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M/S SANTANI SALES ORGANISATION Vs. CENTRAL EXCISE, CUSTOMS AND SERVICE TAX APPELLATE TRIUBNAL, DELHI AND OTHERS
June, 05th 2018
$~
*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+               WRIT PETITION (CIVIL) No. 4551/2017

                                       Reserved on : 16th February, 2018
                                        Date of decision: 31st May, 2018

        M/S SANTANI SALES ORGANISATION               ..... Petitioner
                      Through Mr. J. K. Mittal, Advocate.

                           versus

        CENTRAL EXCISE, CUSTOMS AND SERVICE TAX
        APPELLATE TRIUBNAL, DELHI AND OTHERS ..... Respondents
                     Through Mr. Rajender Sahu, Advocate for
                      respondent Nos. 1 & 3.
                      Mr. Harpreet Singh, Sr. Standing Counsel for
                      Respondent No. 2.

        CORAM:
        HON'BLE MR. JUSTICE SANJIV KHANNA
        HON'BLE MR. JUSTICE CHANDER SHEKHAR

SANJIV KHANNA, J.:

        Question raised in the present writ petition is whether as per Section
35F of the Central Excise Act, 1944 (C.E. Act, for short) the petitioner-
assessee on filing of second appeal before the Central Excise, Customs and
Service Tax Appellate Tribunal (Tribunal, for short) is required to make an
additional pre-deposit of 10% of the duty and penalty in dispute, over and
above 7.5% pre-deposit made for filing of first appeal before the
Commissioner (Appeals).


W.P. (C) No. 4551/2017                                            Page 1 of 27
2.      The petitioner contends that they are required to make pre-deposit of
the balance 2.5%, of the duty and penalty, i.e., difference between 10% as
mandated for filing of second appeal before the Tribunal and 7.5% as
mandated for filing of first appeal before the Commissioner (Appeals).

3.      The petitioner has challenged validity of circular dated 27th April,
2017 issued by the Tribunal, based on the larger Bench decision of the
Tribunal in In Re: Quantum of Mandatory Deposit, reported as 2017 (349)
ELT 477 (Tri.-LB), stipulating that while preferring an appeal against an
order of Commissioner (Appeals), the appellants are required to deposit 10%
of the amount of duty and penalty imposed and confirmed separately and
over and above pre-deposit of 7.5% for filing first appeal before
Commissioner (Appeals).

4.      Second contention of the petitioner is that requirement of pre-deposit
mandated vide Section 35F of the C.E. Act, does not apply to service tax
appeals preferred under Sections 85 and 86 of the Finance Act, 1994.

5.      In view of the limited controversy and question for consideration, we
need not refer to the factual matrix in detail, except notice that the writ
petitioner - M/s Santani Sales Organisation has preferred second appeals
bearing Nos. ST 52898/2016 and ST 50372/2017 before the Tribunal against
the orders passed in the first appeal by the Commissioner (Appeals).
Disputed duty demand including Education and Secondary and Higher
Education Cess confirmed by Commissioner (Appeals) under challenge in
Appeal No. ST 52898/2016 is Rs.15,05,046/- and Rs.27,46,819/-, and in
Appeal No. ST 50372/2017 is Rs.24,44,138/-. The petitioner had deposited

W.P. (C) No. 4551/2017                                            Page 2 of 27
7.5% of the total duty and cess demand, amounting to Rs.3,19,000/- and
Rs.1,83,310/- respectively for the two appeals, as a pre-deposit before the
Commissioner (Appeals). While filing the second appeal before the
Tribunal, the petitioner made a further deposit of 2.5% of the duty and cess
demand under challenge of Rs.1,06,296/- and Rs.61,000/- respectively in
order to reach a figure of 10% of the disputed tax demand.

6.      The contention of the respondent-Revenue is that in terms of Section
35F of the C.E. Act, which is applicable to appeals before the Tribunal
against adjudication orders-in-original and appeals against the first appellate
orders, there has to be a fresh and separate deposit of 10% of total tax
demand and/or penalty in dispute. In other words, in case of second appeal,
the assessee would have to deposit 10% of the disputed duty demand and
penalty in addition to the pre-deposit of 7.5% already made before the first
appellate authority. Therefore, 17.5% of the duty demand and penalty has to
be paid.

7.      In order to decide the controversy, we would like to reproduce Section
35F of the C.E. Act, as it exists, after amendment made vide Finance (No. 2)
Act, 2014. The Section reads:-

        "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

W.P. (C) No. 4551/2017                                             Page 3 of 27
              Principal Commissioner of Central Excise or 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."

        Section 35F requires mandatory deposit of specified percentage of
duty demanded or penalty imposed before filing an appeal and stipulates that
the Tribunal or Commissioner (Appeals) shall not entertain any appeal,
unless pre-deposit of 7.5% or 10%, as the case may be, has been made. The


W.P. (C) No. 4551/2017                                                Page 4 of 27
said provisions are not applicable to stay applications or appeals pending
before any appellate authority prior to commencement of the Finance (No.
2) Act, 2014.

