The Court set aside the CESTAT order and restored the appeal to its original number. It directed that the appeal should now be heard on its merits without requiring any further pre-deposit.
The Delhi High Court has ruled that an appeal cannot be dismissed merely because the pre-deposit required under Section 35F of the Central Excise Act, 1944, was made in an incorrect account. The Court emphasized that procedural defects should not hinder the right to appeal, especially when the integrated payment portal was not fully operational at the time of deposit.
Background of the Case
The case involved the petitioner, DD Interiors, which had filed deposit challans in compliance with the mandatory pre-deposit requirement. The petitioner initially deposited 7.5% of the disputed amount before the Commissioner (Appeals) and later deposited the remaining 2.5% when filing an appeal before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). However, the Department objected on the grounds that the deposit had been made in the wrong account.
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Key Arguments and Court’s Observations
The petitioner argued that the new CBIC-GST Integrated portal, which facilitates the correct payment of pre-deposits, was launched only in July 2019. At the time of the petitioner’s deposit, the integrated system was not available, and the procedure followed was as per the prevailing guidelines.
The Delhi HC referenced a similar judgment by the Bombay High Court in Sodexo India Services Pvt. Ltd. vs. Union of India (2022). In that case, the Bombay HC highlighted the lack of a clear legal framework regarding the correct account for pre-deposits and had urged the Central Board of Indirect Taxes and Customs (CBIC) to provide necessary clarifications. The Bombay High Court had also ruled that dismissing an appeal on such procedural grounds would be a denial of substantial justice.
Additionally, the Court cited a recent CESTAT Allahabad ruling, where the tribunal recognized that rejecting an appeal solely on the basis of an incorrect deposit account was unjust. The tribunal asserted that as long as the deposit was made in good faith, it should be considered valid.
Final Verdict by Delhi High Court
A division bench comprising Justices Prathiba M. Singh and Rajneesh Kumar Gupta ruled in favor of the petitioner. The Court set aside the CESTAT order and restored the appeal to its original number. It directed that the appeal should now be heard on its merits without requiring any further pre-deposit. The Court concluded that the pre-deposit condition had been fulfilled and procedural technicalities should not override substantive justice.
Implications of the Judgment
This ruling provides significant relief to taxpayers and appellants facing procedural challenges in making pre-deposits. It underscores the judiciary’s stance that technical errors in payment methods should not impede access to legal remedies. Additionally, the verdict reinforces the need for CBIC to issue clear and consistent guidelines regarding pre-deposit payments to prevent future disputes.
Conclusion
The Delhi High Court’s decision upholds the principle of fairness in taxation and appeals. By setting aside the dismissal of appeals due to procedural lapses, the ruling ensures that taxpayers are not unfairly denied their right to be heard. This judgment is expected to set a precedent for similar cases in the future, offering clarity and relief to appellants navigating the taxation system.
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