Requirement Of Pre-Deposit For Appeal Is A Statutory Obligation; No Obligation On Customs & Excise Department To Issue Defect Notice To Assessee: Kerala HC
The Kerala High Court observed that the requirement of pre-deposit for appeal is a statutory obligation and there is no obligation on the Central Excise & Customs Department (Tax Department) to issue a defect notice to an assessee even though it was a usual practice to point the same out in the interest of fairness.
The Bench noted that compliance with the pre-deposit requirement was a statutory obligation cast upon an assessee who chose to prefer an appeal before an Appellate Authority under the provisions of the Finance Act, 1994 (the Act).
A Division Bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. observed, “We find force in the submission of the learned counsel for the appellant that inasmuch as the requirement of pre-deposit is a statutory obligation cast upon an assessee who chooses to prefer an appeal before the Appellate Authority under the provisions of the Finance Act, 1994, as amended, as applicable to service tax, it was incumbent upon the respondent writ petitioner to have made the pre-deposit as a condition for maintaining the appeals before the Appellate Authority. In that sense, there was no obligation on the department to issue any defect notice to the assessee although it is a usual practice for the department to point this out to assessees in the interests of fairness…although the appellant had communicated the defect of non-payment of pre-deposit through emails sent to the email address of the respondent writ petitioner, he had not chosen to effect the payment of the mandatory pre-deposit.”
Advocate Vishnu Jayapalan represented the appellants, while SC Jose Joseph appeared for the respondent.
The Deputy Commissioner of the Tax Department had confirmed a demand of service tax against M/S. Western Interior Designers & Marine Contractors (Company). The Appellate Authority had dismissed the appeals preferred by the Company against the orders on the ground that the Company had not paid the mandatory pre-deposit of 7.5% of the confirmed amounts of tax while preferring the appeals before the Appellate Authority.
The Court explained that “while we find force in the submission of the learned counsel for the appellant that inasmuch as the requirement of pre-deposit is a statutory obligation cast upon an assessee who chooses to prefer an appeal before the Appellate Authority under the provisions of the Finance Act, 1994, as amended, as applicable to service tax, it was incumbent upon the respondent writ petitioner to have made the pre-deposit as a condition for maintaining the appeals before the Appellate Authority.”
The Bench stated that the company had failed to make the pre-deposit within the statutory period prescribed under the Act. It was pointed out that although the Appellate Authority communicated the defect through emails, the Company chose not to effect the payment of the mandatory pre-deposit.
The Court took into account that the Company had subsequently made the pre-deposit in compliance with the Court’s judgment. Given that the pre-deposit was accepted and the appeals restored, the Court decided not to interfere with the Single Judge's order to hear the appeals on their merits. However, the Court clarified that this decision should not set a precedent for future cases.
“The directions issued by the learned Single Judge to hear appeals on merits after restoring them to file, are not interfered with solely because we find that the appellant had chosen to comply with the directions of the learned Single Judge before filing this appeal by accepting the pre-deposit amount of 7.5% in both the statutory appeals referred above,” the Bench explained.
Accordingly, the High Court disposed of the appeal.
Cause Title: Commissioner (Appeals) v. M/S. Western Interior Designers & Marine Contractors (Neutral Citation: 2024:KER:36834)