 8.     In order to interpret these clauses and the requirements stipulated
therein, we would like to first reproduce Section 35B(1) of the C.E. Act,
which reads as under:-

               "Section 35B. Appeals to the Appellate Tribunal. -
               (1) Any person aggrieved by any of the following orders may
               appeal to the Appellate Tribunal against such order -
               (a) a decision or order passed by the Principal Commissioner of
               Central Excise or Commissioner of Central Excise as an
               adjudicating authority;
               (b) an order passed by the Commissioner (Appeals) under
               Section 35A;
               (c) an order passed by the Central Board of Excise and Customs
               constituted under the Central Boards of Revenue Act, 1963 (54
               of 1963) (hereafter in this Chapter referred to as the Board) or
               the Appellate Principal Commissioner of Central Excise or
               Commissioner of Central Excise under Section 35, as it stood
               immediately before the appointed day;
               (d) an order passed by the Board or the Principal Commissioner
               of Central Excise or Commissioner of Central Excise , either
               before or after the appointed day, under Section 35A, as it stood
               immediately before that day :
               Provided that no appeal shall lie to the Appellate Tribunal and
               the Appellate Tribunal shall not have jurisdiction to decide any
               appeal in respect of any order referred to in clause (b) if such
               order relates to, -
               (a) a case of loss of goods, where the loss occurs in transit from
               a factory to a warehouse or to another factory, or from one
               warehouse to another, or during the course of processing of the


W.P. (C) No. 4551/2017                                               Page 5 of 27
               goods in a warehouse or in storage, whether in a factory or in a
               warehouse;
               (b) a rebate of duty of excise on goods exported to any country
               or territory outside India or on excisable materials used in the
               manufacture of goods which are exported to any country or
               territory outside India;
               (c) goods exported outside India (except to Nepal or Bhutan)
               without payment of duty ;
               (d) credit of any duty allowed to be utilised towards payment of
               excise duty on final products under the provisions of this Act or
               the rules made thereunder and such order is passed by the
               Commissioner (Appeals) on or after the date appointed under
               Section 109 of the Finance (No. 2) Act, 1998:
               Provided further that the Appellate Tribunal may, in its
               discretion, refuse to admit an appeal in respect of an order
               referred to in clause (b) or clause (c) or clause (d) where -
               (i) in any disputed case, other than a case where the
               determination of any question having a relation to the rate of
               duty of excise or to the value of goods for purposes of
               assessment is in issue or is one of the points in issue, the
               difference in duty involved or the duty involved;
               (ii) the amount of fine or penalty determined by such order,
               does not exceed Two lakh rupees;"

9.      As per clause (a) to Section 35B (1), any person aggrieved by an order
or decision of the Principal Commissioner of Central Excise or
Commissioner of Central Excise as the adjudicating authority, can file an
appeal before the Tribunal. In terms of clause (ii) of Section 35F, the
appellant, while filing an appeal against order referred to in clause (a) of
sub-section (1) of Section 35B, is required to deposit 7.5% of the duty, or
duty and penalty, or penalty, which is in dispute.




W.P. (C) No. 4551/2017                                              Page 6 of 27
10.     As per clause (b) to sub-section (1) of Section 35B, an assessee can
also file an appeal before the Tribunal against an order passed by the
Commissioner (Appeals), which is the first appellate authority in some
cases. As per clause (iii) of Section 35F, where an appeal is preferred
against an order referred to in clause (b) to sub-section (1) of Section 35B,
the appellant has to deposit 10% of the duty, or duty and penalty, or penalty,
which is in dispute in pursuance of the decision and order appealed against.
The distinction between clause (ii) and clause (iii) of Section 35F is
predicated on whether an appeal has been preferred against the order-in-
original or against the order passed by the first appellate authority, i.e.,
Commissioner (Appeals). In the former case, 7.5% of the duty and penalty
which is in dispute is to be pre-deposited. In the latter case, 10% of the duty
and penalty in dispute has to be pre-deposited. Thus, Section 35F draws
distinction on the quantum of pre-deposit depending on whether the appeal
is the first or the second appeal. In case decision of the first appellate
authority is challenged before the Tribunal, the pre-deposit is to be at the
higher figure of 10%, as opposed to a pre-deposit of 7.5%, which is required
to be made when the order-in-original is challenged in the first appeal before
the Tribunal.

11.     Clause (1) of Section 35 relates to appeals before Commissioner
(Appeals). Section 35(1) of the C.E. Act reads as under:-

               "Section 35. Appeals to Commissioner (Appeals). -
               (1) Any person aggrieved by any decision or order passed under
               this Act by a Central Excise Officer, lower in rank than a
               Commissioner of Central Excise , may appeal to the







W.P. (C) No. 4551/2017                                             Page 7 of 27
               Commissioner of Central Excise (Appeals) hereafter in this
               Chapter referred to as the Commissioner (Appeals) within sixty
               days from the date of the communication to him of such
               decision or order :
               Provided that the Commissioner (Appeals) may, if he is
               satisfied that the appellant was prevented by sufficient cause
               from presenting the appeal within the aforesaid period of sixty
               days, allow it to be presented within a further period of thirty
               days."

        As per clause (i) of Section 35F, the appellant-assessee is required to
deposit 7.5% of the duty and penalty in dispute pursuant to the order passed
by an officer below the rank of Principal Commissioner or Commissioner of
Central Excise.

12.     It is clear from the aforesaid provisions that a graded scale of pre-
deposit has been provided. In case of first appeal, whether before the
Tribunal or before the Commissioner (Appeals), 7.5% of the duty and
penalty in dispute must be deposited. In case of second appeal before the
Tribunal, the amount gets enhanced from 7.5% to 10%.

