SRI SATYA NAND JHA, R/O STAFF QUARTERS, KENDRIYA VIDYALAY, PO RIMS, BARIYATU, PS SADAR, DISTRICT RANCHI, JHARKHAND Vs. UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, HAVING OFFICE AT CENTRAL SECRETARIAT NORTH BLOCK, NEW DELHI

JUDGEMENT

(1.) These writ petitions have been preferred challenging Sec. 35F of the Central Excise Act, 1944. This section has been amended with effect from 6th Aug., 2014 by section 105 of the Finance (No. 2) Act, 2014, which prescribes that 7.5% or 10% of the duty demanded or penalty levied is to be deposited in case appeal is being preferred before the Commissioner (Appeals) or the Tribunal. This is mainly challenged in these four writ petitions.

(2.) Factual Matrix:

(3.) Arguments canvassed by counsels for the petitioners. Counsel appearing for the writ petitioners mainly submitted that the newly substituted Sec. 35F is violative of provisions of the Constitution of India, more particularly Art. 14 thereof. It is also submitted that the object for amendment must be legal and cannot be discriminatory. Counsel for the petitioners has submitted that Sec. 35F is confiscatory in nature. The classification created by this amendment to be read with the Circulars issued by the respondent-authority dated 16th Sept., 2014 and 14th Oct., 2014 have created two classes of the assessees viz. those who have preferred appeals prior to 6th Aug., 2014 and those who have preferred appeals after 6th Aug., 2014. This classification is not a valid classification and two tests of the valid classification have been violated. Irrelevant criteria have been taken into consideration for creating these two classes. The differentia must be intelligible and it must have a reasonable nexus with the object, sought to be achieved by the amendment. It is further submitted by the learned counsel for the petitioners that classification made by substituted Sec. 35F of the Act, 1944 is absolutely arbitrary in nature. The whole classification is based upon the date of filing of the appeal, either before the Commissioner (Appeals) or before the Custom, Excise, and Service Tax Appellate Tribunal. This cannot be a criteria for classification. It is also submitted that right to prefer appeal has already accrued prior to 6th Aug., 2014 under Sec. 35F of the earlier un-amended provision. It is further submitted that the newly substituted Sec. 35F is also violative of Art. 19(1)(g) of the Constitution of India. Even if the order-in-original is passed for want of jurisdiction or in excess of jurisdiction or imposition of penalty or the demand of duty are absolutely baseless and devoid of any merit, then also 7.5% or 10%, as the case may be, of the duty demanded or penalty levied, has to be deposited by the assessee, if he wants to prefer an appeal. Some time the Directors/ employees are fined in crores of rupees e.g. in W.P. (T) No. 4858 of 2015, the Directors/Employees of these petitioners have been fined Rs.15 crores and therefore, if these appellants want to prefer an appeal they will have no option but to deposit 7.5% or 10% of the amount of penalty, as the case may be. It is further submitted that right to prefer an appeal has already accrued to these petitioners prior to 6th Aug., 2014 and, therefore, earlier Sec. 35F is applicable and not the substituted Sec. 35F. Much has been argued by the counsel for the petitioners on the point of classification that there is class within a class and there is overdoing of classification, which tantamount to undoing of the equality. There is a micro-classification etc. Conclusively it is submitted that the newly substituted Sec. 35F violates grossly the provisions of Art. 14 of the Constitution of India. It is further submitted by the counsel for the petitioners that 2nd proviso to the newly substituted Sec. 35F is not severable and hence as per Art. 13(2) of the Constitution of India the whole Sec. 35F may be struck down by this Court. Counsels appearing for the petitioners has further submitted that right given under unamended Sec. 35F is a substantive right and not merely a procedural one and once it is a substantive right, looking to the facts of the present case, it has already accrued prior to cut off date i.e. 6th Aug., 2014. Counsels for the petitioners submitted that burden of proof of the Constitutional validity of Sec. 35F of the Act, 1944 is upon the Union of India and this burden has not been discharged by the Union of India and hence, this court may quash section 35F of the Act, 1944.