TIOL-DDT 2728
19 11 2015
Thursday

THE Karnataka High Court has recently held the amended provisions of Section 35F of the Central Excise Act has retrospective effect

By virtue of amendment to Section 35F by Finance Act 2014,certain major changes have been made in the appellate mechanism.

1. Firstly, it is not mandatory for the appellant to deposit the entire duty and penalty levied as the case may be, but only 7.5% or 10% thereof as the case may be.

2. Secondly, prior to the amendment, the appellant could seek dispensation of deposit of the entire duty demanded or penalty levied as the case may be, but under the amended provision, such a discretion granted to the Commissioner (Appeals) or the Appellate Tribunal has been taken away.

3. Thirdly, there is a cap on the predeposit amount, as 7.5% or 10% as the case may be, of the disputed amount cannot exceed Rs.10.00 crores.

The petitioner argued that the amendment does not apply to the case of the petitioners as their  lis  commenced prior to the coming into force of the amendment i.e., prior to 6/8/2014 and that they are governed under Section 35F as it stood prior to the amendment as according to them, the amendment does not have a retrospective effect.

Significantly, the second proviso of Section 35F as amended categorically states that the amendment would not apply to the stay applications and appeals pending before the Appellate Authority prior to the commencement of 2014 Act. The implication is that the proviso has distinguished between two categories of   lis namely, a   lis   which has commenced from 6/8/2014 i.e., on the date, on which 2014 Act commenced and a   lis   which had commenced prior to that date. In respect of the lis which had commenced prior to 6/8/2014, the second proviso states that if prior to 6/8/2014, an appeal had been filed or a stay application had been filed and was pending before the concerned Appellate Authority, then the amendment would not apply. That means, where, in respect of a   lis, which has commenced prior to 6/8/2014, an appeal had been filed or a stay application was filed prior to the said date and pending before the appellate authority on 6/8/2014 the earlier provision would apply and the Appellate Authority would continue to have the discretion to deal with the application filed under the first proviso to Section 35F as it stood prior to 6/8/2014. But in respect of those cases, where the lis though commenced prior to 6/8/2014 and where the appeals had not been filed prior to that date, the amendment does not expressly say anything in that regard and is silent. Thus, the proviso declares that the amended provision would not apply to stay applications or appeals pending before the appellate authority, prior to commencement of the amendment.  

The High Court had to consider:

1. Whether Section 35F of the Act as amended, is a piece of substantive or procedural law, prescribing a mandatory pre-deposit at the time of filing an appeal, is an unreasonable condition?

2. Whether amendment made to Section 35 F of the Act has a retrospective operation?

Difference between substantive law and procedural law: - Black's Dictionary:

Substantive law: The part of the law that creates, defines, and regulates the rights, duties and powers of parties.

So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.

Procedural law: T he rules that prescribe the steps for having a right or duty judicially enforced, as opposed to the law that defines the specific rights or duties themselves.- Also termed adjective law.

On the present issue, the High Court observed, "a requirement regarding deposit of amount as a condition precedent to the entertainment of appeal is a means of regulating the exercise of right of appeal. The Parliament while granting the right of appeal could also impose conditions to exercise such a right so long as the conditions are reasonable. In the instant case, Section 35F also uses the expression   "shall not entertain any appeal….. unless the appellant has deposited 7.5% of duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute…." . It is held that the requirement of deposit of 7.5% as stated supra, is not an onerous condition precedent for the filing of an appeal by an aggrieved party. This is particularly so, when there is a cap on the pre-deposit amount, where 7.5% of the disputed amount exceeds Rs.10.00 crore. In which event, only Rs.10.00 crore has to be deposited as a pre-deposit. The above reasoning also applies where the section mandates a pre-deposit of 10%.

So, the High Court answered point No.1 by holding that the condition of pre-deposit does not adversely affect the right of appeal of an aggrieved party and the said condition is not unreasonable.

The High Court further observed, "the right to file an appeal envisaged under Sections 35 and 35B of the Act remains unaltered and is available to an aggrieved party despite the amendment made to Section 35F of the Act. Sections 35 and 35B of the Act are substantive law, which are not in the realm of procedure. But Section 35F is a piece of procedural law. There is no vested right available to any party in matters of procedure.

