EXORA BUSINESS PARKS PRIVATE LIMITED vs. UNION OF INDIA

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 07TH DAY OF OCTOBER, 2015

BEFORE

THE HON'BLE MRS.JUSTICE B.V.NAGARATHNA

WRIT PETITION NOs.10559-10560/2015 (T-TAR) C/w. W.P.NO.54017/2014 (T-RES), W.P.NO.54018/2014 (T-RES) & W.P.NO.21492/2015 (T-TAR)

IN W.P.NOs.10559-10560/2015:

BETWEEN:

AGED 55 YEARS, GENERAL MANAGER (TAX), M/S. HINDUSTAN PETROLEUM CORPORATION LTD., CORPORATE OFFICE, NO.17, JAMSHEDJI TATA ROAD, P.O. BOX NO. 11041, MUMBAI-400 020.

... PETITIONERS

(BY SRI: G. SHIVADASS, ADVOCATE)

AND:

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... RESPONDENTS

(BY SRI: K.M.NATARAJ, ADDL. SOLICITOR GENERAL A/W. SRI. JEEVAN J.NEERALGI, ADVOCATE)

THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO 1)HOLD THAT SEC. 35F OF THE CENTRAL EXCISE ACT, 1944 AS AMENDED BY SEC. 105 OF THE FINANCE ACT (NO.2) , 2014 W.E.F. 6/8/2014 WHICH PROVIDES FOR MANDATORY PRE- DEPOSIT OF 7.5% FOR FIRST APPEALS AND 10% FOR SECOND APPEALS OF THE TOTAL TAX OR PENALTY DEMANDED, AS A MANDATORY CONDITION FOR ENTERTAINING AN APPEAL AS ILLEGAL AND VIOLATIVE OF ARTICLES 14, 19 (1) (g) AND 265 OF THE CONSTITUTION OF INDIA AND ETC.,

*****

IN W.P.NO.54017/2014:

BETWEEN:

PRESTIGE GARDEN CONSTRUCTIONS PRIVATE LIMITED, A COMPAMY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT "THE FALCON HOUSE" NO.1 MAIN GUARD CROSS ROAD, INFANTRY ROAD, BANGALORE-560 001.

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REP.BY ITS AUTHORISED REPRESENTATIVE MR. MANOJ KRISHNA J V.

... PETITIONER

(BY SRI: ARUN KUMAR .K, ADVOCATE)

AND:

... RESPONDENTS

(BY SRI: K.M. NATARAJ, ADDL. SOLICITOR GENERAL A/W. SRI. JEEVAN J. NEERALGI, ADVOCATE)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH SECTION 35F OF THE CENTRAL EXCISE ACT OF 1944 AS AMENDED BY SECTION 105 OF THE FINANCE ACT OF 2014 AND THE SAID SECTION 105 OF THE FINANCE ACT OF 2014 AS BEING UNCONSTITUTIONAL.

******

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IN W.P.NO.54018/2014:

BETWEEN:

EXORA BUSINESS PARKS PRIVATE LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT "THE FALCON HOUSE" NO.1, MAIN GUARD CROSS ROAD, INFANTRY ROAD, BANGALORE-560 001,

REPRESENTED HEREIN BY ITS AUTHORISED REPRESENTATIVE MR. MANOJ KRISHNA J V.

... PETITIONER

(BY SRI: ARUN KUMAR .K, ADVOCATE)

AND:

... RESPONDENTS

(BY SRI: K.M. NATARAJ, ADDL. SOLICITOR GENERAL A/W. SRI. JEEVAN J.NEERALGI, ADVOCATE)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH

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SEC.35F OF THE CENTRAL EXCISE ACT OF 1944 AS AMENDED BY SEC.105 OF THE FINANCE ACT OF 2014 & THE SAID SECION 105 OF THE FINANCE ACT OF 2014 AS BEING UNCONSTITUTIONAL.

