Later Statutory 10% Pre-Deposit For Appeal Cannot Cure Earlier 50% Pre-Deposit Default: CESTAT Hyderabad

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has held that a later statutory requirement of a 10% pre-deposit could not cure an earlier failure to comply with a 50% deposit condition imposed for pursuing an appeal.

The amended Section 35F of the Central Excise Act, 1944, introduced a mandatory 10% pre-deposit from August 6, 2014. Since the appeal had already been dismissed on July 23, 2014 for failure to comply with the 50% condition, the later provision could not be used to cure the default.

The coram comprised Judicial Member Angad Prasad and Technical Member A.K. Jyotishi.

The tribunal observed, “The subsequent compliance with the amended requirement of 10% pre-deposit cannot retrospectively validate the appeal which had already stood dismissed under the then applicable statutory provisions. Accepting such a contention would amounts to giving retrospective effect to the amendment, which is not permissible.”

The case concerned ECI BJCL JV, which executed EPC works contracts for construction of dams, reservoirs, canals and allied structures for the Government of Andhra Pradesh between June 2007 and March 2012. A show cause notice demanded service tax of ₹43.86 lakh under Works Contract Service.

The adjudicating authority confirmed the demand on January 9, 2014. The company then appealed before the Commissioner (Appeals) and sought a waiver of the amount it would have to deposit to pursue the appeal.

The Commissioner rejected an adjournment request and, by a June 13, 2014 stay order, directed the company to deposit 50% of the tax demand. This 50% was not a percentage fixed by the statute, but the condition imposed by the Commissioner under the then-applicable Section 35F.

The company did not comply with the condition, and the Commissioner dismissed its appeal on July 23, 2014. It later challenged the dismissal before the tribunal, arguing that the underlying tax dispute had not been considered.

The company relied on Lanco Infratech Ltd. v. Commissioner of Central Excise, Belapur, contending that construction of dams, canals and similar EPC projects was not liable to service tax. It also argued that the Commissioner had not considered its prima facie case, balance of convenience and financial hardship.

The tribunal rejected this challenge. It found that the Commissioner had given the company an opportunity of personal hearing and had recorded reasons for directing the 50% deposit. The cases relied upon by the company were distinguishable because they involved inadequate hearings or unreasoned orders.

On the amended Section 35F, the tribunal held that the case continued to be governed by the old provision. The later 10% deposit, therefore, could not fix the earlier failure to comply with the condition imposed under the old law.

The tribunal also rejected the natural justice argument. It observed that simply asking for an adjournment did not mean the request had to be granted. Since the Commissioner had recorded reasons for refusing it, there was no procedural illegality warranting the tribunal's interference.

The tribunal accordingly upheld the Commissioner (Appeals)' order and dismissed the appeal.

For Appellant: C.S. Srinivas, Consultant

For Respondent: Dr. T.V. Rajesh, Authorised Representative