13.     An appeal, whether first or second, is continuation of original
proceedings. Further, appeal being a substantive right created by the statute
can be circumscribed by the conditions imposed by the Legislature,
including condition of pre-deposit. However, there are rulings that condition
of pre-deposit should not be so onerous and harsh so as to amount to an
unreasonable restriction, thereby rendering and making the right of appeal
illusory and delusive [See Seth Nand Lal And Another Vs. State of
Haryana And Others AIR 1980 SC 2097 and Mardia Chemicals Ltd. And


W.P. (C) No. 4551/2017                                             Page 8 of 27
Others Vs. Union of India And Others (2004) 4 SC 311]. In Law and
practice appeals are remedial right of critical importance because it
empowers the superior forum or court to come to the aid and redress error
and mistakes of the authority or courts below (See Sita Ram And Others Vs.
State of Uttar Pradesh AIR 1979 SC 745). Appellate Courts and Tribunals
in accord and in terms of the discretion vested by the statute and depending
on factual matrix would not impose conditions which are disproportionate as
to pare down this right to invoke a remedy and correct any error and,
therefore, violate the provisions creating the right i.e. reducing the right to
appeal to a farce and rendering it unrealistic. What would be harsh, onerous
and disproportionate depends on the facts and circumstances of each case
and what is stipulated and mandated by the statute.

14.      It would be appropriate here to refer to the two judgments of the
Supreme Court on the question of court fees in Lakshmi Ammal Vs. K.M.
Madhavakrishnan And Others, (1978) 4 SCC 15, and Gujarat State
Financial Corporation Vs. Natson Manufacturing Co. Pvt. Ltd. And
Others (1979) 1 SCC 193. In Lakshmi Ammal (supra) it was observed as
under:

                "2. It is unfortunate that long years have been spent by the
                courts below on a combat between two parties on the question
                of court fee leaving the real issues to be fought between them to
                come up leisurely. Two things have to be made clear. Courts
                should be anxious to grapple with the real issues and not spend
                their energies on peripheral ones. Secondly, the court fee, if it
                seriously restricts the rights of a person to seek his remedies in
                courts of justice, should be strictly construed. After all access to


W.P. (C) No. 4551/2017                                                  Page 9 of 27
                justice is the basis of the legal system. In that view, where there
                is a doubt, reasonable, of course, the benefit must go to him
                who says that the lesser court fee alone be paid."

                                                              (emphasis supplied)

         In Gujarat State Financial Corporation (supra) it was observed as
under:

                "11. ...............Let it be recalled at this stage that if the Court
                Fees Act is a taxing statute its provisions have to be construed
                strictly in favour of the subject litigant (vide State of
                Maharashtrav. Mishri Lal Tarachand Lodha). In a taxing
                statute the strict legal position as disclosed by the form and not
                the substance of the transaction is determinative of its taxability
                [vide Joint Commercial Tax Officer, Harbour Div. II,
                Madras v. Young Men's Indian Association (Regd.), Madras]. If
                it is a fee, the enormity of the exaction will be more difficult to
                sustain. While we do not pronounce, we indicate the
                implication of the High Court's untenable view.
                XXXX
                15. When dealing with a question of court fee, the perspective
                should be informed by the spirit of the magna carta and of equal
                access to justice which suggests that a heavy price tag on relief
                in Court should be regarded as unpalatable."
                                                               (emphasis supplied)


         These decisions relate to interpretation of Statutes imposing court fees
and taxing enactments on charging provisions in general. Charging
provision of the taxing law must be strictly construed. In taxing enactment
one should normally look at what is said in the provision, without reading
anything into it impliedly or on the basis of presumption, for there is no


W.P. (C) No. 4551/2017                                                   Page 10 of 27
room for any intendment [Federation of A.P. Chambers of Commerce of
Industry Vs. State of A.P, (2001) 247 ITR 36 (SC)]. We would keep the
said principles in mind while interpreting the provisions of law relating to
pre-deposit which curtails the right to appeal.

15.     Language of Section 35F of the C.E. Act is unchallenging and
meaning of words and conditions placed is plain and lucid. Requirement is
to pre-deposit 7.5% of the duty and penalty in dispute; and in case of the
second appeal pre-deposit of 10% of the duty and penalty in dispute is
mandated. We say so because of syntactic and adverbial clarity which is
apparent. The provision suffers from no ambiguity and is not open to diverse
interpretations. Section 35F of the C.E. Act should not be construed by
adding or substituting words to clarify and ironout assumed doubts. Intent as
cogently reflected in simple words is that the assessee on second appeal
should pre-deposit 10% of the total tax and penalty subject matter of the
appeal. It is not to ignore the pre-deposit of 7.5% already made to file first
appeal.     There is logic in increasing pre-deposit by 2.5% when second
appeal is filed, but we would be adding words to the plain and unambiguous
provision if we stipulate that 10% pre-deposit will be over and above 7.5%
pre-deposit made at the time of the first appeal. Expression or words 17.5%
or an additional 10% deposit instead of using mere 10% pre deposit have not
been used. Appropriateness of the meaning attached to 10% pre-deposit in
the context is apparent. In this context, two decisions of the Supreme Court
in Lakshmi Ammal (supra) and Gujarat State Financial Corporation
(supra) on strict construction of statutes relating to Court fee and charging



W.P. (C) No. 4551/2017                                            Page 11 of 27
section of tax enactments are relevant and support our interpretation on pre-
deposit of tax. In Sita Ram and Others (supra) it was observed:-

        "43. Of course, procedure is within the Courts power, but where it
        pares down pre-judicially the very right, carving the kernel out, it
        violates the provision creating the right. Appeal is a remedial right
        and if the remedy is reduced to a husk by procedural excess, the right
        became a casualty. That cannot be."


