The High Court dismissed petitions challenging Section 35F of the Central Excise Act, holding that the pre-deposit requirement applies to appeals filed on or after 06/08/2014, regardless of notice dates, ruling the section constitutionally valid.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
THURSDAY, THE 14TH DAY OF JULY 2016/23RD ASHADHA, 1938
WP(C).No. 9991 of 2016 (Y)
PETITIONER(S):
M/S. MUTHOOT FINANCE LIMITED, MUTHOOT CHAMBERS, BANERJI ROAD, COCHIN-682 018, REPRESENTED BY ITS AUTHORIZED SIGNATORY MR.MANOJ JACOB.
BY ADVS.SRI.JOSE JACOB, AMRITHA VARSHINI M.
RESPONDENT(S):
1. UNION OF INDIA, REPRESENTED BY SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI-110 001.
2. CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BRANCH, BANGALORE.
3. COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, C.R. BUILDING, I.S. PRESS ROAD, KOCHI-682 018.
BY ADVS. SRI.JOHN VARGHESE, SC. SRI.THOMAS MATHEW NELLIMOOTTIL, SC.
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 01/06/2016, ALONG WITH WP(C).NO.10881 OF 2016 AND CONNECTED CASES, THE COURT ON 14/07/2016 DELIVERED THE FOLLOWING:
rs.
WP(C).No. 9991 of 2016 (Y)
APPENDIX
PETITIONER'S EXHIBITS:-
| EXT.P1: | TRUE COPY OF THE SUB REPRESENTATIVE AGREEMENT DATED 20.12.2010. |
|---|---|
| EXT.P2: | TRUE COPY OF THE ORDER DATED 31.12.2014. |
| EXT.P3: | TRUE COPY OF THE JUDGMENT IN WP(C).NO.4616 OF 2015(B) DATED 04.03.2015. |
| EXT.P4: | TRUE COPY OF THE ORDER DATED 11.05.2015. |
| EXT.P5: | TRUE COPY OF THE JUDGMENT IN WP(C).NO.17144 OF 2015(P) DATED 09.06.2015. |
| EXT.P6: | TRUE COPY OF THE APPEAL AND STAY APPLICATION BEFORE THE CESTAT DATED 31.07.2015. |
| EXT.P7: | TRUE COPY OF THE JUDGMENT BY DIVISION BENCH DATED 29.10.2015. |
| EXT.P8: | TRUE COPY OF THE ORDER BY CESTAT DATED 17.02.2016. |
RESPONDENT'S EXHIBITS:- NIL.
//TRUE COPY//
P.S. TO JUDGE
rs.
A.M.SHAFFIQUE, J
*** * * * * * * * * * * *** W.P.C.Nos.9991, 10881, 11288, 20393, 20638, 20668, 21346, 21348, 21354 & 22732 of 2016
Dated this the 14th day of July 2016
J U D G M E N T
Since these cases concern a common issue, the same are
decided by a common judgment.
W.P.C.No.9991/2016 & conn.cases
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09/06/2015 permitting the petitioner to pursue the alternate remedy of filing an appeal before the 2nd respondent, with permission to seek waiver of the mandatory pre-deposit of 7.5%. Petitioner preferred an appeal before the 2nd respondent without depositing the amount along with an application for stay. In the meantime, revenue preferred an appeal against the judgment dated 09/06/2015 in W.P.C.No.17144/2015. The Division Bench disposed of the appeal as per judgment dated 29/10/2015 setting aside the said judgment and observed that it is for the appellate Tribunal to take a decision in the matter.
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appeal without insisting on pre-deposit of 7.5% under Section 35F of the Act. It is contended that the appeal being a continuation of the earlier proceedings which commenced much earlier, the insistence for payment of 7.5% is illegal. In the present case, the Commissioner of Central Excise, Customs & Service Tax has passed an order on 29/02/2016, which is challenged by way of filing an appeal as per Ext.P2.
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prevailing at the date of institution of suit or proceeding and not at the date of its decision or filing of appeal.
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of a deposit of 10% is in the case of an appeal to the Tribunal against an order of the Commissioner (Appeals). The 2nd proviso makes it clear 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 Finance (No.2) Act, 2014. It is contended that Sec.35F will apply to all appeals that are filed after 06/08/2014. It is contended that the settled legal position is that vested right of appeal can be taken away by a subsequent enactment either by an express provision or by necessary intendment. Reliance is placed on the Constitution Bench judgment in Garikapati Veeraya v N.Subbaih Choudhury [AIR 1957 SC 540] and the judgment of the Apex Court in Jose Da Costa and Another v. Bascora Sadasiva Sinai Narcomim and others [(1976) 2 SCC 917] . In the latter case, Supreme Court had drawn two exceptions to general rule that a right of appeal is a substantive right and institution of the suit carries with it the implication that all successive appeals available under the law then in force would be preserved to the parties to the suit throughout the rest of the career of the lis. The exceptions are when by competent enactment such right of appeal is taken away
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expressly or impliedly with retrospective effect and when the court to which appeal lay at the commencement of the suit stands abolished. It is further contended that though the above provision is challenged before the Allahabad High Court, the constitutional validity was upheld. Similar challenges were made before Delhi, Karnataka and the Gujarat High Court's and the constitutional validity of Section 35F was upheld by these Courts.