******

IN W.P.NO.21492/2015:

BETWEEN:

M/S HEWLETT PACKARD INDIA SALES PVT. LTD., NO.24, SALARPURIA ARENA, HOSUR MAIN ROAD, ADUGODI, BANGALORE-560 030. BY ITS MANAGER SHESHADRI SRINIVASAN.

... PETITIONER

(BY SRI: G. SHIVADASS, ADVOCATE)

AND:

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... RESPONDENTS

(BY SRI: K.M. NATARAJ, ADDL. SOLICITOR GENERAL A/W. SRI. JEEVAN J.NEERALGI, ADVOCATE)

***** THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO 1)DECLARE SECTION 35F OF THE CENTRAL EXCISE ACT, 1944 AS AMENDED BY SEC. 105 OF THE FINANCE ACT (NO.2) , 2014 W.E.F. 6.8.2014 WHICH PROVIDES FOR MANDATORY PRE- DEPOSIT OF 7.5% FOR FIRST APPEALS AND 10% FOR SECOND APPEALS OF THE TOTAL TAX OR PENALTY DEMANDED, AS A MANDATORY CONDITION FOR ENTERTAINING AN APPEAL AS UNCONSTITUTIONAL VIDE ANN-B AND ETC.

THESE PETITIONS HAVING BEEN HEARD AND RESERVED ON 11/9/2015 AND IT BEING LISTED FOR PRONOUNCEMENT OF ORDERS TODAY, COURT PRONOUNCED THE FOLLOWING:

O R D E R

As common questions of law arise in these writ petitions, they have been heard together and are disposed of by this common order.

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brevity), as amended by Section 105 of the Finance Act (No.2) 2014 (hereinafter referred to as ‘2014 Act’, for the sake of convenience) with effect from 6/8/2014, which provides for monetary pre-deposit of 7.5% for first appeals and 10% for second appeals on the total tax or tax and penalty, demanded for entertaining such appeals.

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are concerned commenced prior to 6/8/2014, which is the date on which the amendment has been enforced.

Background facts:

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to by the petitioners as well as by MRPL. Subsequently, the Commissioner of Central Excise and Service Tax passed an order-in-original, confirming the duty and penalty. The petitioner had not yet filed any appeal assailing the order-in-original.

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The Audit Wing of the Service Tax Commissionerate audited the accounts of the petitioner for the period from April 2008 to March 2013 and a show-cause notice dated 24/10/2013 was issued demanding service tax amount of Rs.3,97,52,322/- from the petitioner on the premise that it was ineligible for availing Cenvat Credit as well as interest thereon. The Commissioner of Central Excise passed an order-in-original bearing No.24/2014 on 30/5/2014, holding that the petitioner was liable to pay the requisite amount. Petitioner has sought to assail that order passed under Section 35B of the Act. Petitioner filed an appeal on 6/8/2014. The CESTAT before whom the appeal has been filed has directed the petitioner to make pre-deposit of 7.5% of the demand in terms of the amended provision Section 35F which is assailed in these writ petitions.

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books, printers etc, which provides all services such as maintenance, repairs of systems and also commissioning, installation of the same, as and when required by the customer and is registered with the Service Tax Department for payment of Service Tax in the categories of ‘Management, Maintenance and Repair’, Commercial Training or Coaching, Business Auxiliary Service, Business Support Service, Information Technology, Software Service, Transport of Goods by GTA with STC No.AAACC9862FST002. Petitioner has opted for registration as a Large Taxpayers Unit (LTU), in the year 2008.

The audit of the accounts of the petitioner- company was conducted by the Commissioner of Large Taxpayers Unit, Bengaluru for the period from December 2006 to September 2009. Petitioner was asked to reverse certain Cenvat credits availed by it. Subsequently, a show-cause notice was issued on 30/9/2011 and a demand was made which was confirmed by the order-in-original bearing

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No.37/2013–ST (Commissioner), dated 26.2.2013/ 6.3.2013. Being aggrieved by that order, petitioner filed an appeal before CESTAT, Bengaluru. That authority after hearing the submissions of the petitioner has passed an order on 9/6/2014 in Order No.21335/2014.