16.     On careful perusal of the aforesaid provisions as elucidated, it is
difficult to accept the plea and contention of the Revenue and the reasoning
given by the Larger Bench of the Tribunal in In Re: Quantum of
Mandatory Deposit (supra), which is as under:-

               "6.1 It can be seen from the above reproduced Sections, the
               dispute is basically only on the point as to the pre-deposit
               mandated for preferring second appeal before the Tribunal. It
               was submitted that CBECs Circular dated 16-9-2004 (sic)
               indicates the clear intention of legislature. On reading the said
               Circular we find in Paragraph No. 2, more specifically 2.1, the
               Circular only states that in the event of appeal of appellant
               against order of Commissioner (Appeals) before the Tribunal,
               10% is to be paid on the amount of duty demanded or penalty
               imposed by the Commissioner (Appeals).              In fact, the
               clarification given by the Board does not indicate what is in the
               mind of the law makers enacting while the provisions of
               Section 35F of the Central Excise Act, 1944 and Section 129E
               of the Customs Act, 1962. Be that as it may, we find that the
               said provisions of pre-depositing an amount for preferring 1st
               appeal against the adjudication order needs to be done so, at the
               rate of 7.5% of the duty confirmed or the penalty imposed as
               the case may be. This would mean that the first appeal can be
               entertained only deposit of such an amount and on conclusion
               of the proceedings, he has option to go further in appeal before

W.P. (C) No. 4551/2017                                              Page 12 of 27
               first appellate authority or if the appeal is disposed of, amount
               pre-deposited by him which is equivalent to 7.5% of the duty
               confirmed or penalty imposed as the case may be, needs to be
               refunded in accordance with law.
               6.2 As regards the second appeal preferred against the first
               appellate authoritys order, the quantum of pre-deposit has been
               set at 10% instead of 7.5% of the duty confirmed or penalty
               imposed. In our view both the appellate proceedings i.e. before
               the first appellate authority and before the Tribunal, it is to be
               treated as an independent provisions then deposits as mandated
               needs to be made. In short, in order to prefer an appeal before
               the Tribunal, an assessee/appellant needs to deposit 10% of the
               amount of duty confirmed or the penalty imposed as the case
               may be irrespective of the amounts equivalent to 7.5%
               deposited by them for preferring an appeal to the first appellate
               authority. On reading of provisions of pre-deposits under
               Central Excise Act, 1944 and Customs Act, if an assessee or
               importer wishes to exercise his statutory right of second appeal,
               then the said exercise of right it needs to be considered as an
               independent right and proceeding subsequent to pre-deposit of
               the amount to exercise first appeal needs to be considered as
               having come to closure. In that case, an assessee or importer as
               the case may seeks legal remedies available to them, as regards
               mandatory pre-deposits made before first appellate authority, it
               needs to be decided in accordance with law."

        Paragraph 6.1 of the order in In Re: Quantum of Mandatory Deposit
(supra) refers to the circular issued by the Central Board of Excise and
Customs dated 16th September, 2014, which we will refer to subsequently.
Thereafter, reference is made to the statutory provisions and the requirement
to pre-deposit 7.5% or 10%, as the case may be, in case of first appeal and
second appeal. It is observed that on decision of an appeal being in favour of
the assessee, the amount deposited has to be refunded in accordance with


W.P. (C) No. 4551/2017                                               Page 13 of 27
law. Paragraph 6.2 refers to second appeal and states that the quantum of
deposit has been set at 10% instead of 7.5% of the duty confirmed or penalty
imposed. This is the correct legal position, as noticed above, on which there
cannot be any lis. Thereafter, in our opinion, it has been erroneously
observed that this deposit of 10% has to be independent of the deposit at the
first appellate stage, or a fresh deposit for once the duty or penalty has been
confirmed, the pre-deposit of 7.5% made for preferring an appeal before the
first appellate authority stands obliterated and is of no consequence. The
reasoning correctly observes the legal position that the right to second
appeal is a statutory right, but then states that second appeal is independent
of the right of first appeal. Appeals whether first or second are continuation
of the original proceedings.

17.     In the counter affidavit filed on behalf of the first respondent,
reference is made to a decision of the Principal Bench of the Tribunal dated
27th March, 2015 in the case of M/s Balajee Structural (India) Private
Limited versus CCE, Raipur, Interim Order No. IO/14/2015-[CR], holding
that if the appellant had deposited 10% of the duty confirmed before
preferring the appeal before the Tribunal, there would be sufficient
compliance of the provision for mandatory deposit. The decision does not
support the stand and stance of the Revenue.

