By TIOL News Service

NEW DELHI, JULY 10, 2014: SECTION 35F of the CEA, 1944 has gone for an overhaul and only time will tell whether the aggrieved assessees would be thankful for the same.

At present, although section 35F of the CEA, 1944 mandated that the person desirous of appealing against an order, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied, once an appeal was filed, it was the discretion of the appellate authorities to dispense with such pre-deposit subject to such conditions as it may deem fit to impose so as to safeguard the interests of revenue.

This section is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded OR penalty imposed OR both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and another 10% of the duty demanded OR penalty imposed OR both for filing second stage appeal before the Tribunal. It is also mentioned that the amount of pre-deposit payable would be subject to a ceiling of Rs.10 Crores.

Suffice to say that this “OR" would be construed by the department as “AND" and we would have a new set of litigation on that front.

All this means to say that before filing of the appeal , the aggrieved assessee should make this pre-deposit and only then knock on the doors of the appellate authorities. But is this really so? Can he not file the appeal and then pay this “pre-deposit" just before the matter comes up for hearing?

The proposed section begins thus - “35F. The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal , -

(i) Under sub-section (1) of section 35, unless the appellant has deposited …"

Moving further, the proposed section aptly titled as "Deposit of certain percentage of duty demanded or penalty imposed before filing appeal " makes it clear that the provisions would not apply to the stay applications and appeal pending before any appellate authority prior to the "commencement " of the Finance (No.2) Act, 2014. Normally, the word used is "enactment ", but does it make a difference?

One of the interesting developments in this new section is exclusion of the "interest " payable under the provisions of this Act or the rules made thereunder which, hitherto, was covered under the definition of “duty demanded".

Another omission from the definition of “duty demanded" is the “amount payable under rule 57CC of Central Excise Rules, 1944". It would be a fallacy on the part of the law making authorities to presume that rule 57CC demands and adjudication orders are not in circulation.

Hand in glove with this substitution is omission of the first, second and third proviso in section 35C(2A) of the CEA, 1944.

Similar substitution is proposed in the Customs Act, 1962 - section 129E and section 129B refers.

By the way, are these percentages of 7.5% and 10% amenable to change in the coming days…only time will tell!