In the above background, the Assistant Commissioner, LTU, had by letter dated 27/3/2012, sought details of the cost of spares used in the warranty support service to customers and credit taken on such spare parts for the period from 1/1/2008 to 31/3/2013 with reference to order dated 26.2.2013/6.3.2013, which is the order-in-original.

Petitioner responded to the said clarification. Thereafter on 22/10/2013, show-cause notice was issued by the Commissionerate proposing to demand duty, interest as well as penalty which was replied to and order-in-original bearing No.94/14-15 was passed on 10/11/2014, confirming demand of service tax, interest and penalty. That order was received by the

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petitioner on 16/3/2015. By then, Section 35F of the Act had been amended with effect from 6/8/2014. Petitioner intends to file an appeal before the CESTAT. Under the amended provision, the mandatory pre- deposit of 7.5% of the demand of duty, interest and penalty has to be made by the petitioner, which is assailed in this writ petition.

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conditions, keeping in mind the interests of Revenue. That provision was amended by the 2014 Act, by which the monetary pre-deposit of 7.5% for first appeals before the Commissioner (Appeals) and 10% for second appeals is prescribed. The petitioners being aggrieved by the amendment have filed these petitions.

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contended that amendment to Section 35F of the Act effected from 6/8/2014 adversely affects a substantive and vital right of appeal of the petitioners. Elaborating the said contention, it was submitted that Section 35F of the said Act as it stood prior to the amendment, had stipulated that, where an appeal was filed in respect of the demand made under the Act the appellant had to deposit with the appellate authority the duty demanded or the penalty levied. The proviso stipulated that the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, could dispense with such deposit, subject to such conditions as the authority may deem fit to impose, so as to safeguard the interests of the revenue. Provided that, where such an application was filed for dispensing with the deposit of the duty demanded or penalty levied the same was to be decided within thirty days from the date of filing of the appeal. Therefore, discretion was given to the Appellate authority to dispense with the deposit of the duty demanded or penalty levied in case undue hardship would be

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caused to such appellant. But by the amendment effected from 6/8/2014, Section 35F of the Act categorically states that the Tribunal or the Commissioner (Appeals) shall not entertain any appeal, unless 7.5% of the duty or penalty in dispute is deposited. The first proviso states that the said deposit of 7.5% of the duty and penalty shall not exceed Rs.10.00 crore, which is an upper limit. But the second proviso states that the amended section shall not apply to stay applications and appeals pending before any appellate authority filed prior to the commencement of the 2014 Act. As a result, the discretion vested with the appellate authority has been taken away and in its place, even if the appellant is not liable to pay any duty or penalty, is forced to deposit 7.5% of the duty and penalty. As a result of the said amendment, the right to file an appeal, which is a vested right of the appellant, particularly where the cause of action has arisen prior to the amendment is adversely effected. In other words, it was submitted that where the lis had commenced prior to

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the impugned amendment, the amended provision would not apply to such lis and the un-amended Section 35F would apply, particularly the first proviso thereof. It was, therefore, contended that in respect of those cases, where the matter had commenced long prior to the impugned amendment to Section 35F of the Act, it is the original and un-amended provision which would apply, irrespective of the fact as to whether the appeal was filed prior to 6/8/2014, on which date the amended provision took effect, or subsequent to that date. b) Referring to various decisions of the Hon’ble Supreme Court, it was contended that insofar as the petitioners herein are concerned, the lis commenced long prior to the amendment of Section 35F and irrespective of whether the appeal was filed prior to 6/8/2014 or subsequently, the un-amended first proviso to Section 35F would apply. That the application of the amended section retrospectively would cause great injustice to those appellants, who

