Case Note & Summary
The appellant, Nimbus Communications Limited, entered into an agreement and was subjected to a service tax demand. The appellant filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) against the demand. The Tribunal dismissed the appellant's stay application on the ground that the appellant failed to comply with the mandatory pre-deposit of 7.5% of the tax amount demanded, as required by the amended Section 35F of the Central Excise Act, 1944, which came into effect on 6 August 2014. The appellant then filed the present appeal before the Bombay High Court, raising substantial questions of law regarding the applicability of the amended provision to appeals where the lis (the original dispute) arose prior to the amendment. The High Court admitted the appeal on three substantial questions of law: (1) whether the right of appeal being a vested right, the law as applicable at the commencement of the lis or at the date of filing of appeal applies; (2) whether the second proviso to amended Section 35F can be interpreted to apply to all appeals filed after 6 August 2014 even if the lis arose prior; and (3) whether the amended provision reduces or fetters the vested right of appeal. With consent of both sides, the court took up the appeal for final disposal. The court held that the right of appeal is a vested right that accrues at the commencement of the lis, and procedural amendments that impose new conditions on the exercise of that right cannot be applied retrospectively to appeals arising from a lis that began before the amendment. The court found that the amended Section 35F, by requiring a pre-deposit of 7.5%, imposes a fetter on the right of appeal and cannot be applied to the appellant's case as the lis arose prior to 6 August 2014. Accordingly, the court allowed the appeal, set aside the Tribunal's order, and directed the Tribunal to hear the stay application without insisting on the pre-deposit under the amended provision.
Headnote
A) Central Excise - Vested Right of Appeal - Section 35F Central Excise Act, 1944 - The right of appeal is a vested right that accrues at the commencement of the lis, and procedural amendments that impose new conditions on the exercise of that right cannot be applied retrospectively to appeals arising from a lis that began before the amendment. The court held that the amended pre-deposit requirement under Section 35F, effective from 6 August 2014, does not apply to appeals where the lis arose prior to that date, as it would fetter the vested right of appeal. (Paras 1-4) B) Central Excise - Retrospective Operation of Procedural Law - Section 35F Central Excise Act, 1944 - Procedural laws are generally retrospective unless they affect substantive rights. However, when a procedural amendment imposes a new condition that restricts the right of appeal, it cannot be applied to pending lis unless expressly made retrospective. The court held that the second proviso to amended Section 35F does not indicate an intention to apply to appeals arising from a lis prior to 6 August 2014. (Paras 2-4)
Issue of Consideration
Whether the amended Section 35F of the Central Excise Act, 1944, requiring pre-deposit of 7.5% of the tax amount, applies to appeals filed after 6 August 2014 when the lis (the original dispute) arose prior to that date, and whether such amendment impinges upon the vested right of appeal.
Final Decision
The appeal is allowed. The order of the Customs, Excise and Service Tax Appellate Tribunal dated 17 December 2015 is set aside. The Tribunal is directed to hear the stay application afresh without insisting on the pre-deposit under the amended Section 35F of the Central Excise Act, 1944.
Law Points
- Vested right of appeal
- Retrospective application of procedural law
- Pre-deposit condition
- Section 35F Central Excise Act 1944
- Amendment effective from 6 August 2014
