TMI Blog2016 (5) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... in the grant. Therefore, it is well settled that the right of appeal is a creature of statute and the legislature is well within its competence to impose conditions for the exercise of such a right subject only to the restriction that the conditions so imposed are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory. Therefore, if one condition that was already available 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, 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 petitioner is liable to be rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot correct. - Decided in favour of appellant - W.P.No.13431 of 2015 and W.A.No.1424 of 2015 - - - Dated:- 18-4-2016 - MR.JUSTICE V.RAMASUBRAMANIAN AND MR.JUSTICE T.MATHIVANAN For the Petitioner : Mr. C. Natarajan Sr.Counsel for Mr.V.Swaroop , Mr. V. Sundareswaran, SPC For the Respondent Mr. M. Santharaman, SPC, Mr. Joseph Prabhakar COMMON JUDGMENT V.RAMASUBRAMANIAN,J While the writ appeal filed by the Commissioner of Service Tax, arises out of an order passed by a learned Judge of this Court, directing the respondent in the writ appeal, who was the writ petitioner, to file a statutory appeal before the CESTAT with a further direction to CESTAT not to insist upon a pre-deposit of 7.5% of the tax amount, as per the 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 Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th an application for stay without making a pre-deposit of 7.5% of the tax demanded. Aggrieved by the interpretation given by the learned Judge to the date of coming into force of the amendment, the Commissioner of Service Tax has come up with the above appeal. W.P.No.13431 of 2015 9. The petitioner in this writ petition is in the business of real estate agency and consultancy. The petitioner has registered itself with the Department of Service Tax, under the category Real Estate Agency Services , in January 2007. 10. In the year 2008, Survey, Intelligence and Research Branch of the Service Tax Commissionerate, Chennai conducted an investigation against the petitioner. After two years of the investigation, the petitioner was issued with a show cause notice dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be in a position to convince CESTAT to grant a total waiver of the pre-deposit condition. But if the amended provision is applicable to his case, he will necessarily have to shell out 7.5% demand without any leverage. Therefore, rather than challenging the Order-in- Original before the CESTAT under Section 35F, the writ petitioner has chosen to seek a declaration. 18. Before proceeding further we must also record one more fact namely that the writ petitioner has not challenged the vires of the amendment. The writ petitioner is seeking only a declaration that the amendment would apply only to show cause proceedings initiated after 6.8.2014 and not to proceedings which were initiated, pending or disposed of at the Original stage, before the cut-off date namely 6.8.2014. STATUTORY PROVISIONS 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave come to be made. These changes are: (i) Prior to the amendment, the rule was that the person desirous of filing an appeal should deposit the duty demanded, during the pendency of the appeal. But the Commissioner (Appeals) and the Appellate Tribunal were granted a discretion to dispense with the requirement of such deposit, in full or in part, if the Appellate Authority is satisfied that such pre-deposit would cause undue hardship to such person. But by the amendment, the rule requiring a pre-deposit of the entire duty as well as the first proviso empowering the Appellate Authority to dispense with the deposit, stand deleted. Now the only rule without any kind of discretion being vested in the Appellate Authority is that a fixed amount representing 7.5% of the duty or duty and penalty or penalty as the case may be, has to be deposited. Neither the assessee nor the Appellate Authority has any discretion either to demand 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the learned senior counsel for the writ petitioner is that High Courts of Andhra Pradesh and Telungana and Kerala have already taken a view that the amendment is prospective in nature and that it would apply only to proceedings initiated after 6.8.2014. 24. Supplementing the aforesaid submissions of the learned senior counsel for the writ petitioner, Mr.Joseph Prabhakar, learned counsel appearing for the respondent/assessee in the writ appeal contended that while interpreting the amendment made to sub-section (3) and (3A) of Section 85 of the Act, the courts have held that they have to be applied only to proceedings initiated after the amendment. The learned counsel further submitted that even the Department had construed the amended provisions in the same manner, as seen from two Circulars issued by the Central Board of Excise and Customs. By Circular No.984/8/2014-CX dated 16.9.2014, the Department issued clarifications with regard 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered to the effect that 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 the procedure. The Court also took note of the fact that the opinion of the Privy Council in Colonial Sugar Refining Company Ltd. was applied in India in Nana bin Aba v. Sheku bin Andu [(1908 ILR 32 Bom. 337] and by the Privy Council itself in Delhi Cloth and General Mills Co. Ltd. v. Income Tax Commissioner [(1927) LR 54 Indian Appeal 421]. The Supreme Court then took note of the decision in Indira Sohanlal v. Custodian of Evacuee Property [(1955( 2 SCR 1117], where the question was whether a right of appeal in respect of a pending action may conceivably be treated as a substantive right vesting in the litigant on the commencement of the action. 