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Section 35-F of central excise act, 1944

Prabhat Kumar 
on 10 July 2015

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Law has always been a dynamic subject and so is the interpretation of law. Section 35F of the Central Excise Acts provides deposit of “certain percentage of duty demanded or penalty imposed before filing of the appeal”. Earlier in this section earlier there used to be a proviso which provided the appellate authority discretion to dispense with the condition of pre-deposit in suitable cases. However by amendment in the section this discretion was taken away by the legislature. Now when no discretion is left with the appellate authority the appeal in the Central Excise is only maintainable when the deposit prescribed in the act is made. But there are thousands of cases in which the dispute arose much before the present amended proviso of the section 35-F of the Central Excise Act came into force but appeal are filed after amendment. What will be impact of amendment in section 35-F of the Central Excise Act, when appeal is filed after 06.08.2014 but ”Lis in the matter” arose before 06.08.2014, is the question I will try to answer in this paper.

Before examining the legal aspect of the section 35F, it is necessary to reproduce amended section 35F of the Central Excise Act, which is as follow:

“35F. Deposit, pending appeal, of duty demanded or penalty levied.- Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of central excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied: Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue. Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing. [Explanation,-For the purpose of this section “duty demanded” shall include,- (i) amount determined under section 11D; (ii) amount of erroneous Cenvat credit taken; (iii) amount payable under rule 57CC of Central Excise Rules, 1944; (iv) amount payable under rule 6 of Cenvat Credit Rules, 2001 or Centvat Credit Rules, 2002 or Cenvat Credit Rules, 2004; (v) interest payable under the provisions of this Act or the rules made thereunder.]”

The perusal of the above said section does not hint or indicate anything regarding the dispute which arose before the cut-off date of 01.08.2014 but appeal filed after 01.08.2014, all it suggest that appeal is only maintainable if certain prescribed deposit is made when the same is filed after 01.08.2014. It is certain that amended provision has not indicated in express terms regarding retrospective application of the dispute and it is well settled that any amendment particularly in the Tax statute has to be prospective unless and until the same has been made the retrospective by express provision in the amendment itself.

Now, when there is no express indication regarding retrospective applicability of amended section 35-F of the Central Excise Act, it has to be presumed prospective. Once it is prospective the pre-existing right of the appeal cannot be destroyed by the amendment and it continue to exist in terms of the old law i.e. in all cases where dispute started before 06.08.2014 and show cause notice was issued the noticee/assessee has a right to request for waiver of pre-deposit to the appellate authority in terms of un-amended proviso of section 35-F of the Central Excise Act 1944. This issue is well settled by the Hon’ble apex court in the matter of Hoosen Kasam Data (India) Limited VS State of Madhya Pradesh and others (1983) ELT (1277) S.C., with following observation:

10. Sri Ganapathy Aiyar urges that the language of Section 22(1) as amended clearly makes the section retrospective. The new proviso, it is pointed out, peremptorily requires the authority not to admit the appeal unless it be accompanied by a satisfactory proof of the payment of the tax in respect of which appeal is preferred and this duty the authority must discharge at the time the appeal is actually preferred before him. The argument is that after the amendment the authority has no option in the matter and he has no jurisdiction to admit any appeal unless the assessed tax be deposited. It follows, therefore, be necessary implication, according to the learned Advocate, that the amended provision applies to an appeal from an assessment order made before the date of amendment as well as to an appeal from an order made after that date. A similar argument was urged before the Calcutta Special Bench in Sardar Ali v. Dolimuddin (supra), namely, that after the amendment the Court had no authority to entertain an appeal without a certificate from the Single Judge. Rankin C.J., repelled this argument with the remark at p. 643 :

“Unless the contrary can be shown, the provision which takes away jurisdiction is itself subject to the implied saving of the litigants’ right.”

In our view the above observation is apposite and applies to the case before us. The true implication of the above observation as of the decisions in the other cases referred to above is that the pre-existing right of appeal is not destroyed by the amendment if the amendment is not made retrospective by express words or necessary intendment. The fact that the pre-existing right of appeal continues to exist must, in its turn, necessarily imply that the old law which created that right of appeal must also exist to support the continuation of that right. As the old law continues to exist for the purpose of supporting the pre-existing right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can then be no question of the amended provision preventing the exercise of that right. The argument that the authority has no option or jurisdiction to admit the appeal unless it be accompanied by the deposit of the assessed tax as required by the amended proviso to Section 22(1) of the Act overlooks the fact of existence of the old law for the purpose of supporting the pre-existing right and really amounts to begging the question. The new proviso is wholly inapplicable in such a situation and the jurisdiction of the authority has to be exercised under the old law which so continues to exist. The argument of Sri Ganapathy Aiyar on this point, therefore, cannot be accepted.

