Case Law Details
DD interiors Vs Commissioner of Service Tax & Anr (Delhi High Court)
Delhi High Court, in the case of DD Interiors vs. Commissioner of Service Tax & Anr, ruled that the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) cannot reject an appeal solely because the pre-deposit was made in the wrong account. The petitioner challenged the November 8, 2024 order, arguing that the pre-deposit, made in August 2018, was valid despite being credited to an incorrect account. The petitioner cited confusion during the transition to the GST regime, along with a 2022 CBIC clarification, which stated that such deposits should be made through an integrated portal. The court also referenced a Bombay High Court ruling (Sodexo India Services Pvt. Ltd. vs. Union of India, 2022), which held that procedural errors in deposit allocation should not be grounds for rejecting an appeal. The Delhi High Court emphasized that the lack of a functional integrated portal or lack of taxpayer awareness should not penalize the appellant. The case has been sent back for reconsideration by CESTAT, with instructions for a competent official from the Respondent-Department to provide clarity on the portal’s implementation timeline. Until further orders, no coercive action will be taken against the petitioner. The matter is listed for the next hearing on February 21, 2025.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This hearing has been done through hybrid mode.
CM APPL. 4242/2025 (for exemption)
2. Allowed, subject to all just exceptions. Application is disposed of.
W.P.(C) 877/2025 & CM APPL. 4241/2025 (for interim stay)
3. The present writ petition has been filed by the Petitioner-M/s DD Interiors under Article 226 of the Constitution of India challenging the impugned order dated 8th November, 2024, by which the Customs, Excise & Service Tax Appellate Tribunal (hereinafter ‘CESTAT’) has returned the appeal due to non-compliance of the pre-deposit condition mandated under Section 35F of the Central Excise Act, 1944.
4. Admittedly, the pre-deposit was made by the Appellant way back on 13th August, 2018 and 17th August, 2018 itself for a sum of Rs. 1,60,600/- and Rs. 4,750/- respectively. The Petitioner has also submitted the challans showing the deposit. The ground taken in the impugned order is that the same was deposited in a wrong account and therefore credit cannot be given of the pre-deposit and hence the appeal does not deserve consideration on merits.
5. The case of the Petitioner is that, Good and Services Tax regime (hereinafter ‘GST’) was recently enacted at the time of payment, and that there was considerable uncertainty and confusion with respect to levied rate of taxes, modes of payment. Mr. Ruchir Bhatia, the ld. Counsel for the Petitioner, has pointed out the instructions given by the Ministry of Finance dated 28th October, 2022, as per which, the Central Board of Indirect Taxes & Customs (hereinafter ‘CBIC’) has clarified that the pre-deposit have to be made in the integrated portal. The Petitioner also relies upon the Bombay High Court judgment in Sodexo India Services Pvt. Ltd. vs. Union of India (2022 SCC OnLine Bom 11975) where in a similar circumstance, the High Court had allowed the writ petition and ordered the appeals to be heard on merits by the CESTAT. The relevant paragraphs are read as under:
“2. Petitioner had, as required under Section 85 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944, made a pre-deposit in cash through Form GST DRC-03. The appeals were accepted and registered and appeal numbers were allotted. Thereafter, petitioner was called for personal hearing and petitioner made submissions on merits of the matter. To petitioner’s surprise, all the appeals came to be dismissed without going into the merits of the submissions made by petitioner only on the ground that the pre-deposit made by petitioner while filing the appeal was improper. According to respondent No. 3, petitioners could not have made the deposit in the manner they made and, therefore, should be construed to have not complied with the precondition of pre-deposit. Strangely in the order respondent No. 3 does not state how the deposit should have been made. According to petitioner, even during the personal hearing respondent No. 3 was totally silent and never brought to the notice of petitioner as to how the deposit should have been made.
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7. Therefore, it does appear that the confusion seems to be due to there being no proper legal provision to accept payment of pre-deposit under Section 35F of the Central Excise Act, 1944 through DRC-03. Some appellants are filing appeals after making pre-deposit payments through DRC-30/GSTR-3B. In our view, this has very wide ramifications and certainly requires the CBI & C to step, in and issue suitable clarifications/guidelines/answers to the FAQs. We would expect CBI & C to take immediate action since the issue has been escalated by Mr. Lal over eight months ago.
8. In the circumstances, we hereby quash and set aside the impugned orders dated 13th April 2022 and direct respondent No. 3 to hear petitioner de novo and pass such orders as he deems fit on merits in accordance with law.”
6. A mere deposit in the wrong account, that too, when the integrated portal might not have been fully functional or the existence of the same was not within the knowledge of the Petitioner, cannot result in a rejection of the appeal on the ground of defects. The matter in the opinion of this Court deserves consideration on merits by the CESTAT.
7. Counsel for the Respondents submits that he would seek instructions as to since when the integrated portal has been made operational and has been informed to the assessee/s publicly.
8. Let a competent official from the Respondent-Department be present on the next date of hearing with the instructions.
9. In the meanwhile, no coercive step shall be taken against the Petitioner.
10. Let a copy of this order be sent to the Respondent-Department for necessary information and compliance.
11. List on 21st February, 2025.
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