CM APPL. 10241/2019 (exemption) in W.P. (C) 2178/2019

CM APPL. 10243/2019 (exemption) in W.P. (C) 2179/2019

1. Allowed, subject to all just exceptions.

2. Applications stand disposed of.

W.P.(C) 2178/2019 & W.P.(C) 2179/2019

1. These writ petitions have been preferred against the order passed by the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as "the CESTAT") on 29th January, 2019, whereby the CESTAT has directed the petitioners to deposit 7.5% of the service tax demand confirmed, against them, by the ADG(Adjudication), Director General of GST Intelligence.

2. We have heard Mr. L. Badri Narayanan, learned counsel appearing for the petitioner and Mr Satish Aggarwal, learned counsel for the respondent, at length, and examined the provisions of the Central Excise Act, 1944 (hereinafter referred to as "the Act"), especially Section 35F of the Act.

3. Section 35F of the Act, as it stood prior to 6th August, 2014, required an assessee, appealing to the CESTAT, to pre-deposit the entire amount of duty, penalty and interest, confirmed against it, by the lower adjudicating/appellate authority, as a condition for entertainment of its appeal, while retaining power, with the CESTAT, to, in appropriate cases, where undue hardship was shown to exist, waive, either in whole or in part, the said requirement of pre-deposit. Section 35F of the Act, as it stood prior to 6th August, 2014, read thus:

"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."

4. With effect from 6th August, 2014, however, Section 35F of the Act stands substituted by Section 105 of Finance (No.2) Act, 2014. As substituted, Section 35F reads thus:

"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 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 Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004."

5. The case sought to be set up, by the petitioner, in the writ petition – which Mr. L. Badri Narayanan did not seriously canvass during argument – is that, as the amendment (by way of substitution) of Section 35F of the Act took place after the period of dispute involved in the present case, the petitioner ought not to be mulcted with the condition of pre-deposit.

6. This issue is no longer res integra, having been conclusively decided by a Division Bench of this Court in Anjani Technoplast Ltd. v. Commissioner of Customs, 2015 (326) ELT 472 (Del.) [LQ/DelHC/2015/2272] .

7. The Show Cause Notice, in the said case, was issued to the appellant, Anjani Technoplast Ltd (hereinafter referred to as "ATL"), on 10th July, 2014, i.e., before the amendment of Section 35F (supra). ATL appealed, against the confirmation of the demand proposed in the show cause notice by the adjudicating authority, to the CESTAT which, vide its order dated 7th July, 2015, dismissed the appeal on the ground that ATL had not complied with the requirement of pre-deposit of 7.5 % of the duty demand confirmed against it, as required by Section 129E of the Customs Act, 1962 (which is in pari materia with Section 35F of the Central Excise Act.) Assailing the said order, ATL sought to contend, before this Court, that, as show cause notice had been issued to it prior to the amendment of Section 35F, the requirement of the mandatory pre-deposit as engrafted in the statute by the said amendment would not apply. Reliance was placed, inter alia¸ on the judgment of the Supreme Court in Hossein Kasam Dada (India) Limited v. The State of Madhya Pradesh, 983 (13) ELT 1277 (SC) – on which the petitioner, too, places reliance, in the present writ petition.

8. This Court noted that the amended Section 35F of the Act, and Section 129E of the Customs Act, 1962, had come in for incisive examination, by the High Court of Allahabad, speaking through Dr. D.Y. Chandrachud, Chief Justice, (as his Lordship then was), in Ganesh Yadav v U.O.I., 2015 (320) ELT 711 (All) [LQ/AllHC/2015/1409] , in respect of which para 9 of the judgment of this Court observes as under:

"9. Dealing with the specific question as to whether the amended Section 35F of the CE Act would apply to the case of the Assessee, the Allahabad High Court held that the words in the amended Section 35F indicated that on and after the date of its enforcement an Assessee in appeal was required to deposit the stipulated percentage of duty and if it failed to do so, the CESTAT shall not entertain the appeal. The amended Section 35F would, therefore, apply to all appeals filed on and from the date of the enforcement of the amended Section 35F of the CE Act……."

