MAY 08, 2017

By LS Karthikeyan, Advocate, Lakshmikumaran & Sridharan

IN its order dated 20.04.2017 [2017-TIOL-1414-CESTAT-DEL-LB], Larger Bench of the Tribunal has held that 'both the appellate proceedings i.e. before the first appellate authority and before the Tribunal, if it is to be treated as independent provisions' and 'in order to prefer an appeal before the Tribunal, an assessee/appellant needs to deposit 10% of the amount of duty confirmed or the penalty... irrespective of the amounts equivalent to 7.5% deposited while preferring an appeal to the first appellate authority'.

The LB has not addressed the controversy whether an assessee/appellant who had paid the entire amount of duty / tax at the time of or earlier to filing the appeal (either during investigation / audit etc), but still contesting the demand is also required to deposit 7.5% or 10% at the time of filing the first or second appeal.

The answer to the question would have its impact under the GST regime also.

Section 107 of the CGST Act provides for 'Appeals to Appellate Authority'. Sub-section (6) thereunder states:

'No appeal shall be filed under sub-section (1), unless the Appellant has paid –

(a) In full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent, of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed'.

Section 112 (Appeals to Appellate Tribunal) under sub-section (8) provides:

'No appeal shall be filed under sub-section (1), unless the Appellant has paid -

(a) In full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to twenty per cent, of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of Section 107, arising from the said order, in relation to which the appeal has been filed'.

On a plain reading, the provision indicates that the undisputed tax amount with interest, fine, fee and penalty should be deposited for filing the appeal. In addition, 10% of the disputed tax amount has to be deposited for appeal before the Appellate authority; an additional 20% of the disputed tax amount is to be deposited (while the 10% deposited earlier would stay with the Government) for appeal before the Tribunal i.e. 30% of the disputed tax.

However, the provisions of even such a seemingly innocuous / direct provision can be given a twist.

It can be noted that 112(8)(b) requires payment in addition to amount paid under Section 107(6) and not clause (b) of 107(6) alone and can be interpreted to mean that while filing appeal before the Tribunal the Appellant should have paid:

- the admitted liability in full (again) - 112(8)(a); and

- 20% of the remaining amount of tax + (100% of the admitted liability + 10% of remaining amount of tax – already paid while filing appeal before the Appellate Authority) being the literal meaning of 112(8)(b).

Isn't that the interpretation of law laid down by the Larger Bench to Section 35F / 129E? Appeals to the Tribunal under GST Act(s) is not in the horizon as of now. But the point is worth contemplating now itself!!!!

(The views expressed are strictly personal.)