INDIRECT TAXES
IMPORTANT RECENT
DEVELOPMENTS
By
Vipin Jain
Managing Partner,
TLC Legal, Advocates.
10th October, 2014
Finance Bill (No. 2), 2014
2
Mandatory Pre-deposit
 Settlement Commission
 Advance Ruling

3
Mandatory Pre-deposit
MANDATORY PRE-DEPOSIT
4
ACT
BILL
83. In the Customs Act, for section 129E, [SECTION 129E. Deposit of certain
the following section shall substituted, percentage of duty demanded or penalty
imposed before filing appeal. — The
namely:—
Tribunal or the Commissioner (Appeals), as
“129E. The Tribunal or the Commissioner
the case may be, shall not entertain any
(Appeals), as the case may be, shall not appeal, —
entertain any appeal,—
(i) under sub-section (1) of section 128,
unless the appellant has deposited seven
and a half per cent. of the duty
demanded or penalty imposed or both,
in pursuance of a decision or an order
passed by an officer of customs lower in
rank than the Commissioner of Customs;
(i)under sub-section (1) of section 128,
unless the appellant has deposited seven
and a half per cent. of the duty, in case
where duty or duty and penalty are in
dispute, or penalty, where such penalty is
in dispute, in pursuance of a decision or an
order passed by an officer of customs lower
in rank than the [Principal Commissioner of
Customs or Commissioner of Customs];
AMENDTMENTS IN APPEAL PROCEDURE –
Mandatory Pre-deposit
5
(ii) against the decision or order
referred to in clause (a) of sub-section
(1) of section 129A, unless the appellant
has deposited seven and a half per
cent. of the duty demanded or penalty
imposed or both, in pursuance of the
decision or order appealed against;
(iii) against the decision or order
referred to in clause (b) of sub-section
(1) of section 129A, unless the appellant
has deposited ten per cent. of the duty
demanded or penalty imposed or
both, in pursuance of the decision or
order appealed against:
(ii)against the decision or order referred to
in clause (a) of sub-section (1) of section
129A, unless the appellant has deposited
seven and a half per cent. of the duty, in
case where duty or duty and penalty are
in dispute, or penalty, where such penalty
is in dispute, in pursuance of the decision or
order appealed against;
(iii)against the decision or order referred to
in clause (b) of sub-section (1) of section
129A, unless the appellant has deposited
ten per cent. of the duty, in case where
duty or duty and penalty are in dispute, or
penalty, where such penalty is in dispute,
in pursuance of the decision or order
appealed against :
MANDATORY PRE-DEPOSIT
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Provided that the amount required to be deposited under this section
shall not exceed rupees ten crores:
Provided further that the provisions of this section shall not apply to
the stay applications and appeals pending before any appellate
authority prior to the commencement of the Finance (No. 2) Act,
2014.’’.
COMPARISON WITH SETTLEMENT
COMMISSION PROVISIONS
7
Settlement Commission
Proposed Provision for Pre-deposit.
127B. Provided that no such
application shall be made unless,
—
129E.
The
Tribunal
or
the
Commissioner (Appeals), as the case
may be, shall not entertain any
appeal,—
(a)….
(b)….
(c)
the applicant has paid the
additional amount of customs duty
accepted by him along with interest
due under section 28AB.
(i) under sub-section (1) of section
128, unless the appellant has
deposited seven and a half per cent.
of the duty demanded or penalty
imposed or both, in pursuance of a
decision or an order passed by an
officer of customs lower in rank than
the Commissioner of Customs;
MANDATORY PRE-DEPOSIT –
CASE ANALYSIS
8
Case Law
Case Note
Dishnet Wireless Ltd. / Amrit
Banaspati Co. Pvt. Ltd. (SC)
and M/s Gobind Trading Co.
Ludhiana (P&H) and Aircel
Cellular Ltd.
The Supreme Court and the P&H High Court has stayed
the operation and implementation of 62(5) of Punjab
VAT Act, 2005 which prescribes for a mandatory predeposit of 25% of additional demand before
admitting any appeal.
Mardia Chemicals Ltd. and It has been held that the requirement of pre-deposit of
others.
75% of the demand for filing an appeal before the DRT
AIR 2004 SC 2371
is unreasonable, arbitrary and violative of Article 14 of
the Constitution of India.
Seth Nandlal and Others.
AIR 1980 SC 2097
The Constitutional validity to pre-deposit the 30 times of
the Land Holding tax (total amount payable for
holding disputed surplus area) was upheld.
It was also stated that right of appeal is a creature of
statute which can be circumscribed by conditions that are
not so onerous as to amount to unreasonable restrictions
MANDATORY PRE-DEPOSIT –
CASE ANALYSIS
9
Case Law
Case Note
M/s Johnsons Lifts A Single Judge rejected the petitions filed by the
Pvt. Ltd. (Kar.) assessee and upheld the order passed by the
2013
Appellate Tribunal refusing to admit the appeal
without depositing 50% of the disputed Tax,
Penalty and Interest. (Note: Nandlal’s case was not
cited or considered.)
Tobacco Board
vs.
State
of
Karnataka,
Comm & Deputy
Comm
(Kar.)
2013
A Single Judge rejected the petitions filed by the
assessee and upheld the order passed by the
Appellate Tribunal refusing to admit the appeal
without depositing 50% of the disputed Tax,
Penalty and Interest. (Note: The principle laid down
in Nandlal’s case has been followed)
MANDATORY PRE-DEPOSIT –
CASE ANALYSIS
10
Case Law
Case Note
Hindustan Petroleum
Corporation Ltd.
(2011) 37 VST 567
(Ker.)
The Kerela High Court has upheld the validity of Sec 17D(5)
of the KGST Act, 1963 providing for deposit of the entire
amount of the additional demand.
(Note: Nandlal’s case was not cited or considered.)
L&T Ltd. vs. State of It was held that interim deposit of 25% being a prerequisite for
Assam (Gau.) 2010
the admission of its appeal, the decretion of the appellate
authority to that effect therefore was not illegal or without
authority of law.
(Note: Assam VAT Act also contained a provision for waiver
of the balance amount by the appellate authority. The
appellate authority in this case, in exercise of this power
vested in it, ordered for pre-deposit of the mandatory
amount and waived the balance amount.)
(Note: Nandlal’s case was not cited or considered.)
MANDATORY PRE-DEPOSIT –
CASE ANALYSIS
11
Case Law
Case Note
Preomech
The Madras HC dismissed the Writ petitions of the
Industries 2013 appellant holding that the order of the single judge
(Mad.)
imposing condition of pre-deposit of 25% could not be
said to be unreasonable or arbitrary.
(Note: Nandlal’s case was not cited or considered.)
B.P. Enterprises
vs. State of
Orissa
2008
(Orissa)
The Orissa HC held that in the fitness of the case,
petitioner ought to have approached the Appellate
forum and only in order to avoid the pre-deposit
condition of 20%, it approached this Court directly.
The HC remitted the matter to the assessing authority
with a direction of 20% pre-deposit.
MANDATORY PRE-DEPOSIT –
CASE ANALYSIS
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Case Law
Case Note
Jindal Stainless The Orissa HC held that the provision for mandatory
Ltd.
2012 pre-deposit of 20% for entertaining and appeal does
(Orissa)
not make the right of appeal illusory and such a
condition is within the legislative power of the State
Legislature and cannot be held to be unreasonable
and violative of Article 14 of the Constitution.
RETROSPECTIVELY
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A pre-existing right of appeal cannot be destroyed by
an amendment unless the same is retrospective.