(Emphasis supplied)

9. Taking stock of similar pronouncements in other cases, this Court proceeded to hold, on the question of applicability of the amended provisions of Section 35F of the Central Excise Act, 1944 or Section 129E of the Customs Act, 1962, to cases in which the periods of dispute – and the date of issuance of show cause notice – were anterior to the amendment of the said provisions, thus (in paras 11 and 12 of the judgment):

"11. The decision of the learned Single Judge of the Madras High Court in Fifth Avenue Sourcing (P) Ltd. V. Commissioner of Service Tax (supra) also proceeds on the basis that the date of issuance of an SCN by itself creates a vested right in the noticee as regards the appeal that may be filed against the adjudication order pursuant to such SCN. As already observed, it is possible that pursuant to an SCN, the adjudication proceedings may be dropped if the adjudication authority comes to the conclusion that no demand requires to be created. Consequently, the relevant date if at all would be the date of creation of the demand which does not get crystallised till the adjudication order confirming the demand is passed. In any event, as far as the amended Section 129E of the Act is concerned, its wording is unambiguous. It opens with the words "The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal.... unless the appellant deposits the percentage of the demanded duty as stipulated in clauses (i), (ii) or (iii) thereunder." The wording of the second proviso to the amended Section 129E is also unambiguous. It makes it clear that the amended provision would not apply to appeals and stay applications already "pending" before the appellate authority "prior to the commencement of the Finance (No. 2) Act, 2014", i.e. 6th August 2014. In other words, it would apply to all appeals filed on or after the said date. Therefore, what is to be seen is the date of filing of the appeal. If the appeal is filed on or after 6th August 2014 then the condition stipulated in the amended Section 129E of the Act has to be fulfilled for the appeal to be entertained.

12. The Court notes that as far as the present case is concerned, the CESTAT had to apply the second proviso to the amended Section 129E of the Act since the appeal before it was filed after 6th August, 2014. Before this Court there is no challenge in these proceedings to the validity of the amended Section 129E of the Act. As regards the interpretation of the amended Section 129E of the Act, the Court concurs with the decision of the Allahabad High Court in Ganesh Yadav v. Union of India (supra) in the context of the identically worded Section 35F of the CE Act and holds that the amended Section 129E of the Act will apply to all appeals filed under Section 130 of the Act on or after 6th August, 2014."

(Emphasis supplied)

10. The Division Bench of the High Court of Jharkhand, speaking through one of us (D.N.Patel, Chief Justice), also examined, in detail, the amendment of Section 35F of the Central Excise Act, in Sri Satya Nand Jha v. Union of India, 2016 SCC OnLine Jhar 22323.

11. Appreciating, inter alia, the judgment in Hossein Kasam Dada (supra), it was held, in para 31 of the judgment, thus:

"31. In view of the aforesaid decision, endless litigations, arising out of waiver applications, have been brought to an end and looking to the very meager percentage of the amount to be deposited, Section 35F as amended cannot be said to be violative of Article 14 of the Constitution of India much less of Article 19(1)(g) of the Constitution of India.

(xix) Thus, even if the show-cause notice has been issued prior to 6th August, 2014 or even if the Order-in-Original is passed prior to 6th August, 2014 or even if, the company and few of its Directors have preferred appeals prior to 6th August, 2014, but, if the left out Director prefers appeal on or after 6th August, 2014, looking to the second proviso to substituted Section 35F, the newly substituted Section 35F shall be applicable, to his appeal and such an appellant, shall have to deposit 7.5% or 10% of the duty demanded or penalty levied, as the case may be. The fact as to whether it will be beneficial to the assessee or not, does not merit any consideration as individual benefit is not to be appreciated at all. Even if anybody has preferred appeal prior to 6th August, 2014 and his waiver application has been dismissed by the appellate authority which is confirmed up to the Hon‘ble Supreme Court and he was compelled to deposit 100% of the duty demanded, then also, if the left out Director or anyone has preferred appeal on or after 6 th August, 2014, he will have to deposit only 7.5% or 10% of the duty demanded or penalty levied."

12. In view of the above decisions, it can no longer lie in the mouth of any assessee, filing an appeal, before the CESTAT, after 6th August, 2014, to contend that, merely because the period of dispute, in its case, or the date when show cause notice was issued to it, was prior, in point of time to the amendment of Section 35F of the Central Excise Act/Section 129E of the Customs Act, it would not be required to make mandatory pre-deposit, or that it was entitled to seek waiver thereof, either in whole or in part.

