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TMI Blog2016 (5) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment that came into effect on 6.8.2014, the writ petition is filed by yet another assessee seeking declaration that Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 would apply only to the show cause proceedings initiated on or after 6.8.2014. 2. We have heard Mr.C.Natarajan, learned Senior Counsel appearing for the petitioner in the writ petition, Mr.V.Sundareswaran, learned Senior Panel Counsel appearing for the appellant in the writ appeal, Mr.Santhanaraman, learned Senior Panel Counsel appearing for the Revenue in the writ petition and Mr.Joseph Prabhakar, learned counsel appearing for the respondent/assessee in the writ appeal. 3. Though the writ appeal and the writ petition arise out of independent proceedings, against different assessees, they were clubbed together in view of the fact that the issue raised in both these proceedings revolve around the question as to whether the amendment to Section 35F could be prospective or retrospective in nature. 4. A few facts out of which both these proceedings arise, may be necessary, before we proceed to deal with the legal issues raised. W.A.No.1424 of 2015 5. The Commissioner of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20.4.2010, alleging that there was a huge variation between the income reported in the Balance Sheet and the Receipt shown in the bank account statements. The show cause notice called upon the petitioner to show cause as to why the entire difference between the two amounts, should not be brought to tax. 11. The writ petitioner filed a detailed reply to the show cause notice on 6.9.2010 and also made written submissions on 25.11.2011. The petitioner claimed in the reply that only an amount of Rs. 77,49,124/- was payable as Service Tax for the period in question and that the same had already been paid. 12. However, the objections of the petitioner were overruled and an Order-in-Original dated 11.8.2014 was passed, confirming the demand of Service Tax to the tune of Rs. 33,59,82,194/-. An equivalent amount was also levied as penalty, apart from a direction to pay interest under Section 75 of the Finance Act, 1994. 13. The said order was followed by a corrigendum dated 20.8.2014, reducing the penalty to 25%, if the Service Tax and interest was paid along with the reduced penalty within 30 days. 14. Challenging the Original order dated 11.8.2014 and the Corrigendum dated 20.8.2014, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Section 35F of the Act, as it stood before the amendment and as it now stands after the amendment by Finance Act, 25 of 2014 with effect from 6.8.2014 are presented in a tabular column for easy appreciation. Before amendment After amendment (with effect from 6.8.2014) Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty 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 impost so as to safeguard the interests of revenue: PROVIDED FURTHER that where an application is filed before the Commissioner (Appeals) for dispensing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd more or to accept less. This is the first change brought forth by the amendment. (ii) The second change brought forth by the amendment is that the distinction between the goods which are under the control of the Central Excise authorities and those which are not under the control of the Excise authorities has been removed. Prior to the amendment, the rule that the entire duty demanded should be deposited during the pendency of the appeal, was not applicable to cases where the goods were under the control of the Central Excise authorities. But now irrespective of whether the goods are under the control of the Central Excise authorities or not, the pre-deposit of 7.5% is made mandatory. 21. However, at the cost of repetition, it is necessary to point out that the amended Section 35F is not under challenge. The actual effect of the amendment is that in respect of persons whose goods are under the control of the Central Excise authorities, the amendment has brought forth an onerous condition. Before the amendment they were entitled to file an apeal without making any deposit. Now it is not so. Yet none of those persons have come up with a challenge to the amendment as such. 22. