APRIL 02, 2015

By Manish Gaur & Narendra Singhvi

THE 2014 Budget introduced the requirement of mandatory pre-deposit for filing of appeals before the Commissioner (Appeals) or CESTAT in Central Excise or Service Tax matters, by substituting the provisions of Section 35F of the Central Excise Act, 1944. The amendment has become applicable to all appeals filed after August 6, 2014. All appeals/ applications pending as on August 6, 2014 continue to be governed by the erstwhile provisions of Section 35F. Similar amendments were made in Customs law vide Section 129E of the Customs Act, 1962.

Further, it has been thankfully clarified by the department vide Circular No. 984/08/2014- CX, dated 16.09.2014 that once the said amount stands paid and the appeal stands filed, there shall be automatic stay of recovery of the balance demand during the pendency of the appeal. Effectively, the payment of the mandatory pre-deposit amount would do away the requirement of obtaining stay of recovery of the balance demand. However, there are certain practical difficulties being faced by litigants in complying with the requirement in-spite of their readiness to comply. The purpose of this article is to only highlight some of the nuances relating to the requirements of Section 35F.

To appreciate the same, it is also necessary to keep in mind the fact that the 2014 budget has also mandated e-payment of Service Tax and Central Excise dues. For example, Notification No. 9/2014-ST, dated 11.07.2014 has substituted Rule 6(2) of the Service Tax Rules, 1994 to mandate payment of tax electronically through internet banking for all assessees. Prior to this amendment, the payment through manual challans was still available in certain cases, which could have been made even without obtaining registration. Thus, the payment of the mandatory pre-deposit would also require the litigants to obtain registration beforehand.

Hence, these amendments have resulted in creating problems for un-registered litigants who must pay the required amount for filing of appeals. It is to be noted that no statutory procedure has been laid down for payment of the mandatory amount by un-registered litigants. Similar is the issue in case of matters involving penalty on employees of business entities, who are co-noticees therein.

Useful reference can be made to the instructions issued by CBEC 919/09/2010-CX dated 23.03.2010 regarding registration of non-assessee. This category of registration is granted to any individual, firm or company which requires to transact with the department, though not as an assessee, but as (a) merchant exporter or (b) co-noticee or (c) refund applicant or (d) persons who have failed to obtain registration and against whom proceedings have been initiated or (e) persons who are required to tender any payment under the relevant Acts. The persons registered under this category are not required to file any returns. The process of registration of these applicants is the same as in the case of new assessee except the choosing and filing of non-assessee registration form. Further, such non-assessee registration can be made by the designated officer of the Commissionerate, on behalf of the non-assessee. Reference can also be made to Circular No. 956/17/2011-CX, dated 28.09.2011 & Annexure ‘F' appended which clarifies to the same effect.

Further, RBI also issued Circular No. RBI/2008-09/165 DGBA.GAD.No. 2286/41/07/006/2008-09, dated 05.09.2008 directing the ACES registered banks to accept deposits from persons registered as non-assessee on the basis of the non-assessee registration number.

The process of registration as a non-assessee was thought to be a boon for the litigants who are, otherwise, not registered with the department and wish to continue to litigate as non-assessee. However, given the not-so-assessee-friendly approach of the departmental officials, the registration under the said category also goes through a number of hurdles.

Simplification and expediency of the registration procedure has been the most highlighted change in the 2015 budget. However, these changes are restricted only to assessee registration and do not extend to non-assessee registration. In fact, one does not find any mention of simplification of non-assessee registration procedure in the recent post-budget changes.

Considering the urgency of registration for the purposes of complying with the requirements of Section 35F and that of the time-bound manner in which appeals can be filed, it is necessary for the government to simplify and expedite the registration procedure for non-assessees. The post budget expectations of the litigants certainly include prescribing an exhaustive procedure for registration and payment of the mandatory pre-deposit. The question regarding the success of such initiatives would, however, still be unanswered given the formal revenue-raising character of the new Section 35F and the informal revenue-raising character of registration powers of the departmental officers.

(The authors are working with Lakshmikumaran & Sridharan, Delhi)