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had the right to file an appeal under the un-amended provision. In this context, heavy reliance was placed on the decision of the Hon’ble Supreme Court in Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh and others (AIR 1953 SC 221) (Hoosein Kasam Dada) to contend that the pre- existing right of appeal, which was vested with the petitioners has not destroyed by the amendment made to Section 35F of the Act. It was contended that the right of appeal from the decision of an inferior authority to a superior authority or Tribunal becomes vested in a party when proceedings are first initiated in, and before a decision is given by the inferior authority. c) With reference to Garikapati Veerayya v. N.Subbaiah Choudhry and others (AIR 1957 SC 540) (Garikapati Veerayya), it was submitted that the right of appeal is a vested right and such a right to enter the superior court or tribunal accrues to the litigant and exists as on and from the date the lis

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commences and although it may be actually exercised when the adverse judgment is pronounced. That such right is to be governed by the law prevailing at the date of institution of the suit or proceeding and not by the law that prevails on the date of its decision or on the date of filing of the appeal. d) Reliance was placed on State of Bombay v. Supreme General Films Exchange Ltd. (AIR 1960 SC 980) to contend that an impairment of the right of appeal by putting a new restriction thereon or imposing a more onerous condition is not a matter of procedure only; it impairs or imperils a substantive right and an enactment which does so is not retrospective, unless it says so expressly or by necessary intendment. e) Reference was made to Ramesh Singh v. Cinta Devi (AIR 1996 SC 1560) to contend that unless an amendment expressly or by necessary implication makes the provision applicable retrospectively, the right to appeal is crystallized on

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the institution of the application at the first instance and that vested right of appeal would not be dislodged by the enactment of a new Act or amendment. f) Reference was made to other decisions to contend that, by virtue of the amendment made to Section 35F of the Act, which stipulates a mandatory deposit of 7.5% of the duty or penalty in dispute, discretion granted to the Commissioner (Appeals) or Appellate Tribunal, as the case may, to relax the deposit has been taken away, which amendment would cause undue hardship to the assessees. It was further contended that the second proviso of amended Section 35F states that the amended provision would not apply to appeals filed prior to the commencement of the 2014 Act which was pending as on that date. But even if the lis had commenced prior to the impugned amendment and the appeals have not been filed as on 6/8/2014, then the amended provision would apply. This is discriminatory as the amendment classifies cases into two categories i.e., where the

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appeals have been filed prior to 6/8/2014 and where the appeals have not been filed prior to that date, even though the lis had arisen in all cases prior to the amendment. Thus, there is violation of doctrine of equality, was the submission. g) Placing reliance on certain other decisions, which shall be referred to, later, it was contended that the amendment to Section 35F of the Act must be interpreted in such a manner that where the lis had commenced prior to the amendment of 6/8/2014, the un-amended provision must be applied, irrespective of the date of filing the appeal. 10. Per contra the submission made on behalf of the respondents is as follows: a) Learned Addl. Solicitor General, Sri. K.M.Nataraj, along with Sri Neeralgi, appearing for Union of India and other respondents, contended that Section 35F does not confer any right of appeal to an assessee. Section 35B is the provision, which confers upon an aggrieved assessee a right to file an appeal,

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either before the Commissioner (Appeals) or before the Tribunal, as the case may be. Section 35B has not been amended. The right of appeal has remained intact and it has not been taken away by the impugned amendment. Section 35F only deals with the conditions to be complied with by an appellant in order that his appeal is entertained by the appellate authority. It is only those conditions which have been altered by the amendment. The conditions required to be complied with, by filing an appeal are not part and parcel of “the right to file an appeal” by an aggrieved party. It only regulates the filing of an appeal by an aggrieved party. The right to file an appeal is no doubt a substantive right, which has not been affected in the instant case. But the conditions to be complied with, in order that an appeal is entertained is a matter of procedure and there is no vested right in matters of procedure, was the submission. b) According to the Addl. Solicitor General, all that has been done by the impugned amendment is that discretion vested with the appellate authority to

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reduce or waive the mandatory deposit of entire duty demanded or penalty levied has been taken away and in its place only 7.5% of the disputed amount has to be deposited at the time of filing an appeal by the aggrieved party. This amendment in no way affects the substantive right of the petitioners herein to prefer an appeal. It was also contended that under the earlier provision, in case the appellate authority rejected the application filed under the un-amended proviso, then the entire demand of duty or penalty had to be deposited. But in the instant case, only 7.5% of the amount in dispute has to be deposited even though the duty or penalty to be paid by an appellant is much more, of course upto a maximum of Rs.10.00 crore. Drawing my attention to the first proviso to amended Section 35F, it was contended that the Parliament has taken care to ensure that 7.5% of amount required to be deposited shall not exceed Rs.10.00 crore.

