Cannot Waive The Statutory Mandate of Pre-Deposit Merely On The Plea Of Financial Hardships: Kerala High Court

The petitioner/assessee, a proprietor of an establishment named M/s. Swathi Constructions at Shoranur, is in the business of laying power lines on behalf of people who have executed contracts with the Power Grid Corporation of India. The petitioner has sought relief from the burden of making a pre-deposit under Section 86 of the Finance Act, 1994 for preferring the appeal before the Central Excise and Service Tax Appellate Tribunal (CESTAT).

The petitioner has executed job work during various financial years. After the coming into force of the CGST Act, an order was issued on 13.5.2019 levying penalty and service tax upon the petitioner under five different heads, imposing a huge liability upon the petitioner. Though the imposition of liability for service tax and penalty upon the petitioner was impermissible in the circumstances of the case, the petitioner challenged the order of the Adjudicating Authority before the CESTAT.

As per the provisions of Section 86 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944, the petitioner was bound to pay as a pre-deposit an amount equivalent to 7.5% of the quantum of tax under dispute.

The petitioner contended that the pre-deposit payable as contemplated under law in the instant case was Rs. 18,06,057 and that, with all bonafides, the petitioner deposited an amount of Rs. 12,50,000, leaving Rs. 5,56,057 as a balance unpaid towards the pre-deposit.

Since the petitioner found it financially impossible to make the balance of the mandatory pre-deposit, he has approached the High Court seeking relief from a pre-deposit.

The petitioner contended that the huge quantum of pre-deposit due from the petitioner was too onerous and made it practically impossible for the petitioner to pursue its statutory remedy.

The court observed that the amendment to section 35F of the Central Excise Act, read with Section 86 of the Finance Act, 1994, clearly manifests the intention of the legislature that the waiver of pre-deposit, which was being resorted to quite often by the courts of law, needed to be amended to make the pre-deposit mandatory. Thus, after the Amendment Act came into force, no discretion is available to the courts of law to waive the mandatory requirement of a pre-deposit of 7.5% even if it is assumed to be onerous.

The court relied on a Supreme Court decision in Oil and Natural Gas Commission vs. Gujarat, which stated that high courts cannot disregard statutory mandates.

"I find no merit in this writ petition and the same is dismissed. However, liberty is granted to the petitioner to make the balance of the pre-deposit within a period of one month from the date of receipt of a copy of this judgement. If the said payment is made and the appeal is otherwise in accordance with law, necessarily the Tribunal will consider and dispose of the appeal on merits," the court said.

Case Title: Santosh Kumar K. v. The Commissioner

Citation: 2022 LiveLaw (Ker) 171

Dated: 24.03.2022

Counsel For Petitioner: Senior Advocate T.M.Sreedharan

Counsel For Respondent: Advocate Sreelal Warrier

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