CESTAT Ahmedabad Strikes Down Appropriation Of Penalty And Interest Amount During Pendency Of Appeal

The Single Bench of Judicial Member Ramesh Nair held that since the assessee had paid the entire amount of duty demanded by the revenue authorities, and not just the amount required to be pre-deposited for filing an appeal before the CESTAT in terms of Section 35F of the Central Excise Act, the revenue authorities should not have recovered the penalty and interest amount by way of appropriation.

The revenue authorities passed an order raising a demand of duty against the assessee/ appellant Bayer Vapi Pvt. Ltd. under the Central Excise Act, 1944, along with penalty and interest. The assessee deposited the duty amount; however, it did not pay the penalty and interest. The assessee filed an appeal before the CESTAT against the order of the revenue authorities. During the pendency of the appeal before the CESTAT, the revenue authorities appropriated the demand raised against the assessee towards penalty and interest from the sanctioned rebate claim of the assessee. The assessee challenged the said appropriation before the CESTAT.

The assessee Bayer Vapi Pvt. Ltd. submitted before the CESTAT that it was required to pay only 7.5% or 10%, as the case may be, of the amount of duty demanded for filing an appeal and that it had deposited the entire duty demanded by the revenue authorities. Thus, the assessee averred that the amount of penalty and interest demanded by the revenue authorities could not have been recovered from the sanctioned rebate claim of the assessee.

The CESTAT noted that in view of Section 35F of the Central Excise Act, 1944, for filing an appeal before the Tribunal or the Commissioner (Appeals), an assessee is required to mandatorily pre-deposit 7.5% or 10%, as the case may be, of the duty demanded from the assessee.

The CESTAT observed that an appropriation was made by the revenue authorities towards the penalty and interest amount during the pendency of the appeal before the CESTAT. The CESTAT noted that at the time the said appropriation was made, the assessee had not only paid 7.5% or 10%, as the case may be, of the amount of duty demanded, but that it had paid the entire duty amount.

The CESTAT noted that the Central Board of Indirect Taxes and Customs had issued a Circular No. 984/8/2014-CX., dated 16.9.2014, regarding recovery of dues during the pendency of an appeal. The CESTAT observed that the said Circular had specified that no coercive measures for recovery of the balance amount, i.e., the amount in excess of 7.5% or 10% deposited in terms of Section 35F of Central Excise Act, 1944, can be taken during the pendency of the appeal. The said Circular had mentioned that recovery action for the balance amount could be initiated only after disposal of the appeal in favour of the revenue department.

Thus, the CESTAT held that it was clear that the assessee was only required to pay 7.5% or 10%, as the case may be, of the duty amount for filling an appeal against the demand raised by the revenue authorities. The CESTAT added that on the payment of such amount, the entire remaining amount stands stayed and hence, no recovery can be made with respect to the remaining amount.

The CESTAT ruled that since the appellant paid the entire amount of duty demanded by the revenue authorities, and not just 7.5% or 10% of the duty in terms of Section 35F of the Central Excise Act read with the Circular No. 984/8/2014-CX., the revenue authorities should not have recovered the penalty and interest amount by way of appropriation from the sanctioned rebate claim of the assessee.

The CESTAT added that since the case of the assessee with respect to the demands raised under the Central Excise Act got settled under the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS-2019), no amount could be appropriated from the assessee.

The CESTAT, thus allowed the appeal and set aside the order of the revenue authorities.

Case Title: Bayer Vapi Pvt. Ltd. versus C.C.E. & S.T.-SURAT-I

Dated: 08.06.2022 (CESTAT Ahmedabad)

Representative for the Appellant/Assessee: Mr. S. Suriyanarayanan, Advocate

Representative for the Respondent/Revenue Department: Mr. G. Kirupanandan

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