“Section 35F-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.
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(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 percent 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 percent 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.......”
a continuation of the proceedings. But, there are well settled exceptions to general rule. A Statute can take away the said
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right. The question is whether the said right can be taken away by Section 35F. There is no dispute that Section 35F has come into effect on 06/08/2014. Section 35F imposes a restriction on the Tribunal or the Commissioner (Appeals) to entertain any appeal. The Section starts with the following words:
“The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal.”
Therefore, the restriction imposed is on entertaining any appeal. It definitely means that any appeal filed after 06/08/2014 cannot be entertained unless the pre-deposit is made in terms with the Statute. The second proviso is only a clarification which states that the provision will not apply to stay applications and appeals pending before any appellate authority prior to the commencement of the Act. Therefore, when the Statute itself makes it clear that the right of appeal is subject to certain restrictions with effect from a particular date, the general rule that the law relating to appeal which is a vested right that accrues to the litigant as on the date of commencement of lis will not be applicable. This position of law has been well settled by the Apex Court in Hoosein Kasam Dada (supra).
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“17. Thus, the principle of law which emerges is that the right of appeal is a vested right and the right to enter a superior Court or Tribunal accrues to a litigant as on and from the date on which the lis commences although it may actually be exercised when the adverse judgment is pronounced. Such a right is governed by the law which prevails on the date of institution of the suit or proceeding and not by the law that prevails at the date of the decision or on the date of the filing of an appeal. Moreover, the vested right of an appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise.
18. Justice G.P. Singh in his treatise on Statutory Interpretation has succinctly elucidated the principles to be applied in determining whether a statute is retrospective or not, in the following words:
"(ii) Statutes dealing with substantive rights.- It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have
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retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the Legislature to affect existing rights, it is "deemed to be prospective only 'nova constitutio futuris formam imponere debet non praeteritis [2 c. Int. 392]". In the words of LORD BLANESBURG, "provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment." "Every statute, it has been said", observed LOPES, L.J., "which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transactions already past, must be presumed to be intended not to have a retrospective effect". As a logical corollary of the general rule, that retrospective operation is not taken to be intended unless that intention is manifested by express words or necessary implication, there is a subordinate rule to the effect that a statute or a section in it is not to be construed so as to have larger retrospective operation than its language renders necessary. In other words close attention must be paid to the language of the statutory provision for determining the scope of the retrospectivity intended by Parliament."
(emphasis supplied)
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19. Parliament while substituting the provisions of Section 35F of the Central Excise Act, 1944 by Finance Act (No. 2) of 2014, has laid down that the Tribunal or the Commissioner (Appeals) "shall not entertain any appeal" unless the appellant has deposited the duty or, as the case may be, a penalty to the stipulated extent. These words in Section 35F of the Act would indicate that on and after the enforcement of the provision of Section 35F of the Act, as amended, an appellant has to deposit the duty and penalty as stipulated and unless the appellant were to do so, the Tribunal shall not entertain any appeal. This provision would, therefore, indicate that it would apply to all appeals which would be filed on and from the date of the enforcement of Section 35F of the Act.
20. The intendment of Section 35F of the Act is further clarified by the second proviso which stipulates that the provisions of the section shall not apply to stay applications and appeals which were pending before any appellate authority prior to the commencement of Finance (No.2) Act 2014. The second proviso is a clear indicator that Parliament has exempted the requirement of complying with the pre-deposit as mandated by Section 35F(1) of the Act as amended only in the case of those stay applications and appeals which were pending before any appellate authority prior to the commencement of Finance (No. 2) Act 2014. Consequently, both by virtue of the opening words of Section 35F(1) of the Act as well as
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by the second proviso to the provision, it is clear that appeals which are filed on and after the enforcement of the amended provision on 6 August 2014 shall be governed by the requirement of pre-deposit as stipulated therein. The only category to which the provision will not apply that would be those where the appeals or, as the case may be, stay applications were pending before the appellate authority prior to the commencement of Finance (No. 2) Act 2014.
