Delhi High Court Dismisses Plea for Pre-Deposit Waiver in Tax Case

Court Name : Delhi High Court

Parties : Classic Decorators Vs Commissioner Central Excise GST

Decision Date : 29 May 2023

Judgement ref : W.P.(C) 7535-2023

In a recent case involving Classic Decorators and the Commissioner Central Excise GST, the Delhi High Court addressed an appeal for a waiver of the mandatory pre-deposit for an appeal against a service tax demand order.

Classic Decorators, aggrieved by a service tax demand confirmed by the Adjudicating Authority, sought the dismissal of the respondent’s order and requested the appeal to be decided on merit, without insistence on a pre-deposit.

The petitioner's argument hinged on the original order’s limitation period, a point that had been previously acknowledged by the High Court. However, the Court found no merit in waiving the pre-deposit requirement, stating that it did not render the appellate remedy illusory and did not prevent the petitioner from pursuing the appeal.

The Delhi High Court’s dismissal of the plea to waive the pre-deposit underscores the strict compliance required in tax law proceedings. Although the original order was argued to be time-barred, the High Court maintained that the pre-deposit was necessary and did not obstruct the petitioner’s appeal. This ruling presents significant implications for future appeals that contest the requirement of a pre-deposit.

The court clarified that if the petitioner makes the pre-deposit within a period of two weeks from the date of the order, the Appellate Authority shall consider the petitioner’s appeal on merits.

This decision emphasizes the importance of adhering to the procedural requirements in tax law proceedings, even when the original order is argued to be time-barred.

1. The petitioner has filed the present petition, inter alia, praying as under: -

“1. To cancel the order dated 04-05-2023 passed by respondent no.1.

2. To direct the respondent no.1 to decide the appeal on merit without insisting for pre deposit as per section 35F of the Central excise Act, 1944.”

2. The petitioner is aggrieved by an order dated 04.05.2023, whereby its appeal against an order-in-original dated 20.12.2022 was not entertained for want of necessary pre-deposit.

3. By the said order-in-original, the Adjudicating Authority had confirmed the demand of service tax of ₹17,259, ₹63,184/- & ₹1,21,731/- including Education Cess, Higher Secondary Education Cess, Swachh Bharat Cess And Krishi Kalyan Cess for the Financial Years 2014-15 to 2016-17, and October 2014 to March, 2015, under the proviso to Section 73(1) of the Finance Act, 1994. The Adjudicating Authority had also confirmed the demand of ₹1,21,731/- for the service tax not paid or wrongly availed. In addition, the Adjudicating Authority also imposed a penalty of ₹2,02,174/- under Section 78 of the Finance Act, 1994 and ₹l,00,000/- under Section 78A of the Finance Act, 1994.

4. The petitioner had filed the writ petition under Article 226 of the Constitution of India, being Writ Petition No.871/2023 captioned M/s Classic Decorators v. Assistant Commissioner, CGST Division & Ors., impugning the order in original passed by the Adjudicating Authority. The said petition was disposed of on 31.01.2023 on the ground that the petitioner has an equally efficacious alternate remedy. This Court had also observed that, prima facie, the petitioner’s contention that the order-in-original is barred by limitation is merited.

5. The learned counsel for the petitioner submits that in view of the observations made by this Court in the order dated 31.01.2023, the petitioner’s appeal ought to have been entertained by the Appellate Authority without insisting on pre-deposit.

6. We find no merit in the aforesaid contention. The amount of pre- Digitally Signed deposit required is 7.5% of the total demand, which is not a large sum.

There is no averment that the requirement of pre-deposit has rendered the appellate remedy illusory or that the petitioner is anyway impeded from availing the same.

7. We find no ground to interfere with the impugned order dated 04.05.2022. We clarify that if the petitioner makes the pre-deposit within a period of two weeks from today, the Appellate Authority shall consider the petitioner’s appeal on merits.

8. The petition is disposed of in the aforesaid observations.

VIBHU BAKHRU, J

AMIT MAHAJAN, J

MAY 29, 2023