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c) Further, the second proviso prescribes that the amendment shall not apply to stay applications and appeals pending before the appellate authority prior to the commencement of the 2014 Act. By this, the Parliament has clearly ensured that the amendment is effective in respect of all those appeals filed subsequent to 6/8/2014 irrespective as to when the lis commenced but to those appeals pending as on that date, original Section 35F would apply. Therefore, the second proviso saves all those appeals, which are pending before the Tribunal or the appellate authority and the amended provision would not apply to them. The second proviso is in the nature of a saving clause and as a result, Section 35F would apply to all appeals to be filed on or after 6/8/2014, irrespective of when the lis had commenced prior to that date as the amendment has a retrospective operation and that the presumption against retrospectivity does not apply in the instant case, was the submission. In this context, reliance was placed on Allied Motors Pvt. Ltd. v.

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Commissioner of Income Tax, Delhi [1997(3) SCC 472]. d) Referring to Section 5 of the General Clauses Act, 1897, it was contended that the amendment was assented to by the Hon’ble President of India on 6/8/2014 and notified on the same day and therefore, would commence from midnight of 5th and 6th August of 2014. It was further contended by the Addl. Solicitor General that the original Section 35F is wiped out from the statute book, except to the extent that has been saved in the second proviso of the amended section. It was also contended that the second proviso is declaratory in nature. That the presumption against retrospective operation is not applicable to declaratory statutes. That declaratory statutes or provisions are inacted for the purpose of removal of doubts. Also, the presumption against retrospectivity may be overcome not only by express words in the provision, but also by circumstances sufficiently strong to displace it. But for the second

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proviso, the amended Section 35F would not have applied to the appeals pending before the appellate authority, though filed prior to the date of amendment. e) Referring to Hoosein Kasam Dada, it was contended, that the said decision turned on its own facts and the amendment of the relevant provision considered in that case. The said judgment is not applicable to the present case as the provisions in the present case and that case are not in pari materia. It was submitted that reference made to other decisions of various High Courts by placing reliance on Hoosein Kasam Dada by petitioners’ counsel was unnecessary and not binding and that this Court could come to an independent decision. It was, therefore, contended that when the case of Hoosein Kasam Dada does not apply to the facts of the present case, the decisions of the Kerala, Madras and Andhra Pradesh High Courts placing reliance on Hoosein Kasam Dada’s case are not relevant. It was also contended that in those

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judgments, the legal provisions under consideration have not been examined thread-bare and hence, those decisions cannot be followed in these cases. It was submitted that there is no merit in these petitions and the same may be dismissed. 11. In reply, learned counsel for the petitioners contended that the second proviso is not declaratory in nature and that the judgments of the other High Courts relied upon by them would squarely apply to the present case. It was reiterated that the right to file an appeal would continue to apply to a lis as it would have accrued to the appellant on the date the lis commenced before the inferior court or Tribunal and that the conditions to be complied with while preferring an appeal cannot, by an amendment be made onerous, so as to defeat a right to file an appeal. Reiterating the earlier contentions, learned counsel for the petitioners submitted that the petitioners are entitled to reliefs in these writ petitions

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as the impugned Section 35F has no retrospective operation. Points for consideration: 12. Having heard learned counsel for the respective parties, the following points would arise for my consideration:

1) Whether Section 35F of the Act as amended, is a piece of substantive or procedural law, prescribing a mandatory pre-deposit at the time of filing an appeal, is an unreasonable condition?

2) Whether amendment made to Section 35 F of the Act has a retrospective operation?

