Shri Navkar Plastic Industries v. Commissioner, (Appeals) Central Goods and Service Tax

The contention of the petitioner is that prior to the implementation of Goods and Service Tax Act, the persons registered under Central Excise Tax used to file their return and maintain returns in the electronic ledger accounts, including Personal Ledger Account (PLA) on designated “ACES” portal, which remained functional for some time and subsequently, migrated to the “CBIC-GST” online portal after Goods and Service Tax came into force. Since the petitioner had sufficient balance of un-utilized cash lying in the PLA of ACES portal, which remains unadjusted as on date of the implementation of the Goods and Service Tax. Thus, the petitioner in order to adjust the excess balance of PLA against the payment of pre-deposited as mandated under Section 35F of the Act, entered the debit entry in the ‘PLA’ account manually vide Folio No. 1 on 01.08.2023 and attached the copy of the same along with the memo of the appeal filed before respondent No. 1, which was well within the limitation period.

04. It is urged that this amounts to substantial compliance of Section 35-F. The rejection of appeal without affording opportunity to cure defects is alleged to be arbitrary and violative of principles of natural justice. The respondent No. 1 has rejected the appeal on 06.01.2025 only on the technical issue of the pre-deposit. It is submitted that the respondents should have been construed the conditions of pre-deposit have been complied with or pointed out the deficiencies to him. 3

05. Learned counsel for the petitioner submits that the respondents being fully satisfied with the filing of the appeal, in all respects, registered the same and intimated allotment number to the petitioner vide Letter dated

06.11.2023. The rejection of the appeal on this technical aspect is unjustified.

06. The appeal filed by the petitioner was submitted before the respondents, no deficiency was pointed out. The appeal to Commissioner (Appeals) is provided under Section 35-F of the Act. Section 35-F provides for payment of pre-deposit as a condition precedent for filing an appeal. Section 35-F for facility of reference is reproduced below:- “The Tribunal or the Commissioner (Appeals) , as the case may be, shall not entertain any appeal - ( i ) under sub-section (1) of section 35, unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the 2 [Principal Commissioner of Central Excise or Commissioner of Central Excise ]; against the decision or order referred to in clause (a) of sub-section (ii) (1) of section 35B, unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against; (iii) against the decision or order referred to in clause (b) of sub-section (1) of section 35B, unless the appellant has deposited ten per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against: Provided that the amount required to be deposited under this section shall not exceed rupees ten crores: Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No. 2) Act, 2014. Explanation - For the purposes of this section "duty demanded" shall include, - (i) amount determined under section 11D; (ii) amount of erroneous Cenvat credit taken; (iii) amount payable under rule 6 of the Cenvat Credit Rules, 2001 or the Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004.” 4

07. In fact, the appeal was registered and number was allotted, personal hearing was also provided to the petitioner. It was incumbent upon the respondents to check and verify the issue of pre-deposit at the time of filing of the appeal and issue a deficiency memo with regard to defect, if any, in the memo of appeal. This would have enabled the petitioner to rectify the same. It is evident from the fact that the appeal was duly registered and no observation with regard to non-payment of deposit was made till the impugned order was passed.

08. In fact, it was only after being satisfied with respect to the filing of the memo of appeal that appeal allotment number was intimated to the petitioner vide communication dated 06.11.2023. The office of respondent No. 1 intimated the date of hearing of appeal to the petitioner as 17th/18th of April, 2024. The matter was finally argued by the authorized representative without any notice regarding defect or any observation regarding issue of pre-deposit. The appeal, however, was dismissed on 06.05.2025 only on the technical issue of pre-deposit.

09. The submission of the petitioner that pre-deposit was in fact made vide Folio No. 1 dated 01.08.2023 through PLA, was not even considered by the respondents. The appeal was dismissed on technical ground of non- deposit through prescribed mode without bringing to the notice of the petitioner or affording him any opportunity.

10. In this regard, reliance is placed on the judgment of Hon’ble High Court of Delhi in M/s D.D. Interiors versus Commissioner of Service Tax and others wherein it was held that non-hearing of an appeal on merits would amount to denial of substantial justice. Relevant portion of the judgment reads as under:-

6. A mere deposit in the wrong account, that too, when the integrated portal might not have been fully functional or the existence of the same was 5 not within the knowledge of the Petitioner, cannot result in a rejection of the appeal on the ground of defects. The matter in the opinion of this Court deserves consideration on merits by the CESTAT.

