CA Pradeep Jain, CA Preeti Parihar, Shruti Bhandari
Filing of appeal is a mechanism available to the assessees who are aggrieved by the orders passed by the adjudicating authority or the higher appellate authorities. However, mere filing of appeal is not sufficient and there is a condition of making pre-deposit of duty or tax amount involved in the case. Pre-deposit is a certain amount of duty or tax amount that is required to be paid beforehand to the government exchequer in order to get the case heard before the appellate authority. The amount of pre-deposit can differ under various circumstances depending upon the merits of the case and financial position of the assessee.
Moreover, litigation is increasing and it has been reported that case pendency at tribunal level is immense. The tribunal was busy in hearing the stay applications or the extension in already granted stay order. There was all around demand from the trade that the pre-deposit before filing of stay application should be waived.
EARLIER PROVISION :-
According to section 35F, Where any appeal, decision or order appealed against under this chapter relates to any duty demanded or any penalty levied under this act then the person desirous of appealing against such decision or order shall deposit with the adjudicating authority the amount of duty demanded or penalty levied. If Comm. (A) or Appellate tribunal is of the view that such deposit would cause an undue hardship to such person then such authority would dispense with such deposit subject to conditions as he or it may deem fit.
SUBSTITUTED PROVISION :-
Section 35F is being substituted and the amended language prescribes a mandatory fixed pre-deposit of 7.5% of duty demanded or penalty imposed or both for filing appeal with Commissioner(A) or the tribunal at the first stage and another 10% of duty demanded or penalty imposed or both for filing second stage appeal before the tribunal, where any appeal, decision or order appealed against under this chapter relates to any duty demanded or any penalty levied under this act. The amount of pre-deposit payable would be subject to a ceiling of 10 crore.
Duty demanded shall include –
Amount determined under section 11D
Amount of erroneous cenvat credit taken
Amount payable under section 57CC of central excise rules, 1944
Amount payable under rule 6 of cenvat credit rules, 2004
Interest payable under this Act or rules made thereunder.
Implication of amendment:-
The fixation of percentage of pre-deposit is a sign of relief to the appellants. This amendment is beneficial particularly to those assessees who have very strong merits but they are insisted to make the pre-deposit as they have no proof to prove the financial hardship. Despite strong merits of the case, the assessees are compelled to make the pre-deposit which results into nothing but hampering their liquidity. Also, the amount pre-deposited by them is ultimately refunded to them. This provision will also benefit those innocent appellants who have been made party to case as abettor eventhough had no active involvement and were ignorant of the frauds. During our practice, we have come across couple of such cases where the case covered persons as abettors who were small town people with negligible amount of assets. Since they were not filing any return, no documentary proof was available w.r.t. their income; thus, it was not possible to prove the undue hardship also. This amended provision is going to benefit such people alongwith all other types of appellants, thereby reducing the cost of filing the appeal as the concept of filing the stay application will reduce drastically. Thus, there will be savings in precious time of appellate authorities which will ultimately lead to early disposal of appeals.
But this has other implications also. It is normally seen that the department authorities issue huge demands on well settled issues and imposes a huge penalty. In such case, the poor litigant will find it difficult to even deposit the 7.5% or 10% of the demand. Hence, he will not be able to file the appeal and the complete demand will be confirmed. This will deprive him of his legal right also. The trade and industry will once again demand to completely waive the pre-deposit condition and hear the appeal itself. If it is confirmed than the department has every right to recover the same.