APRIL 22, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

(First article of series of 3 articles)

1. WHENEVER any appeal is filed under Section 129A to the Appellate Tribunal(CESTAT), the requisite checks that are required to be done, apart from many others are :

a) Pre deposit under Section 129E of Customs Act, 1962

b) Court fee under section 129A(6) of Customs Act, 1962

c) The Respondent

2. On all the three above aspects, the CESTAT has recently come out with Orders which are of great significance. This week, let us discuss about the aspect of Pre deposit under section 129E of Customs Act, 1962. In coming weeks, other two aspects also would be covered

3. Everyone is aware that Pre deposit under section 129E of Customs Act, 1962 has to be paid. But the issue that has come up for hearing before CESTAT is whether adjustment of amount deposited by another person / entity can be done against the requirement of pre-deposit by the appellant under section 129E of the Customs Act.

4. In the case of Shri Sharafat Hussain Versus Principal Commissioner of Customs (Import), ICD, Tughlakabad, New Delhi, Customs Miscellaneous Application No. 50114 of 2022 and Customs Miscellaneous Application No. 50478 of 2021 were filed in the matter of Defect Appeal Diary No. 50713 of 2020.

5. The brief facts of the case is that Miscellaneous Applications are filed by Shri Sharafat Hussain in Appeal Diary No. 50714 of 2020 praying that the amounts deposited by certain entities indicated below during the course of investigation of the matter be considered as payment of mandatory pre-deposit under section 129E of the Customs Act in this appeal. He has submitted copies of No Objection certificates from the persons/entities which had made the pre-deposit.

6. The Learned counsel for the applicant forcefully submitted that the deposits were made during the course of investigation by these entities under coercion and that though the amounts were paid under challans by various entities, they were actually drawn from the bank account of Sharafat Hussain

7. Revenue has opposed any such adjustment on the ground that Section 129E says "The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal, - (i)… (ii) against the decision or order referred to in clause (a) of sub-section (1)of section 129A, unless the appellant has deposited seven and a half per cent. of the duty, ….." It requires the appellant to make the pre-deposit, and in the absence of such pre-deposit the appellant cannot maintain the appeal at all. Learned authorised representative for the Revenue submited that there is no legal provision under which any amount paid by any other entity can be considered as pre deposit by the appellant even if no objection certificates from such entities were produced.

8. The CESTAT has passed Defect Misc. Order No. 167/2022 dated August 30, 2022 - 2022-TIOL-1198-CESTAT-DEL in which it is held that it is evident from section 129E that the legal requirement is that the appellant has to make the mandatory pre-deposit failing which the appeal cannot be admitted at all by this Tribunal. Of course, if during the course of investigation or at any time before filing the appeal, the appellant had deposited any amounts, such amounts would qualify as pre-deposit for the reason that of the total amount of duty confirmed or penalty imposed on the appellant in the impugned order, if some amount has already been deposited only the rest has to be paid. Usually, the impugned order itself appropriates the amounts already deposited towards the liability of duty or penalty. But if the amount has been deposited by others that can never be considered as Pre deposit on the part of the appellant. The amounts deposited by the other entities cannot be reckoned towards the pre-deposit by the appellant herein. Such amounts can be reckoned towards pre-deposit in appeals, if any, by such entities and if they had not filed any appeals, towards their liabilities of duty or penalty as per the order of the lower authority. Of course, if there is no liability against any entity as per the order of the lower authority but any amount has been paid by such entity or if the entity paid an amount in excess of the liability as per the order, such entity can seek refund of the amounts so deposited.

9. The above decision of the Tribunal Delhi has been confirmed by the High Court Delhi vide its Order dated July 18, 2023 - 2023-TIOL-1765-HC-DEL-CUS and it has been held that the CESTAT has found that while various deposits appear to have been made during the course of investigation, those amounts cannot be considered for the purposes of computing the pre-deposit amount since those deposits had been effected by different entities and individuals. Undisputedly, the depositors were not the appellants before the CESTAT. It was in view of the aforesaid that it came to conclude that amounts deposited by other entities cannot be reckoned towards pre-deposit. It has further observed that even if the entities which had made those deposits had chosen not to initiate any appeals, it would still be open for them to seek refund of those amounts. In light of the unambiguous wording of Section 129E, there are no justification to interfere with the view which the CESTAT ultimately took and stands reflected in the impugned order.

10. In many of the appeals, it is noticed that the main Noticee is the company or entity from which the duty is demanded and penalty is imposed. The main Noticee is the company and it pays the pre deposit on the duty demanded or penalty imposed upon the company. The other co notices are generally Directors or employees of the company on whom also penalty is levied. In such situations, the pre deposit has to be paid by the individual co-notees only. The pre deposit, if at all, paid by the company on their behalf shall not be counted against the mandatory requirement of pre deposit under section 129E of the Co noticesas as the Co notice is the appellant in that appeal.

11. So the take away from this CESTAT Defect Misc. Order No. 167/2022 Dated.- August 30, 2022 - 2022-TIOL-1198-CESTAT-DEL read with High Court Delhi vide its Order dated July 18, 2023 - 2023-TIOL-1765-HC-DEL-CUS is that the pre deposit has to be done by the individual co noticees i.e. challan has to be cut on their name and the company or entity or any other person shall not pay the pre deposit on their behalf. The Departmental Officers may verify the same.

(The views expressed are personal and not in official capacity)