Hoosein Kasam Dada (India) Limited SC 1983

Supreme General Films Exchange Limited SC 1960
RETROSPECTIVELY
14

Hoosein Kasam Dada (India) Limited SC 1983
9. …..... In the language of Jenkins C.J., in Nana v. Sheku (supra) to disturb an
existing right of appeal is not a mere alteration in procedure. Such a vested right
cannot be taken away except by express enactment or necessary intendment. An
intention to interfere with or to impair or imperil such a vested right cannot be
presumed unless such intention be clearly manifested by express words or necessary
implication.
12. ……. It will appear from the dates given above that in this case the `lis’ in the
sense explained above arose before the date of amendment of the section. Further,
even if the `lis’ is to be taken as arising only on the date of assessment, there was a
possibility of such a `lis’ arising as soon as proceedings started with the filing of the
return or, at any rate, when the authority called for evidence and started the hearing
and the right of appeal must be taken to have been in existence even at those dates.
For the purposes of the accrual of the right of appeal the critical and relevant date
is the date of initiation of the proceedings and not the decision itself.
ENTERTAINMENT OF APPEAL
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Issue
Whether the pre-deposit is required to be
made at the time of presentation of the
appeal or hearing of the appeal?
ENTERTAINMENT OF APPEAL
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Lakshmi Ratan Engineering Works Limited SC 1968
The distinction made by the learned chief Justice between the tangible and
intangible objects does not in our opinion fall for consideration in the present
case. If one holds that by 'entertainment' is meant the time of admission of the
appeal, satisfactory proof may be furnished at the time of admission of the
appeal. We are of opinion that by the word "entertain" here is meant the
first occasion on which the court takes up the matter for consideration. It may
at the admission stage of if by the rules of that Tribunal the appeals are
automatically admitted, it will be the time of hearing of the appeal. But on
the first occasion when the court takes up the matter for consideration,
satisfactory proof must be presented that the tax was paid within the
period by limitation available for the appeal.
The Supreme Court has followed the aforesaid proposition of law in the case
of Ranjit Impex (2013)
ENTERTAINMENT OF APPEAL
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Hindustan Commercial Bank Limited SC 1969
4. It is the contention of the appellant that the expression. "entertain"
found in the proviso refers to the initiation of the proceedings and not
to the stage when the court takes up, the application for consideration.
This; contention was rejected by the High Court relying on the decision
of that court in Kundan Lal v. Jagan Nath Sharma AIR 1982 All 547
The same view had been taken by the said High Court in Dhoom
Chand Jain v. Chamanlal Gupta AIR 1902 All 543 and Haji Rahim
Bux and Sons v. Firm Samiullah and Sons AIR1963All320 and again in
Mahavir Singh v. Gauri Shankar AIR1964All289 . These decisions
have interpreted the expression "entertain" as meaning 'adjudicate
upon' or 'proceed to consider on merits‘ ….
WRIT REMEDY
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Issue
Is the Writ Remedy available in cases where the right
of appeal becomes illusory on account of exorbitant
or arbitrary demands?
WRIT REMEDY
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Har Devi Asnani SC 2011
12. …. The learned Single Judge of the High Court and the Division Bench of the
High Court have not considered whether the determination of market value and the
demand of deficit stamp duty were exorbitant so as to make the remedy by way of
revision requiring deposit of 50% of the demand before the revision is entertained
ineffective. In Government of Andhra Pradesh and Ors. v. P. Laxmi Devi (supra) this
Court, while upholding the proviso to Sub-section (1) of Section 47A of the Indian
Stamp Act introduced by Andhra Pradesh Amendment Act 8 of 1998, observed:
“29. In our opinion in this situation it is always open to a party to file a writ petition
challenging the exorbitant demand made by the registering officer under the proviso to Section
47A alleging that the determination made is arbitrary and/or based on extraneous