18.     However, similar view in favour of the Revenue was expressed by the
Tribunal, Eastern Zonal Bench, Kolkata in Hindalco Industries Limited and
Others versus Commissioner of Central Excise, Kolkata-II, 2016-TIOL-




W.P. (C) No. 4551/2017                                             Page 14 of 27
3050-CESTAT-KOL. The reasoning given by the Tribunal in this case,
which is in paragraph 4.2, is rather interesting and reads as under:-

               "4.2 It is observed from the case records that neither Section
               35F(iii) of the Central Excise Act, 1944 nor CBEC Circular
               dated 16.09.2014 specifically mention whether 10% deposit
               required before appeal is entertained should be inclusive or
               exclusive of 7.5% deposit made before the first appellate
               authority. It is a well known fact that success rate of
               departmental cases before the appellate authorities is very poor.
               That is the reason that percentage of deposit required to be
               made before the first appellate authorities is as low as 7.5% of
               the disputed amounts or penalties. After success at the level of
               first appellate authority may be Legislature wants that the case
               has passed one test of first appeal successfully and Revenue
               deserves an additional 10% of the duty or penalty as deposit till
               the issue is finally decided in the second appellate stage. In any
               case, Appellant is not at a loss in the above procedure of paying
               additional 10% of deposit, because in case Appellant wins then
               appellant is eligible to interest from the date of deposit it made,
               as per Section 35FF of the Central Excise Act, 1944 or Section
               129EE of the Customs Act, 1962, all introduced w.e.f.
               06.08.2014. In case appellant looses(sic) the case, then also
               Appellant will have to pay lesser interest for the period when
               amount was lying with the department as deposit."
        The Tribunal in the aforesaid paragraph records that the success rate
of departmental cases before the Tribunal was very poor. This was the
reason why pre-deposit of 7.5% in case of first appeal, and 10% in case of
second appeal, was required to be made. Higher deposit of 10% was
justified as the demand had survived test of first appeal. Reasoning observes
that the assessee would not be at loss even if they were asked to pay an
additional amount of 10%, for the amount would be refunded to the assessee
with applicable interest in case they succeed.

W.P. (C) No. 4551/2017                                                Page 15 of 27
19.     It is difficult to accept and appreciate the second part of reasoning, for
we have to interpret the provision as it exists. When required and necessary,
principles applicable to jurisprudence and law of appeals can be applied for
assistance and clarification in interpretation. Refunds are always paid when
tax, duty or penalty is not due and payable. It is not a grace or peculiar.
Interest is compensatory in character, as the compulsory pre-deposit denies
and deprives the assessee of the right to utilize his money. The two grounds
recorded would not matter and help us in interpreting Section 35F of the
C.E. Act.

20.     Our opinion and ratio that difference between 7.5% and 10% is
required as a pre-deposit, gets affirmation in view of Circular
No.984/08/2014-CX dated 16th September, 2014, which has been referred to
by the Tribunal in In Re: Quantum of Mandatory Deposit (supra).
Paragraphs 2 and 3 of the said Circular read as under:-

        "2. Quantum of pre-deposit in terms of Section 35F of Central
        Excise Act, 1944 and Section 129E of the Customs Act, 1962:
        2.1 Doubts have been expressed with regard to the amount to be
        deposited in terms of the amended provisions while filing appeal
        against the order of Commissioner (Appeals) before the CESTAT.
        Sub-section (iii) of Section 35F of the Central Excise Act, 1944 and
        Section 129E of the Customs Act, 1962 stipulate payment of 10% of
        the duty or penalty payable in pursuance of the decision or order
        being appealed against i.e. the order of Commissioner (Appeal). It is,
        therefore, clarified that in the event of appeal against the order of
        Commissioner (Appeal) before the Tribunal, 10% is to be paid on the
        amount of duty demanded or penalty imposed by the Commissioner
        (Appeal). This need not be the same as the amount of duty demanded
        or penalty imposed in the Order-in-Original in the said case.



W.P. (C) No. 4551/2017                                                Page 16 of 27
        2.2 In a case, where penalty alone is in dispute and penalties have
        been imposed under different provisions of the Act, the pre-deposit
        would be calculated based on the aggregate of all penalties imposed in
        the order against which appeal is proposed to be filed.
        2.3 In case of any short payment or non-payment of the amount
        stipulated under Section 35F of the Central Excise Act, 1944 or
        Section 129E of the Customs Act, 1962, the appeal filed is liable for
        rejection.
        3.      Payment made during investigation:
        3.1 Payment made during the course of investigation or audit, prior
        to the date on which appeal is filed, to the extent of 7.5% or 10%,
        subject to the limit of Rs.10 crores, can be considered to be deposit
        made towards fulfillment of stipulation under Section 35F of the
        Central Excise Act, 1944 or Section 129E of the Customs Act, 1962.
        Any shortfall from the amount stipulated under these sections shall
        have to be paid before filing of appeal before the appellate authority.
        As a corollary, amounts paid over and above the amounts stipulated
        under Section 35F of the Central Excise Act, 1944 or Section 129E of
        the Customs Act, 1962, shall not be treated as deposit under the said
        sections.
        3.2 Since the amount paid during investigation/audit takes the
        colour of deposit under Section 35F of the Central Excise Act, 1944
        or Section 129E of the Customs Act, 1962 only when the appeal is
        filed, the date of filing of appeal shall be deemed to be the date of
        deposit made in terms of the said sections.
        3.3 In case of any short-payment or non-payment of the amount
        stipulated under Section 35F of the Central Excise Act, 1944 or
        Section 129E of the Customs Act, 1962, the appeal filed by the
        appellant is liable for rejection."


