Whether mandatory pre-deposit @7.5% also to be made for interest?

PJ/CASE LAW/2016-17/3154

Case:-AIRINDIA CHARTERS LTD VS COMMISSIONER OF SERVICE TAX-V, MUMBAI

Citation: -2016-TIOL-1273-CESTAT-MUM

Brief Facts:-Theapplicant filed this stay application in respect of interest demanded in the adjudication order. In the impugned order the adjudicating authority confirmed the demand of Cenvat Credit amounting to Rs.10,90,44,216/-, the same was reversed by the applicant before issuance of show cause notice hence the same was appropriated. In addition to the recovery of Cenvat amount the adjudicating authority also ordered for recovery of interest at appropriate rate under Section 75 of the Finance Act, penalty of Rs.12,000/- under Section 77 was also imposed. The appeal was filed before this Tribunal contesting only interest and penalty of Rs.5,000/-.

Appellant’s Contention:- The appellant paid the entire amount of Cenvat Credit and also 10% of the penalty imposed therefore the appeal deserves to be admitted in terms of Section 35F of the Act. He prays that stay may be granted from recovery of interest demanded under Section 75 of the Finance Act.

Respondent’s Contention:-The applicant has disputed interest and penalty. Therefore the applicant is required to deposit 7.5% of the interest amount in terms of Section 35F of the Act.

Reasoning Of Judgment:- Heard both sides. The provisions of section 35F are produced as follows:-

"Section 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 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 57CC of Central Excise Rules, 1944;
(iv) amount payable under rule 6 of CENVAT Credit Rules, 2001 or CENVAT Credit Rules, 2002 or CENVAT Credit Rules, 2004;
(v) interest payable under the provisions of this Act or the rules made thereunder."
From the above provision, it may be seen that where the duty and penalty are under dispute 7.5% of only duty amount has to be deposited in order to file the appeal before this Tribunal. In case only penalty is under dispute then 7.5% of the penalty amount is required to be deposited, in the present case there is a dispute of interest and penalty. As per the plain reading of the Section 35F of the Act, in the present case also only 10% of the penalty is required to be deposited for filing an appeal which the applicant have already deposited. As regard the contention of the Ld. AR that 7.5% of interest should also be deposited, Tribunal completely disagree with this contention for the reason that Section 35F of the Act, does not envisage for deposit of 7.5% or as the case may be 10% of interest amount. Therefore, in Tribunal’s considered view, the applicant is not required to deposit any amount towards interest. The applicant has deposited 10% of the penalty amount therefore the appeal is liable to be admitted. In this situation there is no need of filing any stay application.

Decision:-Application dismissed as infructuous.

Comment:- The gist of the case is that the section 35F of the Central Excise Act, 1944 prescribes mandatory pre-deposit at the rate of 7.5% of duty when duty and penalty are in dispute and 7.5% of penalty, if only penalty is in dispute. There is no provision as regards mandatory pre-deposit of interest. Consequently, if interest and penalty is in dispute, the provisions of mandatory pre-deposit have been deemed to be complied if 7.5% of the penalty is being deposited by the appellant.

Prepared By: - Alakh Bhandari

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PJ/CASE LAW/2016-17/3154

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