UncategorizedAPPEAL CANNOT BE REJECTED ON MERE GROUND OF PRE-DEPOSIT DUE TO TECHNICAL GLITCH ON PORTAL

The Hon’ble Delhi High Court (hereinafter referred to as “the High Court”), in the case of DD Interiors v. Commissioner of Service Tax & Anr., [W.P.(C) 877 of 2025 pronounced on 21.02.2025], held that an appeal cannot be dismissed solely due to the statutory pre-deposit being made in an incorrect account, especially when the integrated payment portal was non-operational at the time. It emphasized that procedural lapses should not override a taxpayer’s substantive right to appeal.

FACTS
M/s DD Interiors, (hereinafter referred to as “the Petitioner”) filed a writ petition before the Delhi High Court under Article 226 of the Constitution of India, challenging the impugned order dated 08.11.2024, the Respondent, Commissioner of Service Tax & Anr. (hereinafter referred to as “the Respondent”), passed by the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as “CESTAT”). CESTAT refused to entertain the Petitioner’s appeal on the basis of alleged non-compliance with the mandatory pre-deposit condition under Section 35F of the Central Excise Act, 1944.
The Petitioner had made a pre-deposit of ₹1,60,600 and ₹4,750 on 13.08.2018 and 17.08.2018, respectively, but it was deposited into an incorrect account. Consequently, CESTAT refused to consider the appeal on its merits.
Being aggrieved by the refusal to entertain the Appeal, the Petitioner has filed the present Petition.

ISSUES BEFORE THE DELHI HIGH COURT
1. Whether the appeal before CESTAT could be merely dismissed on the ground that the pre-deposit was made in an incorrect account?
2. Whether the Petitioner had complied with the statutory pre-deposit condition under Section 35F of the Central Excise Act, 1944?

CONTENTIONS OF THE PARTIES
The Petitioner submitted that at the time of making the pre-deposit, the GST regime was newly implemented, leading to uncertainty regarding the prescribed payment method. The Petitioner placed reliance on the case of Sodexo India Services Pvt. Ltd. v. Union of India, 2022 SCC OnLine Bom 11975, wherein it was held that technical lapses in the method of pre-deposit payment cannot be a ground for dismissal of an appeal.

The Petitioner contended that the Ministry of Finance’s instructions dated 28.10.2022 clarified that pre-deposits must be made through the integrated GST portal. However, at the time when the Petitioner made the deposit in August 2018, this portal was not operational. Consequently, the Petitioner argued that the denial of the appeal on account of an administrative lapse was unjustified.

Additionally, the Petitioner stated that CESTAT’s rejection of the appeal, despite full compliance with the pre-deposit condition in substance, amounts to a denial of substantive justice. The Petitioner asserted that the deposit had been made well in advance, and a mere procedural lapse should not render an appeal non-maintainable.

On the contrary, the Respondent submitted that the Petitioner had not complied with the mandatory pre-deposit condition as stipulated under Section 35F of the Central Excise Act, 1944. The Respondent asserted that the statutory requirement necessitates that the deposit be made in the prescribed manner, and any deviation from the same renders the appeal defective.The Respondent further contended that the Petitioner’s failure to deposit the amount into the correct account, despite procedural guidelines being available, amounts to non-compliance with statutory requirements. The Respondent emphasized that mere submission of challans does not validate an incorrect deposit, and the appeal was rightly dismissed by CESTAT for non-adherence to procedural mandates.
Additionally, the Respondent maintained that CESTAT acted well within its jurisdiction in dismissing the appeal, as compliance with procedural formalities is essential for ensuring the proper administration of justice in taxation matters.

DECISION AND FINDINGS
The High Court observed that the pre-deposit condition under Section 35F of the Central Excise Act, 1944, had been complied with by the Petitioner, and therefore, the rejection of the appeal by CESTAT was not justified.
The High Court noted that at the time when the Petitioner made the pre-deposit, the integrated portal for tax payments was not operational. In such circumstances, the Petitioner could not be penalized for depositing the amount through an alternative available mode. The Court held that mere procedural irregularities in making the pre-deposit cannot override substantive compliance with statutory requirements.
The High Court further took into account that the Respondents themselves admitted that the new CBIC-GST integrated payment system came into effect only in July 2019, whereas the Petitioner had made the deposit in August 2018, much before the system was introduced.
As a result, the High Court set aside the impugned order dated 08.11.2024 and held that the Petitioner’s appeal must be restored before CESTAT and be decided on merits without insisting on any further pre-deposit.

AMLEGALS REMARKS
The decision of the High Court reaffirms the principle that substantive compliance with statutory requirements should not be defeated by procedural technicalities. The High Court has emphasized that the right to appeal cannot be denied on the mere ground of administrative lapses in tax payment mechanisms, particularly when the taxpayer has acted in good faith.
The ruling further clarifies that pre-deposit requirements under tax laws must be interpreted in a manner that facilitates access to justice rather than creating unnecessary hurdles for taxpayers. By setting aside the rejection of the appeal solely due to a procedural defect in deposit mode, the High Court has reinforced the importance of fair treatment in taxation matters.
Additionally, the judgment recognizes the transitional complexities in the GST regime, wherein taxpayers face ambiguities regarding payment procedures. The decision provides clarity on how pre-deposit compliance should be assessed in cases where tax infrastructure is still evolving, thereby preventing arbitrary dismissals of appeals.
The present ruling provide a significant precedent for taxpayers who encountered similar compliance issues during the implementation phase of GST. It ensures that taxpayers are not unfairly penalized for administrative inefficiencies and strengthens the principle of substantial justice in tax litigation.

Team AMLEGALS assisted by-Khilansha Mukhija (Intern)

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