        Paragraph 2.1 above supports interpretation propounded by the
petitioner, for it stipulates pre-deposit of 10% of the duty or penalty is


W.P. (C) No. 4551/2017                                             Page 17 of 27
payable on an appeal filed against an order of the Commissioner (Appeals).
The quantum to be deposited should be computed based on the amount of
duty demanded or penalty imposed confirmed by the Commissioner
(Appeals), and need not be the same as the duty or demand of penalty
imposed in the order-in-original. Thus, where the amount of duty or penalty
is partly reduced, computation of 10% pre-deposit for filing a second appeal
would be done from the reduced amount, and not on the basis of duty and
penalty imposed in the order-in-original. Paragraph 3 stipulates that the pre-
deposit would include deposits or payments made prior to the passing of the
order-in-original. This is relevant. Deposits made during the pendency of the
proceedings, or even after the order-in-original is passed, have to be taken
into consideration for determining and deciding whether condition of pre-
deposit of 7.5% or 10% has been satisfied. Earlier deposits do not get
obliterated and are not to be treated as inconsequential. Equally pertinent is
the second sentence in paragraph 3.1, which states that any shortfall from
the amount stipulated in the Section shall have to be paid before filing of an
appeal before the appellate authority.
21.     Second contention of the petitioner relating to inapplicability of
section 35F of the C.E. Act, i.e. Central Excise Act, to appeals preferred
before the Tribunal under Section 86 of the Finance Act, is however,
without merit and has to be rejected. Sections 83, 85 and 86 of the Finance
Act, as they presently are, read as under:

        "83. Application of certain provisions of Act 1 of 1944 .--The
        provisions of the following sections of the Central Excises Act, 1944,



W.P. (C) No. 4551/2017                                            Page 18 of 27
        as in force from time to time, shall apply, so far as may be, in relation
        to service tax as they apply in relation to a duty of excise: --
            [sub-section (2-A) of Section 5-A, sub-section (2) of Section 9-A],
            9AA, 9B, 9C, 9D, 9E, 11B, 11BB, 11C, 12, 12A, 12B, 12C, 12D,
            [12E, 14, [15, 15A, 15B], 31, 32, 32A to 32P (both inclusive),
            33A, 34A, 35EE, 35F] [35FF] to 35-O (both inclusive), 35Q,
            [35R,] 36, 36A, 36B, 37A, 37B, 37C, 37D, 38A and 40.
            xxx
        85. Appeals to the Commissioner of Central Excise (Appeals).--
        (1) Any person aggrieved by any decision or order passed by an
        adjudicating authority subordinate to the Commissioner of Central
        Excise may appeal to the Commissioner of Central Excise (Appeals).
        (2) Every appeal shall be in the prescribed form and shall be verified
        in the prescribed manner.
        (3) An appeal shall be presented within three months from the date of
        receipt of the decision or order of such adjudicating authority, relating
        to service tax, interest or penalty under this Chapter made before the
        date on which the Finance Bill, 2012 receives the assent of the
        President:
            Provided that the Commissioner of Central Excise (Appeals) may,
            if he is satisfied that the appellant was prevented by sufficient
            cause from presenting the appeal within the aforesaid period of
            three months, allow it to be presented within a further period of
            three months.
        (3-A) An appeal shall be presented within two months from the date
        of receipt of the decision or order of such adjudicating authority,
        made on and after the Finance Bill, 2012 receives the assent of the
        President, relating to service tax, interest or penalty under this
        chapter:
            Provided that the Commissioner of Central Excise (Appeals) may,
            if he is satisfied that the appellant was prevented by sufficient


W.P. (C) No. 4551/2017                                               Page 19 of 27
           cause from presenting the appeal within the aforesaid period of
           two months, allow it to be presented within a further period of one
           month.
        (4) The Commissioner of Central Excise (Appeals) shall hear and
        determine the appeal and, subject to the provisions of this Chapter,
        pass such orders as he thinks fit and such orders may include an order
        enhancing the service tax, interest or penalty:
           Provided that an order enhancing the service tax, interest or
           penalty shall not be made unless the person affected thereby has
           been given a reasonable opportunity of showing cause against such
           enhancement.
        (5) Subject to the provisions of this Chapter, in hearing the appeals
        and making order under this section, the Commissioner of Central
        Excise (Appeals) shall exercise the same powers and follow the same
        procedure as he exercises and follows in hearing the appeals and
        making orders under the Central Excise Act, 1944.
        86. Appeals to Appellate Tribunal.--(1) Save as otherwise provided
        herein, an assessee aggrieved by an order passed by a Commissioner
        of Central Excise under Section 73 or Section 83-A xxx, or an order
        passed by a Commissioner of Central Excise (Appeals) under Section
        85, may appeal to the Appellate Tribunal against such order within
        three months of the date of receipt of the order:
        Provided that where an order, relating to a service which is exported,
        has been passed under Section 85 and the matter relates to grant of
        rebate of service tax on input services, or rebate of duty paid on
        inputs, used in providing such service, such order shall be dealt with
        in accordance with the provisions of Section 35-EE of the Central
        Excise Act, 1944:
        Provided further that all appeals filed before the Appellate Tribunal in
        respect of matters covered under the first proviso, after the coming
        into force of the Finance Act, 2012 and pending before it up to the
        date on which the Finance Bill, 2015 receives the assent of the