13. Mr. L. Badri Narayanan also sought to contend that, though the Tribunal was incapacitated from entertaining any appeal in the absence of mandatory pre-deposit, this Court, in exercise of the inherent powers conferred on it by Article 226 of the Constitution of India, it was always possessed of the jurisdiction, in an appropriate case, to allow the appellant to prosecute its appeal before the CESTAT, without requiring to pay the mandatory pre-deposit.

14. To support this submission, he has placed reliance on the judgments of this Court in Pioneer Corporation v. Union of India, 2016 (340), ELT 63, Shubh Impex v. Union of India, 2018 (361) ELT 199 (Del) and Manoj Kumar Jha v. DRI, 2019 (365) ELT 166 (Del) [LQ/DelHC/2018/3038] .

15. He submits that it was in view of the said decisions that this Court had, vide its order dated 8 th March, 2019, passed in the present appeal, directed the respondent to ascertain the true financial status of his client.

16. There is no gainsaying the fact that, in Pioneer Corporation (supra) this Court, even while dealing with a case in which the appeal had been filed before the CESTAT after 6th August, 2014, nevertheless, allowed the appeal to be prosecuted on payment of partial pre-deposit, given the financial stringency in which the appellant, before it, was placed.

17. Shubh Impex (supra) and Manoj Kumar Jha (supra), for their part, merely followed Pioneer Corporation (supra), and, again keeping in view the financial position of the respective appellants in the said appeals, granted partial waiver of pre-deposit, despite the brooding omnipresence of Section 35F of the Central Excise Act and Section 129E of the Customs Act, 1962.

18. We are, however not persuaded to accept the submission of Mr.L. Badri Narayanan, for more than one reason.

19. A reading of the decisions in Pioneer Corporation (supra), Shubh Impex (supra) and Manoj Kumar Jha (supra), reveal that the attention of this Court had, in the said decisions, not been invited to its earlier judgment in Anjani Technoplast (supra) which set out, in clear and unambiguous terms, that every appeal, before the CESTAT, filed after the amendment of Section 35F/129E would be maintainable only if mandatory pre-deposit were made.

20. The Civil Appeal, preferred against the said decision, also stood dismissed by the Supreme Court, as reported in Anjani Technoplast Ltd. v, CCE, 2017 (348) E.L.T A132 (SC).

21. Dismissal of a Civil Appeal, it is trite, results in merger of the judgment of the High Court, with the order passed by the Supreme Court and, thereby, elevates the judgment of the High Court to the status of the pronouncement of the Supreme Court. In this context, one may refer to the following passages from Kunhayamed v. State of Kerala, (2000) 6 SCC 359 [LQ/SC/2000/1013] .

"32. It may be that in spite of having granted leave to appeal, the Court may dismiss the appeal on such grounds as may have provided foundation for refusing the grant at the earlier stage. But that will be a dismissal of appeal. The decision of this Court would result in superseding the decision under appeal attracting doctrine of merger. But if the same reasons had prevailed with this Court for refusing leave to appeal, the order would not have been an appellate order but only an order refusing to grant leave to appeal.

xxx xxx xxx

41. Once a special leave petition has been granted, the doors for the exercise of appellate jurisdiction of this Court have been let open. The order impugned before the Supreme Court becomes an order appealed against. Any order passed thereafter would be an appellate order and would attract the applicability of doctrine of merger. It would not make a difference whether the order is one of reversal or of modification or of dismissal affirming the order appealed against. It would also not make any difference if the order is a speaking or non- speaking one. Whenever this Court has felt inclined to apply its mind to the merits of the order put in issue before it though it may be inclined to affirm the same, it is customary with this Court to grant leave to appeal and thereafter dismiss the appeal itself (and not merely the petition for special leave) though at times the orders granting leave to appeal and dismissing the appeal are contained in the same order and at times the orders are quite brief. Nevertheless, the order shows the exercise of appellate jurisdiction and therein the merits of the order impugned having been subjected to judicial scrutiny of this Court.

xxx xxx xxx

44. To sum up our conclusions are:-

xxx xxx xxx

(vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.

xxx xxx xxx"

(Emphasis supplied)

22. In view of the aforesaid merger, of the judgment of the Division Bench of this Court in Anjani Technoplast (supra) with the order passed by the Supreme Court in appeal thereagainst, we are bound, by Article 141 of the Constitution of India, to follow the law laid down in Anjani Technoplast (supra), in preference to that laid down in Pioneer Corporation (supra), Manoj Kumar Jha (supra) and Shubh Impex (supra).

