Substitution Of A Provision Results In Its Repeal; Pre-Deposit Mandatory Under Section 129E Customs Act : Supreme Court

A Bench comprising Justices K.M. Joseph and Hrishikesh Roy dismissed an appeal assailing the order of the Calcutta High Court, which endorsed the decision of the Customs, Excise and Service Tax Appellate Tribunal, Kolkata to dismiss the appeal emanating from the penalty imposed by the Commissioner of Customs (Preventive) West Bengal, Kolkata, for not making the pre-deposit as per the present Section 129E of the Customs Act, 1962.

Factual Background

The appellant was alleged to have smuggled gold into India from Bangladesh. The Commissioner of Customs (Preventive) West Bengal, Kolkata passed an order imposing a penalty of Rs. 75 lakhs. An appeal was preferred before the Customs, Excise and Service Tax Appellate Tribunal, Kolkata, which was dismissed in 2017 on the ground that the pre-deposit was not made by the appellant. The High Court upheld the order of the Appellate Tribunal.

Appellant's case

Advocate Mr. Galib Kabir, appearing on behalf of the appellant submitted that the demand of pre-deposit is not warranted in law. It was argued that the incident took place on 28.02.2013, before the new Section 129E of the Customs Act, which mandates depositing 7.5% of the entire penalty imposed before filing appeal, came into effect on 06.08.2014. Therefore, the case of the petitioner would be governed by the old Section 129E, where the Appellate Tribunal was vested with the power to dispense with the deposit considering that it causes undue hardship to the person on whom the penalty had been imposed. Mr. Kabir asserted that the pre-deposit amount was harsh and onerous.

Analysis of the Supreme Court

The Court noted that under the old regime the appellant was to deposit the full amount of the penalty levied, which has been scaled down and only 7.5% of the amount needs to be deposited now. However, in the earlier regime the Appellate Tribunal had the power to dispense with the deposit subject to imposing conditions as it deemed fit to safeguard interest of the revenue. It further observed that as per second proviso to the present Section 129E, the mandate of the pre-deposit would not be applicable to the stay applications and appeal which were pending before the Appellate Tribunal prior to 06.08.2014, when the provision came into effect. In the present case, the Court noted, the Commission passed the order on 23.11.2015 and the appeal was filed in 2017 - both after the new provision came into effect, in essence, repealing the older Section 129E.

"Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision…

[...]

…The substitution has effected a repeal and it has re-enacted the provision as it is contained in Section 129E."

In view of the same, the Court was of the opinion that the benefit of the proviso in the old provision could not be extended to the appellant who had filed the appeal after the new regime came into effect. Moreover, the amount asked to be deposited was 7.5% of the entire penalty imposed, which goes on to show that the intention was to treat the appellant's case under the new Section 129E as opposed to the older version which required depositing the entire amount.

However, in the interest of justice, the Court decided to provide two months' time to make the deposit as per the present Section 129E.

Case Name: Chandra Sekhar Jha v. Union of India And Anr.

Citation: 2022 LiveLaw (SC) 256

Case No. and Date: Civil Appeal No 1566 of 2022 | 28 Feb 2022

Corum: Justices K.M. Joseph and Hrishikesh Roy

Authored By: Justice K.M. Joseph

Counsels for the Appellant: Advocate, Mr. Galib Kabir; AoR, Mr. Sandeep Singh

Headnotes

Section 129E of the Customs Act, 1962 before substitution - Deposit, pending, appeal , of duty and interest, demanded or penalty levied - deposit of the entire amount to be made to the proper officer pending appeal challenging order of penalty - first proviso - vested power in the Appellate Tribunal to dispense with the pre-deposit if appellant was under hardship, upon imposing conditions to safeguard the interest of revenue - appellant cannot seek benefit under old provision because new provision came into existence on 06.08.2014 and the appeal was filed by the appellant in 2017.

Section 129E of the Customs Act, 1962 after substitution - Scaled down the pre-deposit amount from 100% to 7.5% - no discretion on pre-deposit rests with the Appellate Tribunal - appellant was asked to pay 7.5%, therefore his case would fall under the new provision which does not extend benefit of discretion in making the pre-deposit.

Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision - substitution of Section 129E, in effect, is a repeal and it re-enacted the provision as it is contained in Section 129E.

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