D.N.Patel,J. - (1.) These writ petitions have been preferred challenging Section 35F of the Central Excise Act, 1944. This section has been amended with effect from 6th August, 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: These petitioners are the manufacturers and they are liable to make payment of excise duty under the Central Excise Act, 1944 (hereinafter to be referred to as the Act, 1944). They have been issued show-cause notices and ultimately, Orders-in-Original have been passed under the Act, 1944. These petitioners can prefer appeal either before the Commissioner (Appeals) or before the Tribunal under the Act, 1944. Section 35F as it stands before the amendment i.e. prior to 6th Augus t 2014 reads as under:- 35F. Deposit, pending appeal, of duty demanded or penalty levied - where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with adjudicating authority the duty demanded or the penalty levied: Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue. Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decides such application within thirty days from the date of its filing. Explanation:-For the purposes of this section duty demanded shall include,- (i) amount determined under section 11D; (ii) amount of erroneous Cenvat credit taken; (iii) amount payable under rule 57CC of Central Excise Rules, 1944; (iv) amount payable under rule 6 of Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2002 or Cenvat Credit Rules, 2004; (v) interest payable under the provisions of this Act or the rules made thereunder. (Emphasis supplied) It appears that under the aforesaid provision, as a rule, an appellant had to deposit with the appellate authority or the Tribunal, the duty demanded or the penalty levied. Nonetheless, the application for waiving the deposit was also permitted to be preferred. Evaluating the undue hardship on the part of the assessee-appellant and safeguard of the interests of the revenue from the other side the amount of deposit may be waived by the Tribunal or the appellate authority by using the judicial discretion. By virtue of Section 105 of the Finance (No.2) Act, 2014, Section 35F has been substituted and the said substituted Section 35F which has been brought into force with effect from 6th August, 2014 reads as under:- 35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.- The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal.- (i) under sub-section (1) of Section 35, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Principal Commissioner of Central Excise or Commissioner of Central Excise; (ii) against the decision or order referred to in clause (a) of sub-section(1) of section 35B, unless the appellant has deposited seven and a half per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against; (iii) against the decision or order referred to in clause (b) of sub-section(1) of section 35B, unless the appellant has deposited ten per cent of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against; Provided that the amount required to be deposited under this section shall not exceed rupees ten crores; Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act 2014. Explanation.- For the purposes of this section duty demanded shall include,- (i) amount determined under section 11D; (ii) amount of erroneous Cenvat credit taken; (iii) amount payable under rule 6 of the Cenvat Credit Rules, 2001 or the Central Credit Rules, 2002 or the Cenvat Credit Rules, 2004. (Emphasis supplied) Being aggrieved and feeling dissatisfied by the substituted provision, these writ petitions have been preferred challenging the vires of Section 35 F of the Act, 1944, by these petitioners.
(3.) Arguments canvassed by counsels for the petitioners. Counsel appearing for the writ petitioners mainly submitted that the newly substituted Section 35F is violative of provisions of the Constitution of India, more particularly Article 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 Section 35F is confiscatory in nature. The classification created by this amendment to be read with the Circulars issued by the respondent-authority dated 16th September, 2014 and 14th October, 2014 have created two classes of the assessees viz. those who have preferred appeals prior to 6th August, 2014 and those who have preferred appeals after 6th August, 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 Section 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 August, 2014 under Section 35F of the earlier un-amended provision. It is further submitted that the newly substituted Section 35F is also violative of Article 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 August, 2014 and, therefore, earlier Section 35F is applicable and not the substituted Section 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 Section 35F violates grossly the provisions of Article 14 of the Constitution of India. It is further submitted by the counsel for the petitioners that 2nd proviso to the newly substituted Section 35F is not severable and hence as per Article 13(2) of the Constitution of India the whole Section 35F may be struck down by this Court. Counsels appearing for the petitioners has further submitted that right given under unamended Section 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 August, 2014. Counsels for the petitioners submitted that burden of proof of the Constitutional validity of Section 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.;