M/S Nava Raipur Atal Nangar Vikas Pradhikaran vs. The Union Of INDIA

Facts

The petitioner, M/s Nava Raipur Atal Nangar Vikas Pradhikaran, a statutory body, filed a writ petition challenging a Defect Notice dated April 16, 2021, issued by the Registry of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The petitioner had appealed an order dated December 18, 2020, passed by the Principal Commissioner, Central Tax and Central Excise, Raipur, which demanded service tax of Rs. 134,83,58,448/- along with interest and penalty. The CESTAT issued the Defect Notice because the petitioner had not made the mandatory pre-deposit as required under Section 35-F of the Central Excise Act, 1944, read with Section 83 of the Act, and Section 129-E of the Customs Act, 1962. The petitioner claimed financial hardship due to the COVID-19 pandemic, which adversely affected its commercial operations and revenue collection, rendering it unable to pay the pre-deposit.

Held

The Court held that the petitioner's prayer for waiver of the mandatory pre-deposit under Section 35-F of the Central Excise Act, 1944, could not be accepted. The Court reasoned that Section 35-F, with its peremptory words "shall not," creates an absolute bar on the CESTAT entertaining any appeal unless the stipulated pre-deposit is made. The Court noted that the financial hardship claimed by the petitioner, particularly in light of the balance sheet showing profits after the pandemic period, did not warrant a waiver. The Court relied on the Delhi High Court's decision in M/s Vish Wind Infrastructure LLP, which held that allowing an appeal without pre-deposit would violate the statutory mandate and render the legislature's command ineffective. The Court also referenced the Allahabad High Court's observation in Ganesh Yadav regarding the applicability of amended Section 35-F to appeals filed after its enforcement. The ratio decidendi is that statutory provisions mandating pre-deposit for appeals cannot be waived based on financial hardship alone, as this would undermine legislative intent. However, the Court granted the petitioner's alternate prayer for an extension of time to make the pre-deposit, allowing three months from the date of the order to comply. If compliance is made within this period, the appeal will be heard on merits.

Key Issues

1. Whether the Court should direct the CESTAT to admit and hear the appeal on merits without insisting on the payment of pre-deposit, considering the petitioner's alleged financial hardship due to the COVID-19 pandemic? (Question of law and fact, turning on Section 35-F of the Central Excise Act, 1944). Petitioner's arguments: The petitioner argued that due to severe financial hardship caused by the COVID-19 pandemic, its commercial operations were adversely affected, leading to an acute cash crunch. They contended that this financial crisis made it impossible to pay the huge pre-deposit amount (7.5% of the tax demanded, capped at Rs. 10 crores). They asserted having a good prima facie case and sought waiver of the pre-deposit to avoid losing the opportunity to contest the appeal on merits. They relied on decisions from the Delhi High Court in M/s Pioneer Corporation, Manoj Kumar Jha, and Shubh Impex. Revenue's arguments: The respondent argued that the writ petition was not maintainable as it solely prayed for waiver of the mandatory pre-deposit. They pointed out that the challenged notice was a 'Defect Notice' from the CESTAT, merely intimating the petitioner after scrutiny. They further contended that the Delhi High Court, in M/s Vish Wind Infrastructure LLP, had considered and distinguished the cases relied upon by the petitioner, holding them contrary to the law laid down in Anjani Technoplast Ltd., which was upheld by the Supreme Court.