The object of amending Section 35F of the Act is to withdraw the discretion granted to the appellate authorities in the matter of making pre-deposit at the time of filing the appeal by an aggrieved party. Any order passed by the appellate authority regarding the hardship pleaded by the appellant with regard to   predeposit, who sought dispensation of such deposit would be a subject matter of further litigation and until that aspect was settled finally, the main appeal would not be taken up for hearing. As a result, there would be considerable delay in disposing of the appeal by the appellate authorities. Parliament must have thought that discretion vested with the appellate authorities with regard to dispensation of deposit to be made by an aggrieved appellant at the time of filing the appeal was not in the interest of revenue. It is in order to overcome the aforesaid mischief, that Parliament thought it fit to amend Section 35F. It is in the aforesaid background that the object and intendment of amending Section 35F by the Parliament has been considered.”

On the second question, the High Court observed, "the date on which the lis  has commenced in each case has no bearing on the amendment as it has a retrospective effect. Even if the  lis  had commenced prior to the date of amendment and an appeal had not been filed on that date, even in such a situation, the main amended Section 35F would apply and a pre-deposit as per amended provision would have to be made. Accordingly, Point No.2 is answered by holding that amended Section 35F of the Act has a retrospective operation.

We bring you this order today. Please see Breaking News.

Anti Dumping Duty - "Carbon Black used in rubber applications" - Re-imposed; no retrospective imposition

ANTI Dumping Duty on "Carbon Black used in rubber applications" imported from People's Republic of China, Russia and Thailand was imposed by Notification No.9/2013-Customs (ADD), dated 26th April, 2013 and was to be valid till 29th July 2014. This was extended till 29th July 2015.

Though there is continued dumping from People's Republic of China and Russia, the notification could not be extended before 29th July 2015. Now they have freshly imposed the anti dumping duty from 18th November 2015 for five years.

But Government has been kind to avoid a retrospective imposition. Let's hope the Government continues this good trend.

Notification No. 54/2015-Customs(ADD), Dated: November 18, 2015

Bonanza for Babus - 7th Pay Commission Report Today

THE Central Pay Commission has announced that it has completed its deliberations and will submit the report to the Government of India on 19.11.2015 at 19:30 hours. This was the topic of discussion and gossip in Government offices in the last few weeks, reaching the crescendo in the last few days with leaks, guesses and calculations.

There are nearly 50 lakh Central Government employees and more pensioners who get a substantial hike in salaries once in ten years through these Pay Commissions. The Pay Commission Report is a very complicated and powerful document, to understand which the Government will appoint another Committee. The Sixth Pay Commission submitted a 650 pages report. The anomalies and complications are still being litigated at various administrative and judicial levels.

Yesterday there was a pall of gloom all over the Central Government offices on a rumour that the Pay Commission has recommended only a 15% hike, but late evening rumours suggested an increase of 22%.

I almost got beaten up when I suggested to some Government officers that they should opt for a reduction of 10 percent of their salaries.

The Pay Commission report and its implementation has a cascading effect that the States will also be forced to increase the pay packets of their employees. In fact, after the Fifth Pay Commission, some States virtually went bankrupt with not enough money to pay the staff.

Anyway the next few days or months will be spent on calculations and complaints. Every section is going to feel that it had been treated unfairly and somebody else got a better deal. IAS vs the Rest of the World; more HRA, more allowances, more promotions, more … more.

The Pay Commission is expected to suggest some radical changes like pay based on performance, mandatory computer literacy...

There is nothing wrong in giving our babus a good pay packet, but the problem is there are too many of them in the corridors of power that even a small hike will cause a huge expenditure bill for the Government - a rupee hike for each employee will cost the government 12 crore rupees a year. A ten thousand rupees hike will cost the Nation 1.2 lakh crore per year.

Before the 6th Pay Commission, it used to be said that if you pay peanuts, you get monkeys.

Until Tomorrow with more DDT

Have a nice day.

Mail your comments to vijaywrite@tiol.in