Appeal Dismissed For Non-Payment Of Pre-Deposit; Revenue Can't Challenge Restoration After Accepting Deposit: Punjab and Haryana High Court

The Punjab and Haryana High Court stated that if the appeal of the assessee was previously dismissed due to non-payment of the pre-deposit, and they have since made that payment, which has been accepted by the Revenue, then the Revenue cannot later challenge the restoration of the appeal.

The Division Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “Tribunal can be said to be functus officio only after it decides any appeal on merits. If the appeal has been only dismissed on account of being defective, i.e. due to lack of pre-deposit, it means that the appeal has not been entertained, and therefore such an appeal would have to be treated as lying dormant.”

Section 35F of the Central Excise Act, 1944 mandates that an assessee must deposit a certain percentage of the disputed duty or penalty before an appeal can be entertained. Without fulfilling this deposit requirement, the Tribunal or Commissioner (Appeals) will not hear the appeal.

Facts of the case:

The assessee was directed by the CESTAT, New Delhi, on 04.06.2012 to make a pre-deposit of Rs. 3.30 crores in order to proceed with their appeal against the order of the Commissioner of Customs and Excise, which confirmed duty demands and penalties. However, when the appeal was heard, the Tribunal observed that the assessee had not deposited the amount, although one of the directors had made a partial payment. Consequently, on 13.10.2014, the appeals were dismissed for non-compliance with Section 35F of the Central Excise Act.

The assessee subsequently filed a Customs Appeal before the Punjab and Haryana High Court, challenging the order dated 13.10.2014. However, the appeal was dismissed due to a delay of 450 days in filing. The assessee then made a pre-deposit of Rs. 4 crores and filed an application for restoration of the appeal, along with an application for condonation of delay. CESTAT condoned the delay in filing the application for restoration of the appeal, as the pre-deposit of Rs. 4 crores had been made. The department has now challenged the order passed by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) for the restoration of the appeal before the Punjab and Haryana High Court.

The Revenue submitted that once the High Court in writ petition had upheld the order of dismissal of appeals, there was no reason to allow the restoration of the said appeal on the basis of interim order.

Observations of the High Court:

The bench noted that when the interim order was passed, the company was a sick company under BIFR. It appears to have restored its position and had become functional much later, and therefore it could not have deposited the amount while under control of BIFR.

The bench, while rejecting the Revenue's contention that the Tribunal was functus officio after 2014, stated that the Tribunal can be considered functus officio only after it has decided any appeal on its merits. If the appeal has been dismissed solely on account of being defective, i.e., due to a lack of pre-deposit, it means that the appeal has not been entertained; therefore, such an appeal should be treated as lying dormant.

The delay in filing application for restoration of an appeal after 07 years by the company/assessee was maintainable before the Tribunal as the company/assessee was earlier sick and restored only later, added the bench.

The bench concluded that “since the appeal of the assessee has been dismissed on the ground of non-payment which they have made now and also the same as having been accepted by the Revenue, the Revenue cannot be allowed to turn around and challenge the restoration.”

In view of the above, the bench dismissed the appeal.

Counsel for Appellant/ Revenue: Sourabh Goel

Counsel for Respondent/ Assessee: Anil Mehta

Case Title: Commissioner Of Customs Ludhiana v. Royal Industries Ltd.

Case Number: CUSAP-12-2022 (O&M)

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