CX - It is a well known fact that success rate of departmental cases is very poor and, therefore, Appellants are required to pay additional 10% deposit, in addition to 7.5% deposit made before Commr(A): CESTAT
By TIOL News Service
KOLKATA, NOV 24, 2016: THE new appeal provisions as per the Finance Act, 2014 came into effect from 6th August 2014.
And we are still trying to comprehend what those provisions actually intend to do.
It all started with the following content of the D.O. letter F.No. 334/15/2014-TRU dated 10th July 2014.
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Annex IV
LEGISLATIVE CHANGES
Amendments in the Customs Act, 1962
14) Section 129E is being substituted with a new section to prescribe a mandatory fixed predeposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and another 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs. 10 crore.
Amendments in the Central Excise Act, 1944
13) Section 35F is being substituted with a new section to prescribe a mandatory fixed predeposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and another 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs.10 crore.
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In the above context, DDT 2394mentioned –
| There is a doubt on payment of another 10 percent for the second appeal. Though the TRU letter states that another 10 percent, the amendment does not say so clearly. So, there is a doubt whether the pre-deposit at the second appellate stage is 10 percent or 17.5 percent. Even if it is 17.5 percent, what will happen to the 7.5% deposited with the Commissioner (A)?. Shouldn't that also be considered as pre-deposit? This also needs clarification statutorily. |
In DDT 2439, the CBEC Circular No. 984/08/2014-CX., Dated: September 16, 2014 was reported thus -
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After a month and ten days, the CBEC has come out with some clarifications which were crying for attention of the Board. But as they say better late than never .
Quantum of pre-deposit for appeal to Tribunal from Commissioner (Appeals) - pay additional 10 percent: As per the amended provisions, a pre-deposit of 10 percent is to be made for an appeal to the Tribunal against an order of a Commissioner (Appeals). While appealing to the Commissioner (Appeals), an amount of 7.5 percent of the duty/penalty must have already been deposited. Now the doubt is whether the 10 percent deposit for appeal to the Tribunal is in addition to the 7.5 percent already deposited or is it inclusive of that?
In DDT 2394 - 11.07.2014 , we had raised this doubt - " There is a doubt on payment of another 10 percent for the second appeal. Though the TRU letter states that another 10 percent, the amendment does not say so clearly. So, there is a doubt whether the pre-deposit at the second appellate stage is 10 percent or 17.5 percent. Even if it is 17.5 percent, what will happen to the 7.5% deposited with the Commissioner (A)?. Shouldn't that also be considered as pre-deposit? This also needs clarification statutorily ."
Though the Government did not make any statutory clarification, the Board has now issued a circular which clarifies: " It is, therefore, clarified that in the event of appeal against the order of Commissioner (Appeal) before the Tribunal, 10% is to be paid on the amount of duty demanded or penalty imposed by the Commissioner (Appeal). This need not be the same as the amount of duty demanded or penalty imposed in the Order-in-Original in the said case. ”
There is absolutely no doubt about this, but the doubt is what happens to the 7.5 percent already deposited? Will it be refunded? When the order of the lower authority merges with the order of the Commissioner (Appeals), and the appellant is required to pay 10 of the duty determined by the Commissioner (Appeals), where is the question of retaining the 7.5 percent with the Department?
In any case, this is not for the Board to decide; if this was their intention, they should have made it clear in the Law passed by Parliament. The Board is not a super parliament which can add to the legislation, its own belated wisdom.
This will be an issue for litigation in CESTAT as well as several High Courts and eventually the Supreme Court.
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DDT was right.
The matter was recently decided by the Single Member Bench of the Kolkata CESTAT.
The issue involved in the present appeals is whether Appellants are required to deposit an additional 10% of duty confirmed, while filing Appeal before CESTAT against Orders passed by the first appellate authority [Commissioner(Appeals)] over and above 7.5% deposit made before the first appellate authority.
The case of the Applicants in response to the defect memoranda issued by CESTAT Registry and during arguments is that only additional 2.5% of duty demanded is required to be deposited.
The AR argued that in all other Benches of CESTAT the Appellants are paying 10% of deposit in addition to 7.5% deposit made before the first appellate authority. That in Kolkata Bench also, except the present Appellants, all other Appellants are making deposit of additional 10% deposit while appeal against first appellate authority under Section 35F of the Central Excise Act, 1944 and Section 129E of the Customs Act, 1962.
Both sides have relied upon CBEC Circulardated 16.09.2014 as evidence on interpretation in their favour.
The Bench considered the submissions and after extracting the provisions of section 35F of the CEA, 1944 observed -
++ Neither Section 35F(iii) of the Central Excise Act, 1944 nor CBEC Circular dated 16.09.2014 specifically mention whether 10% deposit required before Appeal is entertained should be inclusive or exclusive of 7.5% deposit made before the first appellate authority.
++ It is a well known fact that success rate of departmental cases before the appellate authorities is very poor. That is the reason that percentage of deposit required to be made before the first appellate authorities is as low as 7.5% of the disputed amounts or penalties. After success at the level of first appellate authority may be Legislature wants that the case has passed one test of first appeal successfully and Revenue deserves an additional 10% of the duty or penalty as deposit till the issue is finally decided in the second appellate stage.
++ In any case, Appellant is not at a loss in the above procedure of paying additional 10% of deposit, because in case Appellant wins then Appellant is eligible to interest from the date of deposit is made, as per Section 35FF of the Central Excise Act, 1944 or Section 129EE of the Customs Act, 1962, all introduced w.e.f. 06.08.2014. In case Appellant loses the case, then also Appellant will have to pay lesser interest for the period when amount was lying with the department as deposit.
++ In view of the above it is held that Appellants were required to pay additional 10% deposit, under Section 35F(iii) of the Central Excise Act, 1944 or Section 129E(iii) of the Customs Act, 1962, in addition to 7.5% deposit made before the first appellate authority.
Holding that the Defect Memoranda were correctly issued by CESTAT Registry, all the Appeals were dismissed for non-compliance of the requirement under Section 35F(iii) of the Central Excise Act, 1944 or Section 129E of the Customs Act, 1962, as the case may be.
In passing: But can the appeals not be restored after the appellants tender the amount? See 2015-TIOL-658-CESTAT-MUM.
(See 2016-TIOL-3050-CESTAT-KOL)