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the amended provisions of Section 35F of the Central Excise Act, 1944 and Section 129E of the Customs Act, 1962. This Circular was followed by another Circular No.993/17/2014-CX dated 5.1.2015. In the second Circular, it is stated in para 4 that an Act of Parliament comes into effect on the date it received the assent of the President of India and that therefore the amended provision regarding the filing of appeals along with stipulated percentage of pre-deposit, shall apply to all appeals filed on or after 6.8.2014. The second Circular became necessary in view of a confusion created in para 1.2 of the first Circular to the effect that the amended provisions contain a specific saving clause to the effect that all pending appeals and stay applications will be governed by the erstwhile proceedings. The further contention of Mr.Joseph Prabhakar learned counsel for the respondent/assessee in the writ appeal is that by refusing to make a pre-deposit of 7.5%, the assessees do not gain anything. If an assessee is found, after exhausting all channels of remedies, to be liable to pay any amount, the assessee is obliged to pay it along with an exorbitant interest. Therefore, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sithai Ammal [(1925) ILR 48 Mad. 620], where this Court followed the distinction that was made out in Colonial Sugar Refining Company Ltd. between a case of procedure and a real right to invoke the aid of a higher Tribunal. The Supreme Court also took note of a decision of the Special Bench of the Calcutta High Court in Sadar Ali v. Dalimuddin [(1929) ILR 56 Cal. 512], wherein Rankin, CJ, on behalf of the Special Bench, opined that the right of appeal is not a matter of procedure and that the right to enter the superior Court should be deemed to arise to a litigant before any decision has been given by the inferior Court. 29. The decision of the Calcutta High Court was also approved by the Supreme Court in Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh [ AIR 1953 SC 221]. It was held therein that the right of appeal was a matter of substantive right and not merely a matter of procedure and this right became vested in a party when the proceedings were initiated. Such a right was held by the Supreme Court in Hoosein Kasam Dada to be a right that could not be taken away except by express enactment or necessary intendment. If the amendment had the effect of whittli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent enactment, if it so provides expressly or by necessary intendment and not otherwise." 32. As a matter of fact, the decision in Hoosein Kasam Dada was followed in Collector of Customs and Excise v. A.S.Bava [AIR 1968 SC 13]. In that case, an order of adjudication was passed on 31.3.1963. The assessee filed appeals on 04.7.1963. But, in the meantime, a notification dated 04.5.1963 was issued in exercise of the powers conferred under Section 12 of the Central Excise and Salt Act, 1944, declaring the provisions of Section 129 of the Customs Act, 1962, to be applicable in regard to like matters. The High Court held the notification on which reliance was placed by the revenue, to be in excess of the powers conferred. When the matter was taken to the Supreme Court, the Supreme Court held that Section 35 of the Excise Act gave a right of appeal, but Section 129 whittled down the substantive right of appeal and hence, it cannot be regarded as "procedure relating to appeals" within Section 12 of the Excise Act. To come to the said conclusion, the Court relied upon the following passage from the decision in Hoosein Kasam Dada: "There can be no doubt that the new requirement 'to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem, for filing statutory appeals. But, after the amendment, a mandatory pre-deposit of 25% of the difference between the tax assessed and admitted became mandatory. Therefore, two questions were taken up for consideration by the Division Bench. They were (i) whether the right of an assessee to file an appeal is a substantive right? and (ii) whether such a right get crystalised at the time of initiation of assessment proceedings? 36. After taking note of the decision of the Supreme Court in Hoosein Kasam Dada as well as the decision of the Constitution Bench in Garikapatti Veeraya, this Court held in paragraph 25 as follows: "In view of the foregoing discussion, we hold that the crucial date on which the right of the assessees to prefer an appeal under Section 31 or Section 36 of the Act is the date on which the returns are filed under the Act. In all these appeals, returns were filed long prior to the date when the provisions of Section 31 of the Act was amended by virtue of Act 14 of 1999. Further more, it is not disputed by the parties that the aforesaid amendments to the Act have not been given retrospective effect as and from an anterior date and those amendments are prospe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the Court upheld the constitutional validity of the Finance Act 2 of 2014. 