28. In Garikapatti Veeraya, the Supreme Court then analysed the decision of the Full Bench of this Court in Ramakrishna Iyer 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 Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding. (ii) The right of appeal is not a mere matter of procedure but is a substantive right. (iii) The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit. (iv) 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 and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal. (v) This vested right of appeal can be taken away only by a subsequent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has not made retrospective by the legislature seeks to affect the vested rights and corresponding obligations of parties, such provision cannot be said to have any retrospective effect by necessary implication. The Supreme Court quoted Maxwell to the effect that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. 35. The next decision relied upon by the learned senior counsel for the writ petitioner is that of a Division Bench of this Court in The Deputy Commercial Tax Officer v. Cameo Exports [2006 (3) CTC 81]. In that case, the Division Bench of this Court was concerned with the effect of an amendment made to the Tamil Nadu General Sales Tax Act, 1959, by the amendment Act 14 of 1999. Prior to the amendment, the assessees were obliged only to pay the tax admitted by them, 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 consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Super Threading (India) Pvt. Ltd. v. Union of India [2015 (323) ELT 119 (P H)], the decision of the single Judge of the Kerala High Court in Muthoot Finance Ltd. was followed. 39. However, a Division Bench of the Allahabad High Court struck a different note in Ganesh Yadav v. Union of India [2015 (39) STR 177 (All.)]. In the said case, the Allahabad High Court was dealing with a writ petition challenging the very vires of the amendment. After pointing out in paragraph 4 of its decision that as a first principle of law, the right of appeal is a statutory right and that it is always open to the legislature which confers a remedy of appeal to regulate the same subject to compliance of certain conditions, the Bench took note of the decisions of the Supreme Court to the effect that the right of appeal is neither an absolute right nor an ingredient to natural justice. Since it is only a statutory right, it can always be circumscribed by the condition in the grant. Therefore, 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, learned counsel for the respondent/assessee in the writ appeal contended that in Winwind Power Energy Private Limited v. Commissioner of Central Excise [2013 TIOL 863 Madras], a learned Judge of this Court was concerned with a situation where the time limit for filing an appeal was reduced by an amendment to Section 85 of the Finance Act, 1994. Since the amendment came into force on 28.5.2012, the learned Judge held that the same (the reduced period of limitation) would not apply to appeals arising out of the orders passed by the original authority before the date of coming into force of the amendment. 42. Mr.Joseph Prabhakar, learned counsel also brought to our notice a decision of the Division Bench of the Delhi High Court in Bajaj Overseas Impex v. Special Commissioner [2013 (62) VST 397]. The said case arose out of a dispute with regard to the applicability of the third proviso to Section 74(1) of the Delhi Value Added Tax Act, 2004, inserted by way of an amendment with 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 retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajasthan High Court recorded an opinion that the effect of the amendment cannot be restricted only to those appeals which are filed after 06.8.2014. The Court proceeded on the footing that the amendment was actually beneficial to the assessee and hence, the Bench held that to restrict such a benefit only to one category of assessees would be violative of Article 14. The Court held that the amended provisions will apply even to those orders which were passed before the amendment came into force. 45. Though the opinion rendered in Paramount Security was only a prima facie opinion rendered at the stage of ordering notices, the same was followed by two decisions of the Rajasthan High Court, one in D.B.Central Excise Appeal Nos.1 to 7 of 2015, by order dated 12.02.2015 and another in Arjun Industries Ltd. v. Commissioner of Customs [2015 (320) ELT 497 (Raj.)]. 46. In State of Bombay v. Supreme General Films [1960 (3) SCR 640], a suit that was decreed on 22.7.1954 was taken on appeal to 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed after 01.4.1958, the date of coming into force of the amendment. The assessee contended that the amended Act 6 of 1958 could not be given retrospective effect so as to apply to assessment periods anterior to that date. Prior to the amendment, Section 30 contained a proviso requiring the assessee to pay only the admitted amount of tax as a pre-condition for entertaining the appeal. But, the Supreme Court held that when the orders of assessment were completed only after the coming into force of the amendment and when the appeals themselves were filed only after the amendment, it is not correct to say that the amended Act had been given retrospective effect. 49. Though the decision in Hardeodas Jagannath did not go into greater details on questions relating to vested right and statutory right, the decision was nevertheless by a Constitution Bench and that too rendered long after the decisions in Hoosein Kasam Dada and Garikapatti Veeraiah. Though the decisions in Hoosein Kasam Dada and Garikapatti 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 confli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering the right almost illusory. 