Mandatory Pre-Deposit U/S 129E of the Customs Act Is Constitutional: Bombay High Court

The three-judge bench of Justice R.D. Dhanuka, Justice Nitin W. Sambre, and Justice Abhay Ahuja has observed that the fiscal legislation can very well stipulate as a requirement of law a mandatory pre-deposit as a condition precedent for an appeal to be entertained by the appellate authority. Thus, section 129E of the Customs Act cannot be held to be unconstitutional.

The Court noted that the right to appeal is a statutory right and not an absolute right, which can be circumscribed by the conditions in the grant.

The petitioners/assessee filed the first quarterly returns for the period 2013-2014 under the Maharashtra Value Added Tax Act, 2002. The assessment proceedings were initiated by the Deputy Commissioner of Sales Tax, Issue-Based Audit, Mumbai. The assessing officer passed an assessment order. The petitioner filed a stay application on Form No. 311 of the MVAT Act, 2002 before the Joint Commissioner of State Tax (Appeals), Mumbai. It is the First Appellate Authority. The petitioners also filed an appeal on Form No. 301 before the State First Appellate Authority.

The Joint Commissioner of State Tax (Appeals) II addressed a letter to the petitioners inviting attention to Section 26 (6A) of the MVAT Act, 2002. The Joint Commissioner stated that until a part payment towards the tax liability is made, the document submitted by the petitioners cannot be called an appeal.

The Central Government by the Constitution (One Hundred and First Amendment) Act, 2016 introduced Goods and Services Tax (GST) w.e.f. 1 July 2017. Various central indirect taxes and levies as they relate to the supply of goods and services have been subsumed under GST. Article 246 (A) regarding GST came to be inserted in the Constitution of India, which enables the Union and States to legislate in respect of the GST. Article 269-A deals with the levy and collection of GST in the course of inter-state trade or commerce. The tax collected is to be apportioned between the Union and States in the manner as provided by Parliament by law on the recommendation of the Goods and Services Tax Council.

On April 15th, 2017, the State Government published the Maharashtra Tax Laws (Levy, Amendment, and Validation) Act 2017 in the Government Gazette, thereby amending various provisions of various Acts. In paragraph No. 26 of the MVAT Act, 2002, Sections 6 (A), 6 (B), and 6 (C) were inserted.

The state government amended section 26(6B)(c) of the MVAT Act which required the assessee to deposit 10% of the disputed tax which is a mandatory condition for an appeal.

The petitioner has raised the issue of whether the State of Maharashtra has legislative competence to enact the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2017 and the Maharashtra Tax Laws (Amendment and Validation) Act, 2019. Whether the provisions of the Maharashtra Value Added Tax Act, 2002 can be amended to incorporate mandatory pre-deposit for filing appeals against the assessment orders pertaining to all goods after September 16, 2016 (i.e., post 101 Constitutional Amendment Act, 2016).

The department contended that the "right of appeal" is neither a fundamental right nor a constitutional right and it is not even an ingredient of 'natural justice'. It is a statutory right and is a creature of statute. The right accrued under the statute can be taken away completely by the Legislature by effecting a statutory amendment. There are provisions made by the Legislature to take away such a right. It cannot be taken away merely "impliedly". It cannot be taken away by an executive fiat or an administrative instruction.

The petitioner contended that there is no dispute that an appeal is a creature of statute and is a substantive right created by express provision or by necessary implication. Any conditions introduced for filing an appeal cannot be introduced at a later stage. Any conditions which take away the right of appeal cannot be introduced, even by way of amendment. If 'lis' had commenced before the amendment, then the assessees would be governed by the old provisions and not by the amendment. However, if the 'lis' is commenced after amendment, then the amended provisions would apply.

The petitioner contended that the MVAT Act, 2002 was not repealed in toto and some of the provisions were either deleted or amended. The amendments were carried out by the respondents to remove the alleged inconsistency in the Act in view of the 101st Constitutional Amendment. The old Act is saved for all other goods previously covered by the earlier provisions. The provisions of Section 78 of the MVAT Act, 2002 dealing with the provision of appeal prescribed under the Act have been continued.

The court noted that there is no substance in the submission made by the petitioner that the state government had no power to legislate, including the power to amend the legislation, or that such power to legislate has been taken away in view of the introduction of Article 246A in the Constitution of India.

"In our view, the decision of the Nagpur Bench of this Court in the case of M/s. Anshul Impex Private Ltd. (supra) holding that the 'right of filing appeal accrues on the date of order of assessment and the requirement of mandatory pre-deposit introduced by way of amendment does not apply to the orders passed in the assessment years prior to 15th April, 2017' is not a correct proposition since the right of appeal can be made conditional by the Legislature with express indication," the court said.

Case Title: United Projects Versus The State of Maharashtra

Case No: Writ Petition No. 2883 Of 2018

Citation: 2022 LiveLaw (Bom) 249

Dated: 12.07.2022

Counsel For Petitioner: Senior Advocate Vikram Nankani

Counsel For Respondent: Advocate General Ashutosh Kumbhakoni

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