Pre-deposit mandatory under Customs Act

Pre-deposit mandatory under Customs Act

A bench comprising Justices KM Joseph and Hrishikesh Roy, in the case of Chander Sekhar Jha v Union of India and Anr, dismissed an appeal assailing the order of the Calcutta High Court regarding a gold smuggling charge.

The Calcutta High Court endorsed the decision of the Customs, Excise and Service Tax Appellate Tribunal in Kolkata to dismiss an appeal emanating from a penalty imposed by the Commissioner of Customs (Preventive) West Bengal, for not making a pre-deposit as per section 129E of the Customs Act, 1962.

The allegation is that the appellant smuggled gold into India from Bangladesh. The Commissioner of Customs passed an order imposing a penalty of INR7.5 million (USD98,300).

An appeal was proferred before the Customs, Excise and Service Tax Appellate Tribunal, Kolkata, which was dismissed in 2017 on the grounds that the pre-deposit was not made by the appellant.

The high court upheld the order of the appellate tribunal. The court noted that, under the old regime, the appellant was to deposit the full amount of the penalty levied, which had been scaled down, and only 7.5% of the amount needed to be deposited now. However, in the earlier regime the appellate tribunal had the power to dispense with the deposit, subject to imposing conditions as it deemed fit, to safeguard the interest on the revenue.

It further observed that as per second proviso to section 129E, the mandate of the pre-deposit would not be applicable to the stay applications and appeal, which were pending before the appellate tribunal prior to 6 August 2014, when the provision came into effect.

In the present case, the court noted, the commissioner passed the order on 23 October 2015, and the appeal was filed in 2017 – both after the new provision came into effect, repealing the older section 129E.

In view of this, the court was of the opinion that the benefit of the proviso in the old provision could not be extended to the appellant, who had filed the appeal after the new regime came into effect. Additionally, the amount asked to be deposited was 7.5% of the entire penalty imposed, which goes on to show that the intention was to treat the appellant’s case under the new section 129E, as opposed to the older version, which required depositing the entire amount.

The Supreme Court therefore held that the benefit of the first proviso to section 129E of the Customs Act, 1962, before substitution – whereby the appellate tribunal was vested with the power to dispense with the deposit of the penalty amount to be made during the pendency of appeal – could not be extended to the appellants, who had filed an appeal after the provision was substituted by the new section 129E, which came into effect on 6 August 2014. The court stated that the substitution of a provision results in repeal of the older provision and replacement by the new provision.