11. Similarly in M/s Shri Krishna Road Carrier (Proprietor Vijay Kumar Gupta) vs Commissioner of Central Excise & CGST, Meerut, 2024 (6) TMI 188, it has been held as under :-

5. We find that the learned Commissioner (Appeals) could have granted the refund of amount of pre-deposit wrongly made by DRC-03 to the Appellant and given an opportunity to deposit the said amount on its Integrated Portal instead of dismissing the appeal in limine. Because dismissing the appeal filed by the Appellant, even after making the pre- deposit, merely on the ground that it has not been deposited in the prescribed manner or by the prescribed Form, amounts to denial of substantial justice and the Commissioner (Appeals) has erred in shirking from its responsibility of deciding the appeal on merits. CBIC has issued another Circular/Instruction dated 18.04.2023, by which it has clarified the earlier Instruction dated 28.10.2022. It has been provided that DRC-03 is a prescribed mode for payment of pre-deposit under the GST Act. From perusal of paragraph 3 of the Instruction dated 28.10.22, it is evident that the tax under the existing law (Service Tax) shall be recovered as an arrear of tax under the CGST Act and the pre-deposit is neither in the nature of duty nor can be treated as arrears under the Service Tax law. Thus, when the service tax could be recovered as an arrear of Service Tax under CGST Act, after commencement of the CGST Act, then pre-deposit made through DRC- 03 prior to 28.10.22 has to be treated as sufficient compliance, in view of the subsequent Instruction dated 18.4.23. In view of the above discussion and by respectfully following the 6. decision of the Hon’ble High Court, we find it appropriate to remand the matter to the learned Commissioner (Appeals) to decide the appeal on merits without further visiting the aspect of pre-deposit. Needless to mention all issues are kept open. Appellant would not seek refund of the pre-deposit till the appeal is finally decided by the learned Commissioner (Appeals). The appeal filed by the Appellant is allowed by way of remand to the Commissioner (Appeals).

12. It is not disputed that the deposit was made though not in prescribed mode at the relevant time and this fact was neither pointed out by the authority nor was any defect pointed out in this regard. Considering the circumstances instead of rejecting the appeal merely on the ground that the amount was deposited in a wrong account without informing him of the defect and the opportunity to correct the same.

13. The petitioner also relies upon the Bombay High Court judgment in Sodexo India Services Pvt. Ltd. vs Union of India reported as (2022) SCC Online Bom 11975 where under similar circumstances, this High 6 Court had allowed the writ petition and ordered the appeals to be heard on merits by the CESTAT. The relevant paragraphs are read as under:-

2. Petitioner had, as required under Section 85 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944, made a pre-deposit in cash through Form GST DRC-03. The appeals were accepted and registered and appeal numbers were allotted. Thereafter, petitioner was called for personal hearing and petitioner made submissions on merits of the matter. 3 To petitioner’s surprise, all the appeals came to be dismissed without going into the merits of the submissions made by petitioner only on the ground that the pre- deposit made by petitioner while filing the appeal was improper. According to respondent no.3, petitioners could not have made the deposit in the manner they made and, therefore, should be construed to have not complied with the precondition of pre-deposit. Strangely in the order respondent no.3 does not state how the deposit should have been made. According to petitioner, even during the personal hearing respondent no.3 was totally silent and never brought to the notice of petitioner as to how the deposit should have been made.

14. It is well settled that the laws of procedure are meant to regulate effectively, assist, and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights of citizen under personal, property and other laws. The procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice as held in S. Amarjit Singh Kalra & ors. vs. Pramod Gupta & ors. reported as (2003) 3 SCC 272 and Shaik Salim Haji Abdul vs. Mr. Kumar & ors. reported as AIR 2006 SC

396. The Hon’ble Apex Court in Collector, Land Acquisition Anantnag & anr. Vs. Mst. Katiji & ors. reported as AIR 1987 SC 1353 has held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred.

15. Having considered the facts and submissions made, we are of the view that dismissal of the petitioner’s appeal solely on a technical ground, despite the fact that the pre-deposit was attempted, amounts to denial of substantial justice. The respondent No. 1 was under an obligation to verify compliance at the stage of admission and afford an opportunity to rectify any deficiency, instead after registering the appeal, allotting a number and 7 hearing the appeal on merits, respondent authority erred in rejecting it at the final stage on mere technicalities.

16. In view of the aforesaid facts and circumstances and in the light of proposition laid in aforementioned judgments, this petition is allowed and impugned judgment dated 06.01.2025 is set aside. The petitioner’s appeal is restored to its original number and respondent No. 1, who shall hear and decide the same on merits in accordance with law. The petitioner is granted liberty to deposit the pre-deposit amount in the prescribed manner within a period of eight weeks from the receipt of certified copy of this judgment.

17. Disposed of. (SHAHZAD AZEEM) (SINDHU SHARMA) Judge Judge JAMMU RAM MURTI/PS (27.05.2025)