Whether deposit under Section 35F of Act is mandatory and if the appellant had failed to comply with the requirement of pre-deposit in pursuance of the order and in absence of any cause being shown, the appeal was liable to be dismissed and was accordingl

PJ/Case Laws/2012-13/1161

Case:- BIHARIJI PACKAGING VERSUS UNION OF INDIA

Citation: - 2012 (281) E.L.T. 377 (ALL)
Issue: - Whether deposit under Section 35F of Act is mandatory and if the appellant had failed to comply with the requirement of pre-deposit in pursuance of the order and in absence of any cause being shown, the appeal was liable to be dismissed and was accordingly dismissed?

Brief fact: - The Appellant is engaged in manufacture of goods classified under Tariff Heading 32.91 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant having been found to have committed certain irregularities in relation to the excise law, hence a show cause notice dated 30-1-2009 was issued to the appellant which was contested by them by filing reply dated 1-5-2009. After receipt of reply, the Assistant Commissioner, Lucknow by the order dated 29-1- 2010 confirmed the demand to the tune of Rs. 4,86,472/- while appropriating an amount of 4,86,500/- already deposited by the appellant and also ordered payment of interest on the said amount of duty, besides imposing equal amount of penalty. Further. 27775.00 Kgs. plastic granules valued at Rs. 26,94,175/- were ordered to be confiscated while giving option to redeem the same on payment of redemption fine of Rs. 6,75,000/- and further, penalty of Rs. 38,850/- was also imposed under Rule 15(1) of the Cenvat Credit Rules, 2004. Being aggrieved, the appellants filed an appeal before the Commissioner (Appeals) along with application for dispensing with the requirement of pre-deposit. The said application was disposed of by an order dated 1-6-2010 directing for deposit of 50% of the entire amount of penalty within two weeks from the receipt of the copy of the said order. However, the appellant did not deposit the amount but under its letter dated 14-6-2010 submitted that the financial condition was very poor and the appellant was facing acute financial hardship and, therefore, requested for modification of the said order. After hearing, the Commissioner (Appeals), by an order dated 17-8-2010 held that the appellant had failed to comply with the requirement of pre-deposit and in absence of any cause being shown, the appeal was liable to be dismissed and was accordingly dismissed. The appeal preferred against the impugned order dated 17-8-2010, has been dismissed by the Tribunal on the ground that deposit under Section 35F of Act is mandatory hence in absence of fault on the part of the appellant to make deposit, the appellate authority has rightly dismissed the appeal.
Present appeal under Section 35G of Central Excise Act, 1944 (in short the Act), has been preferred against the impugned order passed by the Customs, Excise & Service Tax Appellate Tribunal (in short the Tribunal), dated 15-3-2011 12011 (271) E.L.T. 80 (Tri.-Del.)

Appellant Contention: - The Appellant submit that a decision dated 23-5-2011, rendered by the Division Bench of this Court of which one of us (Hon'ble Mr. Justice Devi Prasad Singh) was a member, is based on different facts and hence is not applicable. Further submission is that the provision of Section 35F is not mandatory. Only the application moved by the appellant was rejected by the appellate authority hence, it was not incumbent on the appellate authority to dismiss the appeal on the ground that pre-deposit was not made in pursuance of the order dated 1-6-2010. Further submission is that the excise duty was already deposited hence, it was not incumbent on the appellate authority to dismiss the appeal only because of lack of pre-deposit of amount on the part of the appellant in pursuance of the order dated 1-6-2010.
The Appellant's Counsel has laid much emphasis on the Apex Court judgment reported in (1993) 1 SCC 22: Shyam Kishore and Others v. Municipal Corporation of Delhi and Another.

Respondent contention :- The Respondents would submit that the provisions of Section 35F is mandatory so, when the appellate authority had exercised powers on the application moved by the appellate himself partly dispensing the deposits by the order dated 1-6-2010. Submission is that pre-deposit of the excise has direct nexus with the statutory adjudication of dispute in question.

Reasoning of judgement :- The provision is that subject to rider contained in proviso to Section 35F which provides that whenever in any particular case, the Commissioner (Appeals) or Appellate Tribunal is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals), as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the interest of revenue. The emphasis is to secure the interest of Revenue. The purpose of the provision is that while passing any order, it shall be incumbent on the appellate authority to ensure that tax imposed or penalty levied, in any case, be not frustrated and the assessee may not escape the liability with regard to the payment of duty for any reason whatsoever. The proviso further provides that whenever 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. Thus, the provisions contained with regard to disposal of application also seem to be mandatory. Meaning thereby whenever an application is moved, it shall be decided within thirty days.
It is true that even if the Legislature has not provided the consequence on account of non-deposit of demand or penalty levied in Section 35F of the Act, the natural consequence will be the dismissal of appeal without entering into the merit of the controversy. Accordingly, the Allahabad High Court are of the view that in case the duty demanded or penalty levied is not deposited by the assessee in pursuance of the decision taken or application decided under Section 35F of the Act, the appeal shall be liable to be dismissed. But while dismissing the appeal it shall not be incumbent on the appellate authority to enter into merit of the controversy. The analogy may be drawn from provisions where the appeal is filed after delay without application under Section 5 of Limitation Act. In case the delay is not condoned, then the Court has to dismiss the appeal without entering into the merit of the controversy. In view of the above, though, Section 35F does not provide consequence with regard to non-payment of duty or penalty but the natural consequence will be the dismissal of the appeal without entering into the merit of the controversy.
From the aforesaid discussions, the observations made and the finding recorded by the Tribunal does not seem to suffer from any impropriety or illegality. In view of catena of judgment of Hon'ble Supreme Court and this Court, question of law involved is no more res integra.
In view of the above, the question raised by the appellant counsel, does not seem to res integra which may require framing substantial question of law. However, The Allahabad High court permit the appellant to deposit the dues in terms of the order dated 1-06-2010 passed by the appellate authority within six week from today. In case the appellant deposit the dues before the appellate authority, then the appeal shall be heard on merit in accordance with law. The amount deposited if any shall be adjusted in terms of the order dated 1-06-2010.

Decision: -Appeal disposed off

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PJ/Case Laws/2012-13/1161

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