By TIOL News Service

MUMBAI, JUNE 28, 2017: THE Petitioners challenge the constitutional validity of Section 129E of the Customs Act,1962 as amended by the Finance Act, 2014 [w.e.f 06.08.2014] prescribing a mandatory pre-deposit for filing appeal. They also challenge the o-in-o on the ground that the order is illegal, being passed without considering the submissions of the petitioners.

In assailing the legality of Section 129E of the Act, the contention interalia urged on behalf of the Petitioners is that the provision is discriminatory and violative of Articles 14, 19 and 21 of the Constitution.

The next contention is that Section 129E as amended has taken away the powers earlier conferred on the appellate authority to waive the pre-deposit, upon forming an opinion that a pre-deposit would cause undue hardship. [Mardia Chemicals Ltd. = 2004-TIOL-32-SC-SECURITISATION relied upon]

Revenue in its reply affidavit contended that the challenge as raised is no more res integra in view of the decision of the Division Bench in Nimbus Communications Ltd. = 2016-TIOL-1708-HC-MUM-ST and followed in other cases.

It is submitted by the counsel for the Revenue that the substituted section has been introduced as a measure to facilitate trade, business and industry by speedy resolution of disputes before various appellate forums; that even pre-deposit of disputed amount of duty or penalty for the longer period by the appellants is no more required after imposition of substituted Section 129E of the Act; that assessees are no more required to deposit the entire disputed amount to prevent the recovery officer from resorting to any coercive measure for recovery of dues; that waiver of pre-deposit under the pre-amended Section of 129E of the Act was not as a matter of right of the Appellants and the Appellate authority after due consideration of the facts and circumstances of the case could grant a waiver in appropriate cases; that under the present disposition after the amendment, the assessee gets immunity from any coercive action for recovery of dues, in case, the appeal is pending before any appellate authority under Section 129 of the Act and pre-deposit as mandated has been made.

After extracting the referred provisions, the High Court observed thus -

++ The contention of the petitioner that the provision is rendered discriminatory as it creates two different classes when it mandates pre-deposit of duty demanded or penalty imposed or both, and more particularly when penalty cannot be considered to be a revenue as it is not a tax requiring it to be safeguarded, also cannot be accepted. It may be pointed out that even the pre-amended provision stipulated for a deposit in case of appeals from orders levying penalty. [ Vijay Prakash D.Mehta and JawaharD.Mehta = 2002-TIOL-427-SC-CUS - right to appeal is a statutory right and not an absolute right, which can be circumscribed by the conditions in the grant.]

++ By virtue of Section 129E, the right to appeal as conferred under the said provision is a conditional right, the legislature in its wisdom has imposed a condition of deposit of a percentage of duty demanded or penalty levied or both. The fiscal legislation as in question can very well stipulate as a requirement of law of a mandatory pre-deposit as a condition precedent for an appeal to be entertained by the appellate authority. In view of the above settled position in law, Section 129E of the Act cannot be held to be unconstitutional on the ground as assailed by the petitioner.

Relying on the decisions in M/s.Dream Castle = 2016-TIOL-1009-HC-MAD-ST and Ganesh Yadav = 2015-TIOL-1490-HC-ALL-ST - that Section 35F of the CEA did not defeat or render the vested right of appeal illusory and that the condition of pre-deposit is a reasonable condition and such condition did not defeat the vested right of appeal, the High Court held that the reliance placed by the petitioner on the apex court decision of Mardia Chemicals Ltd. was completely misplaced.

Concluding that the Writ Petitions lack merit, the same were dismissed.

(See 2017-TIOL-1205-HC-MUM-CUS)