55. Therefore, the question of prime importance that arises is, as to whether a switch-over from a regime where the deposit of the entire duty was mandatory subject however to the discretion granted to the Appellate Authority to waive the whole or any part it, to a regime where a fixed percentage of 7.5% of the demand is made mandatory, can be said to be more onerous or less onerous. This question appears to have been answered in Shyam Kishore v. Municipal Corporation of Delhi [(1993) 1 SCC 22], by a three Member Bench of the Supreme Court, though not directly, but indirectly. In paragraph 38 of the decision, the Supreme Court stated as follows: The decisions of the Bombay and Calcutta High Courts earlier referred to (Elora - AIR 1980 Bom. 162 and Chatter Singh - AIR 1984 Cal. 283) have upheld the validity of a provision banning the entertainment of an appeal altogether where the taxes are not paid. However, the Supreme Court decisions in Anant Mills [1975 (2) SCC 175], 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was concerned with an amendment to the Central Excise Rules, 1944. Prior to 29.6.1995, Rule 57-G of the said Rules entitled a manufacturer to withdraw the Modvat credit at any time without there being any limitation. But, by an amendment which came into effect on 29.6.1995, the second proviso to Rule 57-G was introduced. By the new proviso, a period of limitation of six months was introduced for a manufacturer to take credit. When it was argued that the amendment took away a vested right, the Supreme Court distinguished its earlier decision in Eicher Motors Ltd. v. Union of India [1999 (106) ELT 3] and held that the mere imposition of a restriction with regard to the exercise of a right, without taking away such a right, would not tantamount to a retrospective amendment. The Court held that the second proviso inserted by way of amendment did not take away the right, but merely restricted the period available for a manufacturer for the exercise of such a right. 59. Therefore, if one condition that was already available 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 74], the Judicial Committee of the Privy Council opined that the proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment and its effect confined to that case. Where the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication, what clearly falls within its express terms. 65. In Commissioner of Income Tax vs. Krishna Warriar [AIR 1965 SC 59], the Supreme Court held that it is not always an inflexible rule of construction that a proviso in a statute should always be read as a limitation upon the effect of the main enactment. Though generally the presumption would be that but for the proviso the enacting part of the Section would have included the subject matter of the proviso, in some cases the clear language of the substantive provision as well as the proviso may indicate that both of them were substantive provisions. 66. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive provision. While interpreting the substantive provision, the Allahabad High Court drew inspiration from the second proviso to come to the conclusion that the substantive provision was capable of interpretation only one way. Otherwise, there could have been no necessity for the second proviso at all. 70. In any case, on the first contention of the writ petitioner, we have independently come to a conclusion that even the substantive provision of Section 35-F, after its amendment, is not capable of any other interpretation. Our conclusions on the first contention was not on the basis of the second proviso. Therefore, we need not even find out whether the second proviso is exhaustive about the exclusions, or whether the second proviso is a substantive provision in itself or the extent to which the second proviso would control the substantive provision. Hence, the second contention of the petitioner is also rejected. 71. The third contention of the learned Senior Counsel for the writ petitioner is that the High Courts of Andhra Pradesh and Telungana and Kerala have taken a view that the amendment is prospective in nature and that it would apply only to proceedings originally i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e passage goes to the rescue of the assessees. The argument of the assessees in the cases on hand is that the amendment would apply only to the proceedings that commence with the issue of show cause notices on or after 6.8.2014. In other words, the contention of the writ petitioner before us is that if a show cause notice had been issued on 5.8.2014, the amended provisions will not apply to an order in original passed in pursuance of the same, even if such an order is passed after 6.8.2014. The above Circular does not support this contention of the petitioner. 77. Lastly it is contended by Mr.Joseph Prabhakar that the assessees do not stand to gain by fighting on pre-deposit condition. If they lose the battle after exhausting all avenues, the assessees are obliged to pay the amount due, together with interest at a higher rate. Therefore, it is his contention that a provision that grants a temporary reprieve to the assessees need not necessarily be interpreted in such a harsh manner. 78. But we do not agree. In fact the assessees should be more happy that they are not thrown at the mercy of the Appellate Authorities for considering the question of waiver of pre-deposit conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