The Hon’ble Court while discarding the argument advanced by the state that amendment in the section is mere procedural change and does not affect the right to appeal held that the new requirement in reality affect the right itself and the same cannot be permitted. The relevant para is follows:  

“There can be no doubt that the new requirement “touches” the substantive right of appeal vested in the appellant. Nor can it be overlooked that such a requirement is calculated to interfere with or fetter, if not to impair or imperil, the substantive right. The right that the amended section gives a certainly less than the right which was available before. A provision which is calculated to deprive the appellant of the unfettered right of appeal cannot be regarded as a mere alteration in procedure. Indeed the new requirement cannot be said merely to regulate the exercise of the appellant’s pre-existing right but in truth whittles down the right itself and cannot be regarded as a mere rule of procedure”.

Once the issue is settled by the apex court the same is law of the land till date and we are duty bound to act accordingly as per Article 141 of the Constitution of India. The next question arise when it is considered that “lis arises” for the purpose of appeal under section 35-F of the Central Excise Act. The Hon’ble apex court in Hoosein Kasam Dada (India) Ltd (supra) has answered this in following words:

“Whenever there is a proposition by one party and an opposition to that proposition by another a `lis’ arises. It may be conceded, though not deciding it, that when the assessee files his return a `lis’ may not immediately arise, for under Section 11(1) the authority may accept the return as correct and complete. But if the authority is not satisfied as to the correctness of the return and calls for evidence, surely a controversy arises involving a proposition by the assessee and an opposition by the State. The circumstance that the authority who raises the dispute is him-self the judge can make no difference, for the authority raises the dispute in the interest of the State and in so acting only represents the State. It will appear from the dates given above that in this case the `lis’ in the sense explained above arose before the date of amendment of the section. Further, even if the `lis’ is to be taken as arising only on the date of assessment, there was a possibility of such a `lis’ arising as soon as proceedings started with the filing of the return or, at any rate, when the authority called for evidence and started the hearing and the right of appeal must be taken to have been in existence even at those dates. For the purposes of the accrual of the right of appeal the critical and relevant date is the date of initiation of the proceedings and not the decision itself.”

After amendment recently the Hon’ble High Court of Kerala, at Ernakulam in the matter of Jeevan Telecasting Corporation Ltd CCE, C. & ST, Cochin 2015 (320) ELT (63) Kerala and in the matter of Muthoot Finance Ltd Vs. Union of India 2015 (320) ELT 51 Kelara reiterated the law settled by the apex court in Hoosein Kasam Dada (India) Ltd (supra) and held as follow:

“I note in this connection that that recently, a Division Bench of the High Court of Telengana & Andhra Pradesh has taken a prima facie view that, inasmuch as the lis in question had commenced prior to the introduction of the amendment of the Finance Act, 1994 with effect from August 2014, the petitioner’s right of appeal as per the erstwhile provisions of law would not be affected by the provisions introduced by the amendment of 2014. Although not expressly referred to in the interim order dated 19.02.2014 passed by the High Court of Telengana & Andhra Pradesh in W.P. No. 3393/2015, the view seems to be consistent with the settled law that the institution of a suit carries with it an implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit and, further, that the right of appeal that is vested is to be governed by the Law prevailing at the date of institution of the suit or proceeding, and not by the law that prevails at the date of its decision or at the date of filing of the appeal. (See: Garikapati Veeraya vs N. Subbaiah Choudhry and other (AIR 1957 S.C. 540); Messrs Hoosein Kasam Dada (India) vs The State of Madhya Pradesh and Others (AIR 1953 S.C. 221; = 1983 (13) E.L.T 1277 (S.C) Vitthalbhai Naranbhai Patel vs Commissioner of Sales Tax M.P., Nagpur (AIR 1967 S.C. 344 and Ramesh Singh and Another Vs Cinta Devi and Others (1996 (3) SCC 142). In that view of the matter, I find that the petitioner, in whose case also the lis commenced in 2013, would not be required to deposit the amount of 7.5%, as required pursuant to the 2014 amendment, and in that respect, he would have an efficacious alternate remedy before the Tribunal where he can file an appeal, together with an application for waiver of pre-deposit and stay of recovery of the amounts confirmed against him by Ext. P6 order. At the time of filing the appeal, he will not be required to make any payment as a pre-condition for the hearing of the waiver application by the Tribunal.”

Considering the fact that amendment in law has to be prospective unless made retrospective in express terms the dispute/lis which was created before 01.08.2014 are entitled to be treated as per un-amended section 35-F of Central Excise Act and I sincerely hope that a necessary clarification will soon be issued by the board in this regard.  

PRABHAT KUMAR


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