W.P. (C) No. 4551/2017                                              Page 20 of 27
        President, shall be transferred and dealt with in accordance with the
        provisions of Section 35-EE of the Central Excise Act, 1944
        (1-A)(i) The Board may, by order, constitute such Committees as may
        be necessary for the purposes of this Chapter.
        (ii) Every Committee constituted under clause (i) shall consist of two
        Chief Commissioners of Central Excise or two Commissioners of
        Central Excise, as the case may be.
        (2) The Committee of Chief Commissioners of Central Excise] may,
        if it objects to any order passed by the Commissioner of Central
        Excise under Section 73 or Section 83-A [xxx], direct the
        Commissioner of Central Excise to appeal to the Appellate Tribunal
        against the order:
        Provided that where the Committee of Chief Commissioners of
        Central Excise differs in its opinion against the order of the
        Commissioner of Central Excise, it shall state the point or points on
        which it differs and make a reference to the Board which shall, after
        considering the facts of the order, if is of the opinion that the order
        passed by the Commissioner of Central Excise is not legal or proper,
        direct the Commissioner of Central Excise to appeal to the Appellate
        Tribunal against the order.
        (2-A) The Committee of Commissioners may, if it objects to any
        order passed by the Commissioner of Central Excise (Appeals) under
        Section 85, direct any Central Excise Officer to appeal on its behalf to
        the Appellate Tribunal against the order:
        Provided that where the Committee of Commissioners differs in its
        opinion against the order of the Commissioner of Central Excise
        (Appeals), it shall state the point or points on which it differs and
        make a reference to the jurisdictional Chief Commissioner who shall,
        after considering the facts of the order, if is of the opinion that the
        order passed by the Commissioner of Central Excise (Appeals) is not
        legal or proper, direct any Central Excise Officer to appeal to the
        Appellate Tribunal against the order.

W.P. (C) No. 4551/2017                                              Page 21 of 27
        Explanation.--For the purposes of this sub-section, "jurisdictional
        Chief Commissioner" means the Chief Commissioner having
        jurisdiction over the concerned adjudicating authority in the matter.
         (3) Every appeal under sub-section (2) or sub-section (2-A) shall be
        filed within four months from the date on which the order sought to
        be appealed against is received by the Committee of Chief
        Commissioners or, as the case may be, the Committee of
        Commissioners.
        (4) The Commissioner of Central Excise or [any Central Excise
        Officer subordinate to him or the assessee, as the case may be, on
        receipt of a notice that an appeal against the order of the
        Commissioner of Central Excise or the Commissioner of Central
        Excise (Appeals) has been preferred under sub-section (1) or sub-
        section (2) or sub-section (2-A) by the other party may,
        notwithstanding that he may not have appealed against such order or
        any part thereof, within forty-five days of the receipt of the notice, file
        a memorandum of cross-objections, verified in the prescribed manner,
        against any part of the order of the Commissioner of Central Excise or
        the Commissioner of Central Excise (Appeals), and such
        memorandum shall be disposed of by the Appellate Tribunal as if it
        were an appeal presented within the time specified in sub-section (3).
        (5) The Appellate Tribunal may admit an appeal or permit the filing
        of a memorandum of cross-objections after the expiry of the relevant
        period referred to in [sub-section (1) or sub-section (3)] or sub-section
        (4) if it is satisfied that there was sufficient cause for not presenting it
        within that period.
        (6) An appeal to the Appellate Tribunal shall be in the prescribed
        form and shall be verified in the prescribed manner and shall,
        irrespective of the date of demand of service tax and interest or of
        levy of penalty in relation to which the appeal is made, be
        accompanied by a fee of,--



W.P. (C) No. 4551/2017                                                 Page 22 of 27
              (a) where the amount of service tax and interest demanded and
              penalty levied by any Central Excise Officer in the case to
              which the appeal relates is five lakh rupees or less, one
              thousand rupees;
              (b) where the amount of service tax and interest demanded and
              penalty levied by any Central Excise Officer in the case to
              which the appeal relates is more than five lakh rupees but not
              exceeding fifty lakh rupees, five thousand rupees;
              (c) where the amount of service tax and interest demanded and
              penalty levied by any Central Excise Officer in the case to
              which the appeal relates is more than fifty lakh rupees, ten
              thousand rupees:
              Provided that no fee shall be payable in the case of an appeal
              referred to in sub-section (2) or sub-section (2-A) or a
              memorandum of cross-objections referred to in sub-section (4).
        (6-A) Every application made before the Appellate Tribunal,--
              (a) in an appeal [xxx] for rectification of mistake or for any
              other purpose; or
              (b) for restoration of an appeal or an application, shall be
              accompanied by a fee of five hundred rupees:
              Provided that no such fee shall be payable in the case of an
              application filed by the Commissioner of Central Excise or
              Assistant Commissioner of Central Excise or Deputy
              Commissioner of Central Excise, as the case may be, under this
              sub-section.]
        (7) Subject to the provisions of this Chapter, in hearing the appeals
        and making orders under this section, the Appellate Tribunal shall
        exercise the same powers and follow the same procedure as it
        exercises and follows in hearing the appeals and making orders under
        the Central Excise Act, 1944."









W.P. (C) No. 4551/2017                                            Page 23 of 27
        Section 83 of the Finance Act states that stipulated provisions of the
C.E. Act, as in force from time to time and as they apply in relation to a duty
of excise, shall apply in relation to service tax. Section 35F of the C.E. Act
by virtue of Section 83 of the Finance Act equally applies to service tax
appeals. The words or expression "as in force from time to time" and "as
they apply to in relation to duty of excise" in Section 83 of the Finance Act
with reference to the stated provisions of the C.E. Act, clearly reflects and
clinches the issue that the legislature wanted subsequent amendments in the
enumerated sections of the C.E. Act, would equally apply to service tax.
This is the case of reference or citation of one or more sections into other
statute and not reference by incorporation. Sometimes distinction between
incorporation by reference and adoption of provisions by mere reference or
citation is difficult to draw, but in the present case in view of the clear
legislative mandate and the language used in Section 83 of the Finance Act,
this difficulty does not arise. We, therefore, need not expound and refer to
the said distinction in detail in the present case. Contention of the petitioner
that Section 35F of the C.E. Act, has undergone drastic amendments w.e.f.
6th August, 2014 and the new stipulations in Section 35F of the C.E. Act are
completely different, whereas reference under Section 83 of the Finance Act
to Section 35F of the C.E. Act was with reference to earlier Section 35F,
consequently fails and has to be rejected. As already indicated above, this is
a case of reference or citation, therefore, the amended provisions of Section
35F would apply, as it is specifically stipulated in Section 83 of the Finance
Act that relevant provisions of C.E. Act indicated therein as in force from
time to time will apply. No doubt, Section 35F of the C.E. Act as quoted