considerations, and in that case it is always open to the High Court, if it is satisfied that the
allegation is correct, to set aside such exorbitant demand under the proviso to Section 47A of the
Stamp Act by declaring the demand arbitrary. It is well settled that arbitrariness violates Articles
14 of the Constitution vide Maneka Gandhi v. Union of India (1978) 1 SCC 248. Hence, the party
is not remediless in this situation.
ISSUE
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WHAT IS THE FATE OF THE
BALANCE AMOUNT?
Interlocutory Stay Order vs.
Entertainment of Appeal
21
Shreenath Corp vs. Consumer Education and Research Society (Supreme
Court) (2014) - Relevant observation:
11. The second proviso to Section 19 of the Act mandates pre-deposit for consideration of an appeal
before the National Commission. It requires 50% of the amount in terms of an order of the State
Commission or Rs. 35,000/- whichever is less for entertainment of an appeal by the National
Commission. Unless the Appellant has deposited the pre-deposit amount, the appeal cannot be
entertained by the National Commission. A pre-deposit condition to deposit 50% of the amount in
terms of the order of the State Commission or Rs. 35,000/- being condition precedent for
entertaining appeal, it has no nexus with the order of stay, as such an order may or may not be
passed by the National Commission. Condition of pre-deposit is there to avoid frivolous appeals.
12. It is not the case of any of the Appellants that the Consumer Forum including State and National
Commissions has no power to pass interim order of stay. If the National Commission after hearing the
appeal of the parties in its discretion wants to stay the amount awarded, it is open to the National
Commission to pass an appropriate interim order including conditional order of stay. Entertainment
of an appeal and stay of proceeding pursuant to order impugned in the appeal stands at different
footings, at two different stages. One (pre-deposit) has no nexus with merit of the appeal and the
other (grant of stay) depends on prima facie case; balance of convenience and irreparable loss of
party seeking such stay.
Interlocutory Stay Order vs.
Entertainment of Appeal
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Reckiti Benckiser vs. Commissioner of Commercial Taxes (Rajasthan HC)
(2010) - Relevant observation:
7. Section 82(3) of the VAT Act provides that no appeal under this section shall be entertained
unless it is accompanied by a satisfactory proof of the payment of tax and other amounts
admitted by the Appellant to be due to him and in case of an appeal from an ex-parte
assessment order, five percent and in other cases ten percent of the disputed tax amount.
Section 82(3) envisages deposits which are necessary for hearing of the appeal. With
respect to rest of the amount, interim order can be passed by the Appellate Authority under
Section 38(4) of the VAT Act. When Section 38(4) confers power upon the authority to grant
stay after hearing and to extend life of the interim order by reasoned order, there is an
obligation casts upon the authority to act in consonance with law while granting stay. Rule of
reason is inhered in the provision itself When life of the interim order has to be extended for
the reasons to be recorded in writing, obviously interim stay has to be granted for the reasons
recorded by it, depending upon facts of each case. Thus it cannot be said that arbitrary
power is conferred upon the authority to deal with the interim stay matters under the
provisions of Section 38(4) of the VAT Act.
(Note: Raj. VAT act contained provisions for waiver of the balance amounts)
Recent Board Circular
F. No. 390/Budget/1/2012-JC dated
16.09.2014 on
MANDATORY PRE-DEPOSIT
23
QUANTUM OF PRE-DEPOSIT
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Filing an appeal against the order of the Commissioner (Appeals)
before the CESTAT:
 10% is to be paid on the amount of duty demanded or penalty
imposed by the Commissioner (Appeals).
 This need not be the same as the amount of duty demanded or
penalty imposed in the OIO in the said case.
 Where penalty alone is in dispute, the pre-deposit would be
calculated based on the aggregate of all penalties imposed in
the order against which appeal is proposed to be filed.
ISSUE:
Whether the 10% is in addition to the 7.5% deposited at the
first stage appeal?
PAYMENT MADE DURING
INVESTIGATION
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



