Tribunal's Discretion To Dispense Obligation To Deposit Duty/Interest Or Penalty In Cases Of Undue Hardships: Delhi High Court

The Delhi High Court has held that the proviso to Section 129E of the Customs Act, 1962, gives discretion to the Tribunal in cases of undue hardships to dispense the obligation to deposit the duty, interest, or penalty.

The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that the application for waiver of pre-deposit was dismissed by the Tribunal, and the writ petitions challenging the orders passed by CESTAT have already been dismissed by the High Court. The appellants did not comply with the pre-deposit order even thereafter, and therefore the Tribunal was constrained to dismiss the appeals.

The appellants/exporters preferred an appeal along with an application for waiver of pre-deposit under Section 129-E of the Customs Act, 1962, and a stay of operation of the order before the CESTAT. The CESTAT dismissed the stay applications, directing appellant M/s. G.S. International to deposit Rs. 67,56,033/- and appellant M/s. A's Raj International to deposit an amount of Rs. 1,00,05,250/- within a period of four weeks from the date of the order.

Questioning the correctness of the order passed by the Tribunal, the appellants filed a writ petition before the High Court. However, the petitions were dismissed by the High Court.

The CESTAT recorded the non-compliance of its order and dismissed the appeals. Challenging the CESTAT Final Order, appellants and exporters have filed the appeals under Section 130 of the Customs Act, 1962.

The appellant contended that the right of appeal provided under Section 129E is a statutory right, and failure to make a pre-deposit provides a limited right to the respondents to recover the amount of penalty and drawback from the appellants, but the appeals ought to have been heard by the CESTAT on merits and could not have been dismissed in a summary manner merely on account of the non-deposit of the pre-deposit amount. A condition of pre-deposit is bad as it whittles down the appellant's right to appeal.

The respondents argued that the Tribunal could not have heard the appeal without a pre-deposit, and therefore, the appeals have been rightly rejected.

Section 129E has been amended by the Finance Act, 2014. However, since the SCNs and Order-in-Original were issued and passed before the amendment came into force, the unamended provision would apply.

Section 129E, as it stood prior to its Amendment by Finance Act (No. 2) of 2014, conferred discretion on the Commissioner (Appeals) as well as CESTAT to dispense with the deposit liable to be made for the purposes of an assessee pursuing an appeal where it was found that the deposit of duty, interest, or penalty levied would cause hardship.

Section 129E does not expressly provide for the rejection of an appeal for non-compliance with the requirements regarding the deposit of a penalty or duty, but the provision makes it obligatory on the appellants to deposit the duty or penalty pending the appeal, and if a party does not comply either with the main section or with any order that may be passed under the proviso, the Appellate Authority is fully competent to reject the appeal for non-compliance with the provisions of Section 129E. Unless Section 129E is complied with, the Appellate Authority cannot proceed to hear the appeal on its merits. Therefore, the logical consequence of failure to comply with Section 129E is the rejection of an appeal on that ground. The law on the subject is not res integra.

The court held that if the statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that the right becomes vested and exercisable for the appellant.

The court held that there was no error in the orders passed by CESTAT, dismissing the appeal for non-compliance of the deposit order as per the provisions of Section 129 read with provision to Section 129-E of the Customs Act, 1962.

Counsel For Appellant: Navneet Panwar

Counsel For Respondent: Anish Roy

Case Title: G & S International Versus Commissioner Of Customs

Citation: 2024 LiveLaw (Del) 332

Case No.: CUSAA 6/2010 & CM APPL. 9970/2010

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