23. In the opinion of this Court, once the judgment in Anjani Technoplast (supra) stood merged with the dismissal of the Civil Appeal, preferred thereagainst, by the Supreme Court, there could be no question of this Court, in a subsequent case, adopting a view that an appeal, preferred before the CESTAT after 6th August, 2014, could be maintained without pre-deposit of the entire amount of duty confirmed against the concerned appellant by the authority below.

24. Equally, it is trite that no court can issue a direction to any authority, to act in violation of the law. A reading of Section 35F of the Central Excise Act reveals, by the usage of the peremptory words "shall not" therein, that there is an absolute bar on the CESTAT entertaining any appeal, under Section 35 of the said Act, unless the appellant has deposited 7.5 % of the duty confirmed against it by the authority below.

25. The two provisos in Section 35F relax the rigour of this command only in two respects, the first being that the amount to be deposited would not exceed Rs. 10 crores, and the second being that the requirement of pre-deposit would not apply to stay applications or appeals pending before any authority before the commencement of the Finance (No.2) Act, 2014, i.e. before 6 th August, 2014.

26. Allowing the CESTAT to entertain an appeal, preferred by an assessee after 6th August, 2014, would, therefore, amount to allowing the CESTAT to act in violation, not only of the main body of Section 35F but also of the second proviso thereto, and would reduce the command of the legislature to a dead letter.

27. That no court can direct an authority to act in violation of the law is settled in innumerable authorities, including, inter alia, ViceChancellor, University of Allahabad v. Dr. Anand Prakash Mishra, (1997) 10 SCC 264, [LQ/SC/1996/2208] A.B.Bhaskara Rao v. C.B.I, (2011) 10 SCC 259, [LQ/SC/2011/1290] Manish Goel v. Rohini Goel, (2010) 4 SCC 393 [LQ/SC/2010/164] and State of Bihar v. Arvind Kumar, (2012) 12 SCC 395 [LQ/SC/2012/594] .

28. Inasmuch as the judgment in Pioneer Corporation (supra), Shubh Impex (supra) and Manoj Kumar Jha (supra) are contrary to the law laid down in Anjani Technoplast (supra) as well as to the law laid down in Vice-Chancellor, University of Allahabad v. Dr. Anand Prakash Mishra (supra), A.B.Bhaskara Rao v. C.B.I. (supra), Manish Goel v. Rohini Goel (supra) and State of Bihar v. Arvind Kumar (supra), none of which have been noticed in the said decisions, it is not possible for us to follow the decisions in Pioneer Corporation (supra), Shubh Impex (supra) and Manoj Kumar Jha (supra), on which Mr. L. Badri Narayanan places reliance.

29. In view of the aforesaid facts, reasons and judicial pronouncements, the prayer of the petitioner for being permitted to prosecute its appeal before the CESTAT without complying with the condition of mandatory pre-deposit, cannot be granted. There is, therefore no substance in these writ petitions which are, consequently, dismissed.

30. At this stage, Mr. L. Badri Narayanan prays for extension of the time granted by the CESTAT, vide its order dated 29th January, 2019 to effect pre-deposit, so that his client could revive its appeal.

31. Having heard the counsel for respondent and looking into the facts and circumstances of the case, time to deposit the amount as per the CESTAT, Delhi dated 29th January, 2019 is hereby extended upto 15th November, 2019. If the amount is deposited by these petitioners before respondent as per the order dated 29th January, 2019 (Annexure-1 to the memo of the writ petitions) on or before 15th November, 2019, the appeals preferred by these petitioners before CESTAT Delhi shall be restored with the same number and will be heard on merit and in consideration of the evidence available on record, the decision will be delivered by CESTAT Delhi.

32. Subject to the above, these writ petitions stand dismissed.

CM APPL. 10240/2019 (Stay) in W.P. (C) 2178/2019

CM APPL. 10242/2019 (Stay) in W.P. (C) 2179/2019

33. In view of the order passed in W.P.(C) 2178/2019 and W.P.(C) 2179/2019, these applications stand disposed of.