentiah & others v. Muddala Veeramallappa & others (AIR 1961 SC 1107), it was observed that while interpreting a section or a proviso, .....

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C 1029) the Apex Court observed that the statute is not to be interpreted merely from the lexicographer's angle. The Court must give effect to the will and inbuilt policy of the Legislature as discernible from the object and scheme of the enactment and the language employed therein. The words in a statute often take their meaning in the context of a statute as a whole. They are, therefore, not to be construed in isolation. 30. In light of the aforesaid discussion, what emerges is that the ri .....

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s. 15 and 17 above. The object of amending Section 35F of the Act is to withdraw the discretion granted to the appellate authorities in the matter of making pre-deposit at the time of filing the appeal by an aggrieved party. As submitted by Additional Solicitor General, there has been innumerable litigations under the first proviso to Section 35F as it stood prior to amendment. Any order passed by the appellate authority regarding the hardship pleaded by the appellant with regard to predeposit, .....

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t of revenue. It is in order to overcome the aforesaid mischief, that Parliament thought it fit to amend Section 35F. It is in the aforesaid background that the object and intendment of amending Section 35F by the Parliament has been considered. 31. While analyzing Section 35F, it becomes apparent that the said provision has a retrospective operation, particularly having regard to the second proviso. In case the second proviso was absent, then possibly the contention of petitioners' counsel .....

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rior to that date. Then, in that event, second proviso would become otiose and redundant. No provision of an enactment can be interpreted so as to make any part of it redundant or useless. The real intention of the Parliament is, to insert the second proviso as a saving clause, thereby applying the provision prior to amendment, only in respect of those appeals pending before the appellate authority as on 6/8/2014. In all other cases, the main amended provision would apply. The reason for such a .....

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uty or penalty had to be considered and disposed of. Therefore, Parliament was vigilant to ensure that the appellate authority or tribunal would continue to have jurisdiction to exercise discretion in respect of the applications filed under the proviso to Section 35F as it stood prior to amendment. Thus, if prior to 6/8/2014, an appeal had been preferred by an aggrieved party and the application and appeal were pending before the appellate authority, then the appellate authority could exercise i .....

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he commencement of the amendment must be certain and from a particular date in respect of all lis. In order to ensure that object and in order to have a uniformity in the matter, Parliament has enacted the second proviso to the amended Section 35F. This would mean that in all cases not covered under the second proviso, the main amended Section 35F would apply, irrespective as to when the lis has commenced. Thus, the date on which the lis has commenced in each case has no bearing on the amendment .....

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ctive operation, having regard to its language and object, it is necessary to take into consideration the subsequent dicta of the Hon'ble Supreme Court in that regard in the instant case. When the same is applied to the instant case, it is held that the amended Section 35F of the Act has a retrospective operation having regard to the significance of the second proviso. 33. At this stage, the decisions of the Hon'ble Supreme Court and other High Courts relied upon by petitioners' coun .....

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Hoosein Kasam Dada cannot be of any assistance to the petitioners. The same cannot be applied to the facts of the present case, having regard to second proviso of amended Section 35F of the Act. In Hoosein Kasam Dada, a proviso such as the second proviso under consideration was conspicuous by its absence. The second proviso of Section 35F in the instant case clearly distinguishes the provision amended in that case. b) In Hoosein Kasam Dada, the Hon'ble Supreme Court placed reliance on a dec .....

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rom a Supreme Court of Australia to the Privy Council given by the Order in Council of 1860 was taken away and the only appeal therefrom was directed to lie to the High Court of Australia. In that case, it was in fact held, to deprive a suitor in a pending action of an appeal to a superior tribunal, which belonged to him as of right, is a very different thing, from regulating procedure. It was held that there was no difference between abolishing an appeal altogether and transferring the appeal t .....

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instituted on 22/4/1949 it was held that the right of appeal vested in the parties thereto on that date and was to be governed by the law as it prevailed on that date. That is, on that date, the parties acquired the right, if unsuccessful, to go on in an appeal from the special Court to the High Court and from the High Court to the Federal Court, provided the conditions thereof were satisfied in that case. This was so, unless that right had been taken away only by a subsequent enactment, if it s .....

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ny and Garikapati Veerayya are not applicable to these cases. On the other hand, the decisions of the Hon'ble Supreme Court with regard to pre-deposit of disputed amounts to be made by an aggrieved party before the appellate authority are squarely applicable to these cases. d) Thus, the judgment of the Hon'ble Supreme Court in Hoosein Kasam Dada does not apply to the present case having regard to the provisions considered in both these cases being distinct, different and not being in par .....

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procedural law, which is under consideration in the instant case. Infact, in State of Bombay v. Supreme General Films Exchange Ltd., (Supra) and in Ramesh Singh v. Cintadevi (Supra), it has been categorically held by the Hon'ble Supreme Court that where an onerous condition is imposed in the matter of filing of appeals, it is not retrospective, unless it says so expressly or by necessary intendment. This is because the right to file an appeal is crystallized on the institution of the applica .....

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the reasonable interpretation can be given to the section as a whole. In M/s. National Traders v. State of Karnataka [2008 (64) KLJ 225 (SC)], it was held that the requirement of the assessee to make prior payment of one half of tax or other amount disputed and to produce proof of having made payment while filing appeal was a condition, which was restrictive and impaired the right of filing an appeal and in those circumstances, it was held to be prospective and not retrospective in operation. T .....

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have followed the reasoning in Hoosein Kasam Dada, which has been distinguished herein and held to be not applicable to the present cases. Those judgments were rendered in the cases of Deputy Commercial Tax Officer, Tirupur v. Cameo Experts [(2006)147 STC 218(Mad)], and Fifth Avenue Sourcing (P) Ltd. v. Commissioner of Service Tax Chennai, (W.P.No.12546/2015 disposed on 12/6/2015); Muthoot Finance Limited v. Union of India and M/s. K.Rama Mohana Rao and Co. v. Union of India (Interim Order) resp .....

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mandatory requirement of pre-deposit for entertaining an appeal before the Appellate Authority i.e., before the Commissioner (Appeals) or the Appellate Tribunal as the case may be, is a piece of procedural legislation and does not fall within the realm of substantive law. Thus, Sections 35 and 35B do not confer an absolute right to file an appeal, but are subscribed or controlled by Section 35F of the Act. Hence, in the instant case, the right to file an appeal under Section 35 or 35B as the ca .....

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