3) What order? Legal Frame work: 13. At this stage, it would be useful to extract the relevant provisions of the Act, which have a bearing on the issues raised in these petitions.

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a) Section 35 of the Act provides the appellate remedy before commissioner (Appeals) and it reads as under: “35. Appeals to Commissioner (Appeals).- (1)Any person aggrieved by any decision or order passed under this Act by a Central Excise Officer lower in rank than a Commissioner of Central Excise may appeal to the Commissioner of Central Excise (Appeals) hereafter in this Chapter referred to as the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order: Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days. (1A) The Commissioner (Appeals) may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of

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them and adjourn the hearing of the appeal for reasons to be recorded in writing: Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal. (2) Every appeal under this section shall be in the prescribed form and shall be verified in the prescribed manner.”

b) Section 35B of the Act speaks about the circumstances under which an appeal is maintainable before an appellate tribunal, which reads as under: “35B. Appeals to the Appellate Tribunal.-(1) Any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order-

(a) a decision or order passed by the Commissioner of Central Excise as an adjudicating authority;

(b) an order passed by the Commissioner (Appeals) under section 35A;

(c) an order passed by the Central Board of Excise and Customs constituted

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under the Central Boards of Revenue Act, 1963 (54 of 1963) (hereafter in this Chapter referred to as the Board) or the Appellate Commissioner of Central Excise under section 35, as it stood immediately before the appointed day;

(d) an order passed by the Board or the Commissioner of Central Excise, either before or after the appointed day, under section 35A, as it stood immediately before that day:

Provided that no appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in clause (b) if such order relates to,- (a) a case of loss of goods, where the loss occurs in transit from a factory to a warehouse or to another factory, or from one warehouse to another, or during the course of processing of the goods in a warehouse or in storage, whether in a factory or in a warehouse;

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(b) a rebate of duty of excise on goods, exported to any country or territory outside India or on excisable materials used in the manufacture of goods which are exported to any country or territory outside India;

(c) goods exported outside India (except to Nepal or Bhutan) without payment of duty;

(d) credit of any duty allowed to be utilised towards payment of excise duty on final products under the provisions of this Act or the rules made thereunder and such order is passed by the Commissioner (Appeals) on or after the date appointed under Section 109 of the Finance (No.2) Act, 1998:

Provided further that the appellate Tribunal may, in its discretion, refuse to admit an appeal in respect of an order referred to in clause (b) or clause (c) or clause (d) where-

(i) in any disputed case, other than a case where the determination of any

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question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment is in issue or is one of the points in issue, the difference in duty involved or the duty involved; or

(ii) the amount of fine or penalty determined by such order, does not exceed fifty thousand rupees.

(1A) Every appeal against any order of the nature referred to in the first proviso to sub-section (1), which is pending immediately before the commencement of Section 47 of the Finance Act, 1984 (21 of 1984), before the Appellate Tribunal and any matter arising out of, or connected with, such appeal and which is so pending shall stand transferred on such commencement to the Central Government, and the Central Government shall deal with such appeal or matter under Section 35EE as if such appeal or matter were an application or a matter arising out of an application made to it under that section.

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(1B) (i) The Central Board of Excise and Customs constituted under the Central Boards, of Revenue Act, 1963 (54 of 1963) may by notification in the Official Gazette, constitute such Committees as may be necessary for the purposes of this Act. (ii) Every Committee constituted under clause (i) shall consist of two Chief Commissioners of Central Excise or two Commissioners of Central Excise, as the case may be.” c) Section 35F deals with the deposit of duty demanded or duty and penalty levied at the time of filing an appeal and during the pendency of the appeal as it stood prior to the amendment. It reads as under: “SECTION 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

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or order shall, pending the appeal, deposit with the 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, decide such application within thirty days from the date of its filing. Explanation. – For the purposes of this section “duty demanded” shall include.-

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(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.” d) The amendment effected from 6/8/2014 to Section 35F is as follows: “SECTION 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

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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 other 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

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dispute, or penalty, where such penalty is in dispute, in pursuance 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 Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004.”

