Pre-Deposit Waiver: Rare and Exceptional Cases
The Hon’ble Bombay High Court, in its judgment in the case of Lalit Kulthia & Anr. v. Commissioner of Customs (Appeals) Mumbai III & Ors. [Writ Petitioner No. 476 of 2024], clarified that a waiver of pre-deposit under Section 129E of the Customs Act, 1962, can only be granted in rare and deserving cases where a clear justification exists. Below is a detailed analysis of the judgment and its implications.
Case Background
Petitioner’s Appeal:
Mr. Lalit Kulthia & Anr. sought relief from the Hon’ble Bombay High Court to waive the statutory pre-deposit requirement while filing an appeal under Section 129E of the Customs Act.
Original Petition:
The Petitioners challenged an order dated June 6, 2019, without fulfilling the appellate requirements, including the mandatory pre-deposit.
Argument:
The Petitioners contended that the penalty imposed on gold (of varying purity levels) lacked jurisdiction, and sought direction to waive the pre-deposit requirement and restore their appeal.
Court Observations
- Mandatory Pre-Deposit:
Section 129E mandates a pre-deposit of 7.5% to 10% of the disputed duty or penalty before an appeal can be entertained.
The Court ruled that this statutory provision cannot be overridden through discretionary jurisdiction under Article 226 of the Constitution.
- Rare and Exceptional Cases:
Waiver of pre-deposit is permissible only in rare and deserving cases, where clear and compelling justification is provided.
In this case, the Court found no exceptional circumstances warranting interference.
- Precedent Cases:
The judgment referenced Kotak Mahindra Bank Pvt. Ltd. v. Ambuj A Kasliwal (2021), where the Hon’ble Supreme Court emphasized that appellate authorities must comply with statutory pre-deposit requirements.
Similarly, in Manjit Singh v. Union of India (2022), the Bombay High Court declined to waive the minimum pre-deposit requirement.
- Dismissal of Petition:
The Court concluded that the relief sought was contrary to statutory provisions, and the Petitioners’ appeal was rightly dismissed for non-compliance with the pre-deposit mandate.
Key Provisions and Related Laws
Section 129E of the Customs Act, 1962:
Requires appellants to deposit 7.5% of the disputed duty or penalty for appeals before the Commissioner (Appeals) and 10% for appeals to the Appellate Tribunal.
Central Goods and Services Tax Act, 2017 (CGST Act):
Section 107(6) mandates a 10% pre-deposit of the disputed tax amount for filing appeals before the appellate authority.
ITC (Input Tax Credit) can only be utilized for tax payment, not for penalties or interest.
Implications
- Limited Scope for Waiver:
The judgment reinforces that waivers of pre-deposit requirements are exceptions, not the norm, and must be justified with compelling reasons. - Encourages Compliance:
The strict adherence to statutory provisions ensures procedural discipline among appellants. - Guidance for Appellants:
Appellants should prepare for the mandatory pre-deposit requirement when filing appeals.
Utilizing electronic credit ledger balances for payment remains restricted to output tax liabilities under the CGST Act.
Our Comments
The statutory requirement of pre-deposit under Section 129E of the Customs Act aims to ensure a balance between revenue collection and judicial remedies. While it offers protection against frivolous appeals, the provision allows discretionary relief in rare cases.
This ruling highlights the importance of aligning with procedural laws and provides clarity on when exceptions may apply, ensuring fairness in the appellate process.
