Finance Act 2014 has introduced a new section, Section 35F to Central Excise Act 1994, to prescribe a mandatory fixed pre-deposit in case of Appeals which is as follows:
(I) For filing appeal before the Commissioner (Appeal) or the Tribunal at the first stage, pre-deposit will be
a) 7.5% of the duty demanded if only duty is involved
b) 7.5% of the duty demanded if both duty and penalty is imposed
c) 7.5% of the penalty if only penalty is imposed
(II) For filing second stage appeal before the Tribunal, pre-deposit will be:
a)10% of the duty demanded if only duty is imposed
b) 10% of the duty demanded if both duty and penalty is imposed
c) 10% of the penalty if only penalty is imposed
Further, the amount of pre-deposit payable would be subject to a ceiling of Rs.10 crore. All pending appeals/stay applications would be governed by the statutory provisions prevailing at the time of filing such stay applications/appeals. These new provisions would, mutatis mutandis, apply to Service Tax.

Now following points may lead to further disputes/litigations if not explicitly clarified:

i) While filing IInd stage appeal, what will happen to the Ist stage deposit made? Whether that deposit (7.5% of Duty or Duty+Penalty or Penalty as the case may be) made can be appropriated against the dues which may not be legally correct as such appropriation for which there is no provisions under the Central Excise Act, 1944, will be amounting to initiating recovery proceedings during appealable period.
ii) If the pre deposit of 7.5% mentioned in ( i ) above is appropriated, whether the 10% of Duty, Penalty to be deposited in IInd stage would be reduced to the extent of the pre deposit made at the time of Ist stage appeal or are the appellants at IInd stage required to pay the full amount of duty or duty+Penalty or Penalty as the case may be?

Hari Narayanan 14/08/2014