Payment made during the course of investigation or audit, prior
to the date on which appeal is filed, to the extent of 7.5% or
10%, can be considered to be a pre-deposit.
Any shortfall from the amount stipulated under these sections shall
have to be paid before filing of appeal before the appellate
authority.
As a corollary, amounts paid over and above the stipulated
amounts, shall not be treated as deposit.
Since the amount paid during investigation/ audit takes the color
of deposit only when the appeal is filed, the date of filing of
appeal shall be deemed to be the date of deposit.
RECOVERY OF THE AMOUNTS DURING
THE PENDENCY OF APPEAL
26



Circular no. 967/1/2013 dated 1.01.2013 would not apply to cases
where appeal is filed after the enactment of the amended section
35F/129E.
No coercive measures for the recovery of balance amount shall be
taken during the pendency of appeal.
Recovery action, if any, can be initiated only after the disposal of the
case by the Commissioner (Appeal) / Tribunal in favor of the
department unless the said orders are stayed by the Higher forums.
REFUND OF PRE-DEPOSIT
27




Where the appeal is decided in favour of the party / assessee, he shall be entitled to
refund of the amount deposited along with the interest at the prescribed rate from the
date of making the deposit to the date of refund.
Pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit
need not be subjected to the process of refund of duty under Section 11B/27.
(Unjust enrichment not applicable). Therefore, refund with interest should be paid to
the appellant within 15 days of the receipt of the letter of the appellant seeking
refund, irrespective of whether order of the appellate authority is proposed to be
challenged by the Department or not.
In the event of a remand, refund of the pre-deposit shall be payable along with
interest.
In case of partial remand where a portion of the duty is confirmed, it may be ensured
that the duty due to the Government on the portion of order in favour of the revenue
is collected by adjusting the deposited amount along with interest.
PROCEDURE AND MANNER OF MAKING
THE PRE-DEPOSITS
28




E-payment facility can be made use of by the appellants,
wherever possible.
A self attested copy of the document showing satisfactory proof of
payment shall be submitted before the appellate authority.
The columns of the EA1,EA3 etc., representing payment of duty
may be used for the purpose of indicating the amount of deposit
made, which shall be verified by the appellate authority before
registering the appeal.
As per existing instructions, a copy of the appeal memo along with
proof of deposit made shall be filed with the jurisdictional officers.
PROCEDURE FOR REFUND
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


