SEPTEMBER 26, 2016

By G Jayaprakash, Advocate

AN appeal against an order issued by an original or 1st appellate authority under Customs, Excise or Service Tax can be filed in case of an order determining duty payable only after quantification of the duty payable by the said order. This is because an appeal can be filed subject to the provisions contained in Section (s) 35 F of Central Excise Act, 1944 for Central Excise and Service Tax cases and 129E of the Customs Act, 1962 for customs cases. Section(s) 35 F and 129E was amended with effect from 6.8.2014 by deleting the proviso granting discretion to the appellate authorities to waive pre deposit of duty and penalty and by specifying rate of pre deposit of duty/ penalty payable mandatorily. Section 35F before and after the amendment is as follows:

Prior to 6.8.2014

35F: Deposit pending appeal, of duty demanded or penalty levied:- where in any appeal under this chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or ant penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied:

Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safe guard the interest of Revenue.

From 6.8.2014

Deposit of certain percentage of duty [SECTION 35F. demanded or penalty imposed before filing appeal. - 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 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 Central Excise lower in rank than the [Principal Commissioner of Central Excise or Commissioner of Central Excise];

(ii) against the decision or order referred to in clause (a) of sub-section (1) of section 35B, 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 35B, 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:

Provided that the amount required to be deposited under this section shall not exceed rupees ten crores:

Section 129E is in parimateria with Section 35F. Prior to 6.8.2014 it was obligatory to deposit the duty confirmed subject to the discretion of the Appellate authority. From 6.8.2014, it is mandatory. The determination of the duty payable by the appellant by the authority issuing the order to be appealed or by the delegated authority is extremely necessary to pre-deposit the duty payable before 6.8.2014 and to pre-deposit the specified rate of duty afterwards. Deposit of duty before an appeal is equally applicable in case of finalisation of provisional assessment also. Compliance of a pre requisite will become unfeasible in the absence of quantification of duty in the order to be appealed against.

In the light of the above submissions, this paper analyses the judgment in Re: M/s Chemplast Samar Ltd - 2016-TIOL-2145-HC-MAD-CX. The factual matrix of the case is that the provisional assessment finalised by the proper officer by directing the Superintendent to compute the duty liability and when the differential duty was communicated as per the direction of the proper officer, the same was appealed before the Commissioner (Appeals). The Commissioner (Appeals) dismissed the appeal for want of challenge of the proper officers' order. And held the order had attained finality. On appeal, the Tribunal remanded the case to the Superintendent to re determine the duty payable on finalisation of provisional assessment. The Hon'ble High Court upheld the order of the Commissioner (Appeals) that the order of the proper officer had attained finality. Nonetheless, the Hon'ble High Court also mentioned – "We make it clear that this judgment shall not be treated as a precedent." And, therefore, this judgment may not be treated as a precedent.

The pertinent question being discussed here is whether the order of the proper officer was completed before the quantification of the amount of duty payable as per the order of finalisation of provisional assessment. When an original or appellate authority directs the lower authority to quantify the duty payable by an assessee or appellant whether such an order is complete before quantifying the duty liability? What will be the relevant date for filing appeal against such an order? Is it the date of communication of the order of the original/appellate authority or the date of communication of the letter with the quantum of duty payable determined by the lower authority? It appears the order is complete only on receipt of the quantum of duty payable as determined by the lower authority. The relevant date for computing limitation for filing appeal will be the date of communication of the quantity of duty determined by the lower authority.

In a case decided by an Additional Commissioner, if the appellate Commissioner directs the lower authority to quantify duty payable, is it legal and proper to determine the duty liability by the Assistant Commissioner or by the Superintendent? If the said direction is to determine the duty liability within 3 months from the date of receipt of the order and if the lower authority does not quantify the duty liability within the specified period whether the assessee will lose the opportunity of appeal? Whether the Commissioner (Appeals) can extend the time limit further for quantification of duty liability by the lower authority?

An answer is sought from those who are taking up the legacy work for the next five years after GST.