Pre-deposit for second appeal includes deposits made for first appeal

Delhi High Court has on 31^st of May 2018 held that for filing second appeal before the CESTAT, the assessee is required to deposit 10% of amount of duty/penalty as confirmed by the first appellate authority which is inclusive of 7.5% pre-deposit made for the first appeal. The High Court in this regard was of the view that earlier deposit (for the first appeal) will not get obliterated and will not become inconsequential.
 
It also quashed the Circular dated 27-4-2017 issued by the Tribunal which was based on a Larger Bench decision of the Tribunal in In Re: Quantum of Mandatory Deposit.
 
The revenue in Santani Sales v. CESTAT had contended that in case of second appeal, the assessee would have to deposit 10% of the disputed duty demand and penalty in addition to the pre-deposit of 7.5% already made before the first appellate authority.
 
The Court however observed that the condition of pre-deposit should not be so onerous and harsh so as to amount to an unreasonable restriction, thereby rendering and making the right of appeal illusory and delusive. Reliance was placed upon Apex Court rulings in Seth Nand Lal and Mardia Chemicals.
 
The Court also noted that language of Section 35F of the Central Excise Act, 1944 suffers from no ambiguity and is not open to diverse interpretations, and thus, appropriateness of the meaning attached to 10% pre-deposit is apparent. It concluded that the intent of the said provision cogently reflected in simple words that the assessee on second appeal should pre-deposit 10% of the total tax and penalty without ignoring the pre-deposit of 7.5% already made to file first appeal.
 
Circular No. 984/08/2014-CX dated 16-9-2014 was also referred by the Court here to affirm its opinion relating to difference between 7.5% and 10% as the pre-deposit requirement.
 
It was also held that requirement of pre-deposit under Section 35F of Central Excise Act is also applicable to service tax appeals made under Section 85 and Section 86 of Finance Act, 1994. The words ‘as in force from time to time’ and ‘as they apply to in relation to duty of excise’ in Section 83 of Finance Act, 2012 were relied for this purpose.