When Can Pre-Deposit Be Waived Off in Appeals?
Filing an appeal under customs laws requires a mandatory pre-deposit. However, in rare cases, courts may waive this requirement. Let’s explore the key provisions and recent case laws, like the Bombay High Court’s decision in Lalit Kulthia v. Commissioner of Customs, to understand the circumstances where such waivers can be granted.
What is Pre-Deposit Under Section 129E?
Section 129E of the Customs Act, 1962 mandates pre-deposit of a percentage of the disputed duty or penalty before an appeal is entertained:
| Appeal Type | Pre-Deposit Required |
|---|---|
| Appeal against order of customs officer | 7.5% of disputed duty or penalty |
| Appeal before CESTAT (Section 129A) | 10% of disputed duty or penalty |
| Maximum Limit | ₹10 crores |
This requirement ensures compliance while allowing disputes to be addressed.
Case Law Analysis: Limited Scope for Waiver
Bombay High Court: Lalit Kulthia v. Commissioner of Customs
- The petitioners sought to file an appeal without the statutory pre-deposit.
- The court denied the waiver, emphasizing that only in rare and justified cases can a pre-deposit be waived.
- This decision aligned with the Supreme Court’s ruling in Kotak Mahindra Bank v. Ambuj Kasliwal.
Key Takeaway: Courts rarely exercise discretion to waive pre-deposits unless there is a compelling justification.
When Can a Waiver Be Considered?
Courts have occasionally considered waiving pre-deposits under extraordinary circumstances, such as:
- Severe Financial Hardship
- Clear Violation of Principles of Natural Justice
- Legal Entity Ceasing Operations (as debated in Pioneer Corporation v. Union of India)
However, these cases are exceptions rather than the rule.
GST and Pre-Deposits
Under Section 107(6) of the CGST Act, 2017, a pre-deposit of 10% of the disputed tax is required before an appeal can be filed. The pre-deposit cap is set at ₹25 crores.
Note: Input Tax Credit (ITC) can only be used for output tax payments, not for penalties or fines.
Conclusion
The requirement of pre-deposit under Section 129E and Section 107(6) is strict. Waivers are granted only in rare and deserving cases. Businesses must be prepared to comply with these statutory obligations when filing appeals.