40. Thereafter, the Allahabad High Court took up for consideration the next question which is exactly identical to the question that is raised in the present case. After taking note of the decision of the Privy Council in Colonial Sugar Refining Co. Ltd., the decision of the Supreme Court in Hoosein Kasam Dada and the decisions of the Supreme Court in Jose Da Costa v. Bascora Sadasiva Sinai Narcornim [(1976) 2 SCC 917] and Ramesh Singh v. Cinta Devi [AIR 1996 SC 1560], the Allahabad High Court held in paragraphs 19 and 20 as follows: "19. Parliament while substituting the provisions of Section 35F of the Central Excise Act, 1944 by Finance Act (No.2) of 2014, has laid down that the Tribunal or the Commissioner (Appeals) "shall not entertain any appeal" unless the appellant has deposited the duty or, as the case may be, a penalty to the stipulated extent. These words in Section 35F of the Act would indicate that on and after the enforcement of the provision of Section 35F of the Act, as amended, an appellant has to deposit the duty and penalty as stipulated and unless the appellant were to do so, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 01.10.2011. Following the long line of decisions from Hoosein Kasam Dada up to the decision of the Division Bench of this Court in Cameo Exports, the Delhi High Court held that since the returns were filed much prior to the introduction of the third proviso to Section 74(1), the proviso would have no applicability. Incidentally, the proviso inserted by the amendment, made the pre-deposit, a condition precedent for considering an objection. Such a condition was not in force earlier. 43. But, a Division Bench of the Gujarat High Court took a different view in Premier Polyspin Pvt. Ltd. v. Union of India [2015 TIOL 1265 HC]. In that case, the Gujarat High Court was concerned with the very same amendment to Section 35F of the Central Excise Act with which we are concerned even in this case. Though the Gujarat High Court did not go into greater details, the Court held in paragraph 4 as follows: "There are two aspects of the matter. First, in our opinion, during the pendency of proceedings or after the order passed by the adjudicating authority, if the law is amended and a condition of pre-deposit is also amended in Section 35F of the Central Excise Act, the appellant wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the High Court on 04.9.1954. The Court fee on the appeal was paid under the Court Fees (Bombay Amendment) Act, 1954 that had come into force on 01.4.1954. The appellant claimed a refund of excess Court fee on the ground that the suit was instituted on 16.4.1953 and hence, the Court fee as prevailing at that time alone was payable even on the appeal, despite the fact that the decree itself was passed only on 22.7.1954, after the amendment came into force. The Supreme Court upheld the said contention by holding 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" and that "it impairs or imperils a substantive right and hence, an enactment which does so is not retrospective unless it says so expressly or by necessary intendment". 47. The aforesaid decision in Supreme General Films was followed by the Supreme Court in Ramesh Singh v. Cinta Devi [1996 (3) SCC 142]. In Ramesh Singh, an application for compensation was filed on 23.12.1988 in respect of an accident that took place on 27.5.1988. But, by then, the Motor Vehicles Act, 1988 came into force repealing 1939 Act. The claim for com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rikapatti Veeraya were of the years 1953 and 1957 respectively, they were not taken note of by the Constitution Bench in Hardeodas Jagannath, decided in 1970. 50. Interestingly, the conflict between the Constitution Bench decisions and Hoosein Kasam Dada and Garikapatti Veeraya on the one hand and the Constitution Bench in Hardeodas Jagannath was brought to the notice of a Full Bench of the Punjab and Haryana High Court in Indo Swiss Times Ltd. v. Umrao [1981 PLR 335]. The Full Bench of the Punjab High Court held that in the event of two directly conflicting judgments of the Supreme Court and of equal authority, the judgment which appears to lay down the law more elaborately and accurately is required to be followed. Therefore, the Full Bench followed the decisions in Hoosein Kasam Dada and Garikapatti Veeraya. 51. As a consequence, when a situation similar to the one on hand arose under the Haryana VAT Act, 2003, before the Punjab and Haryana High Court, the Court held that the right of appeal is a vested right and that it existed on the date of commencement of the lis. Therefore, the Court held in Khazan Chand Nathi Ram v. State of Haryana [(2004) 136 STC 261] that the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75], Vijay Prakash Mehta [1988 (4) SCC 402] and A.S.Bava [AIR 1968 SC 13] had occasion to consider only the vires of a milder provision which permitted the Appellate Authority to waive or relax the condition of deposit. As explained in Seth Nand Lal vs. State of Haryana, these decisions settle the principle "that the right of appeal is a creature of a statute and there is no reason why the legislature while granting the right cannot impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory" 56. Let us now conceive of different types of pre-deposit conditions that are capable of being imposed for entertaining a statutory