Delhi High Court Restores Appeal Dismissed for Pre-deposit in
‘Wrong Account’: DD Interiors v. Commissioner of Service Tax
Summary of
the Case
In a significant judgment
protecting the rights of taxpayers navigating the transitional complexities of
GST, the Delhi High Court quashed an order passed by the Customs,
Excise and Service Tax Appellate Tribunal (CESTAT) that dismissed an appeal
by M/s DD Interiors solely on the ground of incorrect pre-deposit
procedure. The petitioner had paid the required 10% pre-deposit amount but
allegedly in the "wrong account" under the legacy system.
The High Court held that
such a dismissal amounted to a denial of substantial justice, especially
when the pre-deposit was made prior to the operationalization of the GST
integrated portal and was otherwise undisputed. The matter was remanded to
CESTAT for adjudication on merits.
Case
Background
- Petitioner:
M/s DD Interiors
- Respondents:
Commissioner of Service Tax & CBIC
- Legal Representation:
- For Petitioner: Mr. Ruchir Bhatia,
Advocate
- For Respondents: Mr. Atul Tripathi,
SSC, CBIC; Mr. Shubham Mishra; Mr. Lal Dev Rajak (Assistant
Commissioner); Mr. Himanshu Dubey (Inspector)
Facts of
the Case
1. Appeal
Filed Before CESTAT: The petitioner had filed an appeal
before the CESTAT challenging a service tax demand.
2. Pre-deposit
Made in 2018: As per statutory requirement under Section
35F of the Central Excise Act, 1944, the petitioner deposited:
o ₹1,60,600
on 13 August 2018
o ₹4,750
on 17 August 2018
3. Dismissal
by CESTAT: On 08 November 2024, the CESTAT rejected the
appeal, holding that the pre-deposit was made in the wrong account, and
hence was invalid. As a result, the appeal was not considered on merits.
4. Writ
Petition Before High Court: Aggrieved by this procedural
rejection, the petitioner filed a writ petition under Article 226 before
the Delhi High Court seeking restoration of the appeal.
Core Legal
Issues
1. Whether
the appeal could be dismissed for non-compliance with Section 35F despite
actual payment of the required pre-deposit, albeit in a "wrong
account"?
2. Whether
such technical issues, especially in a transitional phase between legacy and
GST regimes, should be allowed to defeat access to appellate forums?
3. Was
the petitioner’s action consistent with instructions and clarifications
issued by CBIC regarding transitional pre-deposit mechanisms?
Petitioner's
Submissions
- The pre-deposits were made in August
2018 when the GST Integrated Portal was not functional.
- The Central Board of Indirect
Taxes and Customs (CBIC), through instructions dated 28 October
2022 and 18 April 2023, had clarified that payments made
through DRC-03 under GST could be valid for fulfilling pre-deposit
conditions for legacy matters.
- Dismissal of the appeal on procedural
technicality, when the payment was actually made and not disputed,
is inequitable and contrary to the principles of natural justice.
- Cited precedent:
- Sodexo India Services Pvt. Ltd. v.
Union of India, Bombay High Court (2022 SCC OnLine
Bom 11975)
- Shri Krishna Road Carrier v. CCE
& CGST, Meerut, CESTAT Allahabad, 2024 (6)
TMI 188
In both cases, rejection
of appeals based on form or method of pre-deposit—without questioning
the payment itself—was held unsustainable.
Respondents’
Submissions
- The Department argued that the
petitioner had not followed the prescribed process, and the pre-deposit
was not made via the proper mode, as per the integrated portal’s
requirements.
- However, they conceded:
- The integrated portal was
non-functional at the time of petitioner’s deposit (2018).
- The petitioner made the 7.5% deposit
when required, and a further 2.5% when approaching CESTAT, fulfilling the
total 10% pre-deposit requirement.
- No coercive steps were taken in the
interim as per earlier court directions.
CBIC
Circulars Cited
1. CBIC
Instruction dated 28 October 2022:
o Highlighted
ambiguity in acceptable modes of pre-deposit in transitional cases.
o Directed
acceptance of DRC-03 as a valid mode for pre-deposit under certain
circumstances.
2. CBIC
Clarification dated 18 April 2023:
o Reaffirmed
that pre-deposit payments made under DRC-03 prior to the instruction
date were to be considered valid.
o Emphasized
that substance of compliance should be prioritized over form.
High
Court's Observations
1. Integrated Portal Not
Operational in 2018
The Bench noted that
during the time of the initial pre-deposit (August 2018), the CBIC’s new
payment system wasn’t yet functional, hence depositing in any other
available account could not be held against the petitioner.
2. Deposit Was Not
Disputed
The actual deposit
was acknowledged and not denied by the Department. Hence, the intent
and substance of compliance were clear.
3. Rejection Denied
Substantial Justice
“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... amounts to denial of
substantial justice.” – CESTAT Allahabad in Shri Krishna Road Carrier
The Court found that the
CESTAT erred in shirking its responsibility of deciding the appeal on
merits and relied solely on technical flaws.
4. Precedents Support
Petitioner's Case
The Court expressly relied
on the Bombay High Court’s ruling in Sodexo and the Allahabad CESTAT
decision, both of which emphasized that form cannot override fulfillment
of statutory obligation.
Judgment
The Delhi High Court
allowed the writ petition and passed the following orders:
1. Quashed
the Order: The order dated 08 November 2024, passed by
CESTAT rejecting the appeal, was set aside.
2. Restored
the Appeal: The appeal was restored to its original number
before CESTAT, and it was directed that the appeal shall now be heard on
merits.
3. No
Additional Deposit Required: The deposit already made by the
petitioner was deemed sufficient compliance with the 10% pre-deposit
condition under Section 35F.
4. Appeal
Not to be Rejected on Limitation: If the appeal papers
were returned, the petitioner was permitted to refile within 30 days,
and no objection on limitation would be entertained by CESTAT.
Conclusion
This decision is a
critical affirmation of the principle that procedural or technical glitches
cannot override substantive rights, particularly in the context of tax
appeals and transitional provisions under GST.
The ruling ensures:
- Taxpayers are not penalized for
legacy regime ambiguities
- Appellate bodies must focus on merits
rather than form
- Fair hearing and due process
remain sacrosanct in tax litigation
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
Find the Attachment (Press on Click Here )
Click here
