CBIC Issues Instructions on Pre-deposit payment method In Central Excise and Service Tax Cases

The Central Board of Indirect Taxes and Customs (CBIC) has issued instructions on pre-deposit payment methods in central excise and service tax cases.

Some Commissioners (Appeals) rejected appeals for non-compliance with pre-deposit requirements mandated under Section 35F of the Central Excise Act, 1944 (CEA) and Section 83 of the Finance Act, 1994, read with Section 35F of the CEA. Payments were made through Form GST DRC-03 on the common GST portal. The appeals were rejected on the grounds that it is not a prescribed method of payment of pre-deposit.

The matter was also referred to the Board by the High Court of Bombay in the matter of Sodexo India Services Pvt. Ltd vs. Union of India and Ors., with directions to investigate and issue appropriate instructions.

The Broad has notified sub-sections (6)(b), (7)(a), and (8)(a) of section 142 of the CGST Act, 2017 that any credit, tax, interest, fine, or penalty recoverable from the person under the existing law (Central Excise Act and Chapter-V of the Finance Act, 1994) shall be recovered as an arrear of tax under the CGST Act. It is, however, settled that pre-deposit as a requirement for exercising the right to appeal neither is in the nature of duty nor can be treated as arrears under the existing law and hence cannot be covered under the transitional provisions of the CGST Act.

The CBIC has clarified that payments through DRC-03 under the CGST regime are not a valid mode of payment for making pre-deposits under section 35F of the Central Excise Act, 1944 and Section 83 of the Finance Act, 1994, which should only be utilised for making pre-deposits under the Central Excise Act, 1944 and the Finance Act, 1994.

Circular No. CBIC-240137/14/2022

Date: 28.10.2022

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