Jhar HC | Mandatory pre-deposit not to be waived off by Court under amended S. 35-F, Central Excise Act until exceptional grounds of undue financial hardships is proved beyond doubt

Jharkhand High Court

Jharkhand High Court: A Division Bench of Aparesh Kumar Singh and Anubha Rawat Choudhary, JJ., refused prayer for grant of waiver and dismissed petition being devoid of merit.

The present case related to the petitioner company engaged in manufacturing of  M.S. Ingots falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985 and procuring raw materials required for manufacture of sponge iron, pig iron, scrap, coal, etc. for the use in the manufacturing of this M.S. Ingot. A search was conducted by the officials of Central Excise Department on 04-12-2015 and Central Excise duty along with education cess and secondary and higher secondary education cess along with interest aggregating Rs 11,73,32,395 was imposed under section 11-AC(1)(c) of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules. A official order was passed by Commissioner, Central Goods and Service Tax and Central Excise, Jamshedpur. The petitioner Company voluntarily deposited Rs 37,50,000  to be appropriated against the confirmed demand of duty. Further, penalty of Rs 11,73,32,395 was imposed in terms of Section 11AC(1)(c) of CEA read with Rule 25 of CER, 2002. Separate penalty of Rs 2 crore and Rs 1 crore respectively was imposed upon the two Directors Raj Jaiswal and Gyan Chand Jaiswal under Rule 26 of CER, 2002. Aggrieved by the said order appeal was filed for grant of 7.5% of waiver in pre-deposit which was rejected by CESTAT Kolkata. Hence the instant petition is filed for waiver of the pre deposition of the amount as per Section 35 F of the Central Excise Act.

Amended Section 35F of CEA reads as under

“35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.- The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal.-

(i) under sub-section (1) of Section 35, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Principal Commissioner of Central Excise or Commissioner of Central Excise;

(ii) against the decision or order referred to in clause (a) of sub-section(1) of section 35B, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;

(iii) against the decision or order referred to in clause (b) of sub-section(1) of section 35B, unless the appellant has deposited ten per cent of the duty, in case where duty or duty and penalty are in dispute,

or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;

Provided that the amount required to be deposited under this section shall not exceed rupees ten crores;

Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act, 2014.

Explanation.- For the purposes 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 6 of the Cenvat Credit Rules, 2001 or the Central Credit Rules, 2002 or the Cenvat Credit Rules, 2004.”

The counsel for the petitioners, Sumit Gadodia submitted that the petitioners are facing financial crisis due to drop in sale and economic slowdown in the market. They had lost reputation in business circle due to false allegation and supply market has diminished. They further relied on the judgment titled Pioneer Corporation v.Union of India [2016 (340) ELT63 (Del.)] stating High Court can exercise discretion and reduce the pre-deposit in rare and deserving cases, notwithstanding the amendment made under Section 35F of CEA.

The counsel Ratnesh Kumar represented the respondents.

The Court after hearing the parties held that under the amended section 35-F of C.E.A, there is no provision for making an application for waiver of pre-deposit before the learned CESTAT, as was available under the pre-amended section 35-F. It was further submitted that Section 35-F, as quoted above, regulates the right to appeal under section 35 and 35-B and is conditional upon making pre-deposit under Section 35-F. No exceptional grounds of undue hardship for waiver of mandatory pre-deposit under section 35-F of CEA, 1944, as amended with effect from 06th August 2014 was made out. Therefore, there would be no appeal in the eyes of law in absence of such pre-deposit under the amended Section 35-F.

In view of the above appeal rejected and dismissed. [Raj Jaiswal v. Union of India, 2020 SCC OnLine Jhar 714, decided on 31-07-2020]

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