Smt. Swetha M C vs. Prl. Commissioner Of Central GST And Central Excise

Held

The High Court of Karnataka allowed the petition in part, quashing the CESTAT's order dated 05.04.2023. The Court found merit in the petitioner's submission regarding the extenuating circumstances, specifically her husband's severe illness and subsequent surgery, which prevented her from making the pre-deposit within the stipulated time. The Court reasoned that while the statutory requirement of pre-deposit under Section 35F of the Central Excise Act, 1944, is mandatory, the circumstances presented by the petitioner warranted interference. The CESTAT's order was set aside, and the appeal was restored for reconsideration. The restoration was made conditional upon the petitioner making the pre-deposit within eight weeks from the date of the High Court's order. The petitioner was directed to appear before the Tribunal on 06.02.2026. The ratio decidendi is that while statutory compliance is paramount, courts may grant relief based on genuine and proven extenuating circumstances that impede compliance, provided the underlying obligation is ultimately fulfilled.

Facts

The petitioner, Smt. Swetha M C, proprietor of M/s. Sree Nimishamba Enterprises, challenged an order by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru. The CESTAT had dismissed her appeal on the grounds of failure to make the pre-deposit. The petitioner's appeal was filed on 12.04.2021. The CESTAT noted repeated adjournments and the appellant's failure to deposit the required amount, citing an amendment to Section 35F of the Central Excise Act, 1944. The petitioner argued that while she did not dispute the requirement to deposit 7.5% of the demand amount, her husband's severe illness during Covid-19, requiring surgery in June 2024, necessitated a delay in fund regeneration.

Key Issues

1. Whether the CESTAT was justified in dismissing the petitioner's appeal for non-compliance with the pre-deposit requirement under Section 35F of the Central Excise Act, 1944, as applicable to service tax matters? Petitioner's arguments: The petitioner contended that while she acknowledged the obligation to deposit 7.5% of the disputed amount to prosecute her appeal, her failure to do so was due to extenuating circumstances. Specifically, she highlighted her husband's critical illness during Covid-19, which led to a surgical procedure in June 2024, impacting her ability to regenerate funds. She sought the Court's indulgence based on these circumstances. Revenue's arguments: The respondents, represented by the Principal Commissioner and Additional Commissioner of Central GST and Central Excise, argued that the appeal was filed on 12.04.2021 and despite repeated adjournments granted by the CESTAT, the petitioner failed to deposit the required amount. They relied on the amended Section 35F of the Central Excise Act, 1944, which mandates pre-deposit for appeals, and cited the judgment of the Hon'ble High Court of Kerala at Ernakulam in W.P.(Congress Party) No.25453 of 2021 in Santhosh Kumr K. Vs. Commissioner of Central GST and Central Excise & Others.