appeal. In a graded scale they will be as follows: (i) A condition which makes it mandatory for the assessee to deposit the whole of the disputed tax or penalty or both can be said to be the most onerous; (ii) A condition that makes it mandatory for the assessee to deposit the entire amount of disputed tax, penalty or both with a discretion to the Appellate Authority to grant waiver of the whole or part of the amount can be said to be less one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable in the statute for the exercise of a right of appeal, is merely replaced by another condition, the same cannot be said to be retrospective, unless it is definitely shown that the amended condition is more onerous than the unamended condition. When the unamended condition gave only a chance or hope for an assessee to get a total waiver at the discretion of the Appellate Authority, the same cannot be equated to a vested right. A mere chance of convincing the Appellate Authority to exercise the discretion for the grant of a total waiver is no vested right. The amendment, in our considered view, did not take away a right vested, but merely made a chance divested. What has now gone, is not the right , but the chance or hope. Therefore, the first contention of the learned Senior counsel for the petitioner is liable to be rejected. 60. The second contention of the learned Senior Counsel for the writ petitioner revolves around the legal effect of a proviso. We have already extracted the amended Section 35-F in a tabular column given in para 19 above. 61. There are two provisos to the amended Section 35-F. The first proviso states that the amount required to be deposited under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In S.Sundaram Pillai vs. R.Pattabiraman [AIR 1985 SC 582], the Supreme Court reiterated that though normally a proviso is an exception to the main part of the Section, it could, in exceptional cases, be a substantive provision by itself. Quoting from its earlier decision in Dwarka Prasad vs. Dwarka Das Saraf 1976 (1) SCR 277, the Court pointed out that a proviso should be limited in its operation to the subject matter of the enacting clause and that to expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction. In para 43 the Court summarized the four different purposes that may be served by a proviso, as follows:- "43. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telungana and Kerala have taken a view that the amendment is prospective in nature and that it would apply only to proceedings originally initiated on or after 6.8.2014. 72. The decision of the High Court of Andhra Pradesh relied upon by the learned Senior Counsel in K.Rama Mohanarao is only a prima facie view. We have already analysed this decision while dealing with the first contention. Similarly, the decision of the Kerala High Court in Muthoot Finance Limited has also been analysed in great detail by us. With great respect to these Courts, we have not agreed with the view taken by them, for the reasons that we have indicated in great detail while dealing with the first contention. Therefore, the third contention is also rejected. 73. The contention of Mr.Joseph Prabhakar, learned counsel for the assessee/respondent in the writ appeal, based upon Sub-Sections (3) and (3-A) of Section 85 of the Finance Act, 1994 and the interpretation given to the same by this Court in Winwind Power Energy Private Limited, does not appeal to us. The curtailment of a period of limitation, by way of amendment, takes away a vested right of appeal. An amendment that takes away the right of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are not thrown at the mercy of the Appellate Authorities for considering the question of waiver of pre-deposit condition. The law now fixes a standard rate, applicable to all persons uniformly, without subjecting the assessees to the vagaries of weather prevailing in the offices of the Appellate Authorities/Tribunals. 79. We have actually come across several cases where the Tribunal has granted waiver of different percentages in cases of identical nature, without any rhyme or reason. In fact this Court is burdened with appeals both under Section 35-G of the Central Excise Act and Section 130 of the Customs Act, against the orders of the Tribunal granting or refusing to grant waiver. Therefore, the amendment to the provision has actually taken away the possibility of an arbitrary exercise of power and along with it, the threat of multiplicity of proceedings even at the stage of waiver applications. 80. Therefore, we are of the considered view that the writ petition W.P.No.13431 of 2015 seeking a declaration that the amended Section 35-F of the Central Excise Act 1944, is applicable only to show cause proceedings initiated on or after 6.8.2014 is liable to be dismissed. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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