W.P. (C) No. 4551/2017                                              Page 24 of 27
above refers to appeals under Section 35(1) or Section 35 of the C.E. Act but
this quotation and reference is to the C.E. Act. In the context of service tax
appeals, Sections 85 and 86 of the Finance Act apply, albeit by virtue of
Section 83 of the Finance Act stipulations and requirements of Section 35F
of the C.E. Act will get attracted and apply.

22.     Reliance was placed by counsel for the petitioner on decision of the
Delhi High Court in M/s.Glyph International Limited Vs. Union of India
2014 (34) STR 727 (Delhi). In the said case the Tribunal had ruled that an
appeal in respect of refund or rebate claim was not maintainable before them
in view of Section 35EE of the C.E. Act, which section finds mention in
Section 83 of the Finance Act after its amendment in the year 2011 (sic,
2012). The said ruling was over-turned and set aside, observing that the
Parliament had always intended that the remedy should be available in
respect of refund or rebate claims and amendment of Section 83 in 2012 did
not disturb the appeal remedy under Section 86 of the Finance Act. The
amendment did not limit the appellate power in any manner whatsoever and
reliance was placed upon the decision of the Supreme Court in Subal Paul
Vs. Malina Paul and Another (2003) 10 SCC 361, wherein it has been held
as under:

                "21. If a right of appeal is provided for under the Act, the
                limitation thereof must also be provided therein. A right of
                appeal which is provided under the Letters Patent cannot be
                said to be restricted. Limitation of a right of appeal in
                absence of any provision in a statute cannot be readily
                inferred. It is now well-settled that the appellate jurisdiction of
                a superior court is not taken as excluded simply because


W.P. (C) No. 4551/2017                                                 Page 25 of 27
                subordinate court exercises its special jurisdiction. In G.P.
                Singh's ,,Principles of Statutory Interpretation. It is stated:
                         "The appellate and revisional jurisdiction of superior
                         courts is not taken as excluded simply because the
                         subordinate court exercises a special jurisdiction. The
                         reason is that when a special Act on matters governed by
                         that Act confers a jurisdiction to an established court, as
                         distinguished from a persona designata, without any
                         words of limitation then, the ordinary incident of
                         procedure of that court including any general right of
                         appeal or revision against its decision is attracted."
                22. But an exception to the aforementioned rule is on matters
                where the special Act sets of it a self-contained Code the
                applicability of the general law procedure would be impliedly
                excluded.           (See         Upadhyaya         Hargovind
                Devshanker v. Dhirendrasinh Virbhadrasinnhji Solanki).
                                                          (emphasis supplied)"


23.     Section 86 of the Finance Act provides for an appeal before the
Tribunal and Section 83 of the Finance Act makes Section 35F of the C.E.
Act equally applicable. Section 35F of the C.E. Act is the provision which
relate to pre-deposit, a mandatory provision for the appeal to be
maintainable and heard. If the interpretation given by petitioner is accepted
we would be rendering a part of Section 83 of the Finance Act referring to
Section 35F of the C.E. Act altogether otiose and redundant. Decision is
Glyph International Limited (supra) is in different context of right to appeal
before the Tribunal given vide Section 86 of the Finance Act, and whether
the right to appeal before the Tribunal was subsequently taken away and
withdrawn. The court felt that reference to Section 33 EE of the C.E. Act in
Section 83 of the Finance Act would not make any difference and the

W.P. (C) No. 4551/2017                                                  Page 26 of 27
Tribunal continues to possess jurisdiction vide Section 86 of the Finance Act
to decide matters relating to rebate or refund. This decision is of no avail
and does not help us to decide the controversy in question.              Second
contention raised by the petitioner is accordingly decided against them.

24.     Accordingly, we would allow the present writ petition and set aside
the order and direction of the Tribunal that the petitioner must deposit
additional 10% of the duty and penalty in dispute for the second appeal to be
heard and adjudicated. We would also quash the circular dated 27th April,
2017 issued by the Tribunal. It is directed that the petitioner and others on
filing second appeal before the Tribunal are required to deposit 10% of the
amount of duty/ penalty as confirmed by the first appellate authority
inclusive of 7.5% pre-deposit made for the first appeal. 10% would not be
in addition to and over and above 7.5% of pre deposit made for the first
appeal. However, contention that Section 35F of the C.E. Act does not
apply to service tax appeals and therefore no pre-deposit is required to be
made is rejected. In the facts of the case there would be no order as to costs.



                                                (SANJIV KHANNA)
                                                    JUDGE



                                              (CHANDER SHEKHAR)
                                                   JUDGE
        May 31st, 2018
        VKR/ssn



W.P. (C) No. 4551/2017                                              Page 27 of 27

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