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Finance Act 2014 announces mandatory 7.5% / 10% pre-deposit of penalty for all appeal to Commissioner (Appeals)/CESTAT respectively, creating confusion in minds of assessee's as to whether assessee need to deposit 17.5% for filing appeal at CESTAT (Tribunal). This confusion is now being resolved by department by issuing new clarification circular no. 984/08/2014-CX dated 16th September, 2014 on how to calculate quantum of pre-deposit penalty u/s 35F of Central Excise Act if appeal filed to Commissioner (Appeals) or to CESTAT. Section 35F of Central Excise Act equally applies for levying penalty under service tax law as well.

Brief overview of new circular:

1) Pre-deposit of penalty for appeals pending before Commissioner (Appeals) is 7.5% of the amount of demand mentioned in Order In Original (OIO)

2) Pre-deposit of penalty for appeals pending before CESTAT is 10% of the amount of demand mentioned in order passed by Commissioner (Appeals). Therefore maximum pre-deposit for appeals at CESTAT level cannot exceed 10% of demand as per order of Commissioner (Appeals).

3) No recovery steps will initiate by department for balance demand in excess of 7.5%/10% until the disposal of appeal is in favour of department (This will override earlier board circular no. Circular No.967/1/2013 dated 1st January, 2013 issued for coercive recovery of demand under appeal with stay application)

4) Refund of pre-deposit of penalty when case is decided in favour of assessee shall be made alongwith interest @6% p.a. from the date of deposit till date of payment. Department cannot hold refund amount due to reason of department filed appeal against the order in favour of assessee. 

Enclosing copy of circular for your reference.

Thanks and Regards,

Manoj B. Gavali


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Category Excise, Other Articles by - Manoj B. Gavali 



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