Case Note & Summary
The High Court of Karnataka heard a batch of writ petitions filed by several assessees, including Hindustan Petroleum Corporation Ltd., Prestige Garden Constructions Pvt. Ltd., Exora Business Parks Pvt. Ltd., and Hewlett Packard India Sales Pvt. Ltd., challenging the constitutional validity of the amended Section 35F of the Central Excise Act, 1944. The amendment, effected by Section 105 of the Finance Act (No.2), 2014 with effect from 06.08.2014, made it mandatory for an appellant to deposit 7.5% of the demanded duty or penalty for a first appeal before the Commissioner (Appeals) and 10% for a second appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Prior to the amendment, the appellate authority had the discretion to waive or reduce the pre-deposit requirement. The petitioners contended that the mandatory pre-deposit provision violated their rights under Articles 14 (equality), 19(1)(g) (freedom to carry on trade or business), and 265 (no tax shall be levied or collected except by authority of law) of the Constitution. They also challenged Circular No.984/08/2014-CX dated 16.09.2014 issued by the Central Board of Excise and Customs as ultra vires. The petitioners sought a declaration that the amended provision and the circulars were unconstitutional and a direction to allow the filing of their appeals without the mandatory pre-deposit. The background facts disclosed that the petitioners were involved in businesses such as refining crude oil, renting of immovable property, trading and servicing of computer systems, and were registered under the Central Excise Act or the Finance Act, 1994 for service tax. They had received show-cause notices and subsequent orders-in-original confirming demands of duty/service tax along with interest and penalties. Some had filed appeals before the CESTAT, which directed pre-deposit under the amended provision. The writ petitions were heard together and reserved for orders on 11.09.2015. The court pronounced its common order on 07.10.2015. However, the operative portion of the judgment, including the final decision and reasons, is not contained in the provided excerpt; thus, the outcome of the constitutional challenge remains unknown from this text.
Issue of Consideration
Whether the amendment to Section 35F of the Central Excise Act, 1944 mandating pre-deposit of 7.5% and 10% for first and second appeals respectively is unconstitutional and violative of Articles 14, 19(1)(g) and 265 of the Constitution of India.
Case Details
2015 LawText (KAR) (10) 1
W.P. Nos. 10559-10560/2015, W.P. No. 54017/2014, W.P. No. 54018/2014, W.P. No. 21492/2015
G. Shivadass, Arun Kumar K., K.M. Nataraj, Jeevan J. Neeralgi
M/s. Hindustan Petroleum Corporation Ltd., Mr. V.K. Jain, Prestige Garden Constructions Pvt. Ltd., Exora Business Parks Pvt. Ltd., M/s Hewlett Packard India Sales Pvt. Ltd.
Union of India, Commissioner of Central Excise & Service Tax, Deputy Registrar / Registrar of CESTAT, Central Board of Excise and Customs
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Nature of Litigation
Constitutional challenge to the amended Section 35F of the Central Excise Act, 1944, which imposed a mandatory pre-deposit requirement for entertaining appeals.
Remedy Sought
Declaration that the amended Section 35F and the consequential CBEC circulars are unconstitutional and void; direction to allow filing of appeals without the mandatory pre-deposit.
Filing Reason
The amendment removed the appellate authority's discretion to waive or reduce pre-deposit, allegedly restricting the right to appeal and violating fundamental rights.
Previous Decisions
Various show-cause notices and orders-in-original confirming demands of excise/service tax and penalties were passed against the petitioners; some appeals were filed or intended to be filed before CESTAT, which directed pre-deposit under the amended provision.
Issues
Whether Section 35F of the Central Excise Act, 1944 as amended by Section 105 of the Finance Act (No.2), 2014, mandating pre-deposit of 7.5% for first appeals and 10% for second appeals, is unconstitutional for violating Articles 14, 19(1)(g) and 265 of the Constitution of India.
Submissions/Arguments
Petitioners contended that mandatory pre-deposit without any discretion violates the right to equality under Article 14, freedom to carry on trade/business under Article 19(1)(g), and the prohibition on tax collection without authority of law under Article 265.
Petitioners argued that the amended provision should not apply to proceedings that had commenced before 06.08.2014.
Petitioners also challenged the Circular No.984/08/2014-CX dated 16.09.2014 as ultra vires.
Judgment Excerpts
the requirement of the pre-deposit is in violation of Articles 14, 19(1)(g) and 265 of the Constitution of India.
Section 35F of the Act deals with the deposit to be made i.e., pre-deposit before an appeal is entertained. That Section was amended with effect from 6/8/2014 vide Section 105 of the 2014 Act.
Procedural History
The petitioners filed separate writ petitions under Articles 226 and 227 of the Constitution challenging the validity of amended Section 35F. Prior to filing, some petitioners had received adverse orders-in-original and had filed or intended to file appeals before CESTAT, which directed pre-deposit. The writ petitions were heard together and reserved for judgment on 11.09.2015, and a common order was pronounced on 07.10.2015.
Acts & Sections
- Central Excise Act, 1944: 35F, 35, 35B
- Finance Act (No.2), 2014: 105
- Constitution of India: 14, 19(1)(g), 265
