Bombay HC Upholds Constitutional Validity Of Mandatory Pre-Deposit Under Section 129E Of Customs Act [Read Judgment]

The Bombay High Court has upheld the constitutional validity of Section 129 E of the Indian Customs Act, 1962, that makes pre-deposit mandatory for filing an appeal before the tribunal or the Commissioner (Appeals) concerned.

A bench of Justice SV Gangapurwala and Justice GS Kulkarni pronounced this judgment on Monday, two weeks after it was reserved.

Case Background

The petitioners, Haresh Vora and Sachin Shah, are partners in M/s Bright International, which is engaged in the business of export and import of goods.

The Director of Revenue intelligence (DRI) conducted a search on the premises of M/s Bright International.

Several dubious invoices were recovered, thereafter, both the partners gave a statement under Section 108 of the Customs Act and admitted recovery of parallel invoices for the same goods exported by them.

The partners also conceded that invoices of higher value were submitted to the Customs at the time of export to avail higher duty drawback and the actual invoice is the one with the lesser value.

Hence, a show-cause notice was issued to petitioner partners, and the adjudicating officer concluded that the value of goods exported through ICD (Connected Inland Depot) Mulund, was intentionally mis-declared in violation of Section 50 (2) of the Customs Act.

Thereafter, a fine of Rs. 1 crore was imposed on M/s Bright International under Section 114(iii) of the Customs Act and a total fine of Rs. 22 lakh was imposed on both partners.

Arguments and Final order

Section 129 E was brought in as an amendment by the Finance Act of 2014, it mandates deposit of 7.5% of the duty demanded or penalty imposed or both, in case of an appeal before the Commissioner (Appeals) (Section 128A) and before the Tribunal (Section 129A), respectively.

Clause (iii) of Section 129E provides for deposit of 10% of the duty demanded or penalty imposed or both in pursuance of the order appealed against.

Sub­-clause (i) and (ii) of Section 129E mandates pre-­deposit of certain percentage of only the duty, in case where duty or duty and penalty are in dispute.

Petitioner’s counsel, Suresh Balasubramanian submitted that putting a class into advantageous position by mandating to pre-deposit only certain percentage of duty where both duty and penalty are in dispute and putting another class into disadvantageous position mandating to pre-deposit certain percentage of penalty where only penalty is in dispute, is ultra vires of Articles 14, 19 and 21 of the Constitution of India.

The court noted: “The aim of the amended provision is also to curtail litigation which had assumed high proportions, leaving no time to the appellate authorities to devote the same to important issues. Considering these hard realities and to have an expeditious disposal of the statutory appeals, which undoubtedly is a necessary requirement of effective trade, commerce and business. If such is the aim and insight behind the provision, it certainly cannot be held to be unreasonable, onerous, unfair or discriminatory.”

Refusing to accept the petitioner’s argument that the said provision was discriminatory, the court pointed out the judgment of the apex court in Vijay Prakash D Mehta and Jawahar Mehta vs Collector of Customs (Preventive), Bombay, wherein it was held that the right to appeal is a statutory right, not an absolute one.

Thus, the two petitions were dismissed.