21. Our attention has been drawn to a judgment of the learned Single Judge of the Kerala High Court in Muthoot Finance Ltd. v. Union of India 2015-TIOL-632HC-KERALA-ST. The Kerala High Court has referred to an interim order passed by the Andhra Pradesh High Court in K Rama Mohanarao v. Union of India MANU/AP/0298/2015 : 2015-TIOL-511-HC-AP-CX. The Kerala High Court while adverting to the interim order referred to 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. With great respect, the judgment of the learned Single Judge of the Kerala High Court has not considered the express language which has been used in the amended provisions of Section 35F (1) of the Act. The order of the Andhra Pradesh High Court which was relied upon in the judgment of the Kerala High Court is only an interim order.
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22. For these reasons, we hold that the petitioner would not be justified in urging that the amended provisions of Section 35F(1) of the Act would not apply merely on the ground that the notice to show cause was issued prior to the enforcement of Finance (No. 2) Act, 2014. We find no merit in the constitutional challenge. The petition shall accordingly stand dismissed for the aforesaid reasons.”
“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
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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.”
“It is not disputed by learned counsel for the petitioner that he has filed the appeal after the amendment was made in Section 35F of the Central Excise Act. Therefore, the amended provisions would apply and the appeal of the appellant before the CESTAT would not be maintainable in absence of deposit of an amount equivalent to 7.5% of the
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confirmed amount of duty liability. The other aspect of the matter is that if the argument of the learned counsel for the petitioner is accepted then he is required to pre-deposit 100% of the excise duty levied on him as he has not filed any waiver application under the old provision before the Tribunal exempting him from making any pre-deposit. The Legislature has granted benefit to the assessees by fixing pre-deposit equivalent to 7.5% or 10% of the confirmed amount of duty liability as per the provisions of Section 35F of the Central Excise Act, 1944.”
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16/09/2014, clarification has been issued by the Government of India, Ministry of Finance, that the amended provisions apply to appeals filed after 06/08/2014. Sections 35F of the Central Excise Act, 1944 and 129F of the Customs Act, 1962 contain specific saving clause to state that all pending appeals/stay applications filed till the enactment of the Finance Bill shall be governed by the aforesaid provisions. In the said circumstances, I do not think that a case has been made out for challenging the constitutional validity of Sec.35F. Therefore, the petitioners are liable to deposit 7.5% or 10%, as the case may be, for preferring appeals before the Commissioner (Appeals) or the Tribunal.
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challenge the notification, it shall be open for the petitioner to challenge the same.
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In the result, these writ petitions are dismissed.
(sd/-)
(A.M.SHAFFIQUE, JUDGE)
jsr
3 issues framed by the court
Whether Section 35F of the Central Excise Act imposing pre-deposit conditions applies to appeals filed after 06/08/2014 even if proceedings commenced earlier.
Whether the constitutional validity of Section 35F is barred by the vested right of appeal protected by the second proviso.
Whether Section 35F applies to appeals filed under Section 85 of the Finance Act regarding service tax.
Colour shows how this judgement treated each authority
Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh and OthersExplained¶44
Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh and Others [AIR 1953 Supreme Court 221] · Who else cites this
Garikapati Veeraya v N.Subbaih ChoudhuryRelied on¶51
Garikapati Veeraya v N.Subbaih Choudhury [AIR 1957 SC 540] · Who else cites this
Jose Da Costa and Another v. Bascora Sadasiva Sinai Narcomim and othersRelied on¶51
Jose Da Costa and Another v. Bascora Sadasiva Sinai Narcomim and others [(1976) 2 SCC 917] · Who else cites this
M/s. Ganesh Yadav v. Union of IndiaApplied¶73
Ganesh Yadav v. Union of India [2015(320) E.L.T 711 (All)]
Anjani Technoplast Ltd. v. Commissioner of CustomsApplied¶92
Anjani Technoplast Ltd. v. Commissioner of Customs [2015 (326) E.L.T 472 (Del.)]
Premier Polyspin Pvt. Ltd v. Union of IndiaApplied¶97
Premier Polyspin Pvt. Ltd v. Union of India [2015-TIOL-1265HC-AHM-CX]
Arjun Industries Limited v. Commissioner of Customs, JaipurApplied¶102
Arjun Industries Limited v. Commissioner of Customs, Jaipur [2015 (320) E.L.T 497(Raj.)]
M/s. Dream Castle v. Union of India and OthersApplied¶103
M/s. Dream Castle v. Union of India and Others [2016-TIOL-1009-HC-MAD ST]
3 provisions across 2 enactments
M/s. Muthoot Finance Limited
Union of India
Customs, Excise and Service Tax Appellate Tribunal, South Zonal Branch, Bangalore
Commissioner of Central Excise, Customs & Service Tax, Kochi
A.M. Shaffique
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