A simple letter seeking refund.
A self attested Xerox copy of the order in appeal or the
CESTAT order consequent to which the deposit becomes
returnable.
Attested Xerox copy of the document evidencing payment of
such deposit.
Settlement Commission - Snapshot
30


Provision of settlement of cases made one time affair.
Applications can now be filed only after receipt of a
SCN.
Settlement Commission- Excise and
Service Tax
31
Prior to Finance Act, 2014
Post Finance Act, 2014
Section 32E. Application for settlement of
cases. –
(1)….
Provided that no such application shall be
made unless –
Section 32E. Application for settlement of
cases. –
(1)….
Provided that no such application shall be
made unless –
Provided further that the Settlement
Commission, if it is satisfied that the
circumstances exist for not filing the returns
referred to in clause (a) of the first proviso to
sub-section (1), may after recording the
reasons therefor, allow the applicant to make
such application:
(2) Where any excisable goods, books of
accounts, other documents have been
seized under the provisions of this Act or
rules made therer under, the assesse shall
not be entitled to make an application
under sub-section (1), before the expiry of
one hundred and eighty days from the Sub-section (2) omitted.
date of the seizure.
Settlement Commission- Excise and
Service Tax
32
Prior to Finance Act, 2014
Post Finance Act, 2014
Section 32-O. Bar on subsequent
application for settlement in certain cases.
—
(1) Where –
(i) an order of settlement passed under subsection (7) of section 32F [,as it stood
immediately before the commencement of
section 122 of the Finance Act, 2007 (22 of
2007) or sub-section (5) of section 32F,]
provides for the imposition of a penalty on
the person who made the application under
section 32E for settlement, on the ground of
concealment of particulars of his duty
liability;
Section 32-O. Bar on subsequent application
for settlement in certain cases. —
(1) Where – (i) an order of settlement passed
under sub-section (7) of section 32F [,as it stood
immediately before the commencement of
section 122 of the Finance Act, 2007 (22 of
2007) or sub-section (5) of section 32F,]
provides for the imposition of a penalty on the
person who made the application under section
32E for settlement, on the ground of
concealment of particulars of his duty liability;
Explanation. — In this clause, the concealment of
particulars of duty liability relates to any such
concealment made from the Central Excise
Officer.
then, he shall not be entitled to apply for
settlement under section 32E in relation to any
other matter.
Settlement Commission- Customs
33
Prior to Finance Act, 2014
Post Finance Act, 2014
Section 127B Application for settlement of
cases.
(1) ……
Provided that no such application shall be
made unless, —
(a) the applicant has filed a bill of entry, or
a shipping bill, in respect of import or export
of such goods, as the case may be, and in
relation to such bill of entry or shipping bill,
a show cause notice has been issued to him
by the proper officer;
(b)….
(c) the applicant has paid the additional
amount of customs duty accepted by him
along with interest due under section 28AB
Section 127B Application for settlement of
cases.
(1) ……
Provided that no such application shall be
made unless, —
(a) the applicant has filed a bill of entry, or a
shipping bill, or a bill of export, or made a
baggage declaration, or a label or declaration
accompanying the goods imported or
exported through post or courier, as the case
may be, and in relation to such document or
documents, a show cause notice has been issued
to him by the proper officer;
(b)….
(c) the applicant has paid the additional
amount of customs duty accepted by him along
with interest due under section 28AA
Settlement Commission- Customs
34
Prior to Finance Act, 2014
Post Finance Act, 2014
Section 127B
Section 127B
(2) Where any dutiable goods, books of Sub-section (2) omitted.
account, other documents or any sale
proceeds of the goods have been seized
under section 110, the applicant shall not
be entitled to make an application under
sub-section (1) before the expiry of one
hundred and eighty days from the date of
the seizure.
Section
127L. Bar
on
subsequent Section 127L. Bar on subsequent application
application for settlement in certain cases. for settlement in certain cases.
(1) (i)…..
(1) (i)…..
“Explanation. — In this clause, the
concealment of particulars of duty liability
relates to any such concealment made from
the officer of customs.”
ADVANCE RULING
35
The Advance Ruling provisions have been extended
to Resident Private Limited Companies.
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THANK YOU