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e) Subsequent to the amendment dated 6/8/2014, a Circular was issued by the Department i.e., Circular No.984/8/2014-CX, dated 16/9/2014, which inter alia deals with the procedure and manner of making pre-deposit and such other matters. On 14/10/2014, another Circular was issued by the respondent-department as certain parties had claimed exemption from the applicability of the amended provision. It was notified that no exemption has been provided with regard to appeals filed on or after 6/8/2014. 14. Sections 35 and 35B state the circumstances under which an appeal could be filed by an aggrieved party, either before the Commissioner (Appeals) or the Tribunal, as the case may be. Those provisions have not been amended by the 2014 Act. 15. By virtue of amendment to Section 35F, two major changes have been made. Firstly, it is not mandatory for the appellant to deposit the entire duty and penalty levied as the case may be, but only 7.5%

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or 10% thereof as the case may be. Secondly, prior to the amendment, the appellant could seek dispensation of deposit of the entire duty demanded or penalty levied as the case may be, but under the amended provision, such a discretion granted to the Commissioner (Appeals) or the Appellate Tribunal has been taken away. Thirdly, there is a cap on the pre- deposit amount, as 7.5% or 10% as the case may be, of the disputed amount cannot exceed Rs.10.00 crores. 16. According to petitioners’ counsel, the amendment does not apply to the case of the petitioners as their lis commenced prior to the coming into force of the amendment i.e., prior to 6/8/2014 and that they are governed under Section 35F as it stood prior to the amendment as according to them, the amendment does not have a retrospective effect. 17. What is significant in this case is that the second proviso of Section 35F as amended categorically states that the amendment would not

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apply to the stay applications and appeals pending before the Appellate Authority prior to the commencement of 2014 Act. The implication is that the proviso has distinguished between two categories of lis namely, a lis which has commenced from 6/8/2014 i.e., on the date, on which 2014 Act commenced and a lis which had commenced prior to that date. In respect of the lis which had commenced prior to 6/8/2014, the second proviso states that if prior to 6/8/2014, an appeal had been filed or a stay application had been filed and was pending before the concerned Appellate Authority, then the amendment would not apply. That means, where, in respect of a lis, which has commenced prior to 6/8/2014, an appeal had been filed or a stay application was filed prior to the said date and pending before the appellate authority on 6/8/2014 the earlier provision would apply and the Appellate Authority would continue to have the discretion to deal with the application filed under the first proviso to Section 35F as it stood prior to 6/8/2014. But in respect of those cases, where the

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lis though commenced prior to 6/8/2014 and where the appeals had not been filed prior to that date, the amendment does not expressly say anything in that regard and is silent. Thus, the proviso declares that the amended provision would not apply to stay applications or appeals pending before the appellate authority, prior to commencement of the amendment. The intention of insertion of the second proviso has to be discerned. Is it the intention of the Parliament that Section 35F, as it stood prior to the amendment, would apply to only those cases where the stay applications and appeals filed prior to 6/8/2014 are pending and therefore, the second proviso is in the nature of saving clause? In other words, is it, irrespective of when the lis has commenced, (even if prior to the amendment) if an appeal is filed on or after 6/8/2014, the amended provision would apply? Right of Appeal: 18. Before venturing to unravel this conundrum, it is necessary to take note of the concept

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of right of appeal, as the entire controversy in this case centers on that right, which according to petitioners, has been adversely affected on account of the impugned amendment. It is also necessary to distinguish between substantive law and procedural law and the decisions of the Hon'ble Supreme Court in that regard keeping in mind the same while considering the principles of statutory interpretation. This would have to be done in the back-drop of the decision of Hoosein Kasam Dada relied upon heavily by the learned counsel for he petitioners. a) In Garikapati Veeraya, it has been held by a majority of Judges on the Bench of the Hon’ble Supreme Court that the legal pursuit of a remedy i.e., suit, appeal and second appeal are really steps in a series of proceedings, all connected by an intrinsic unity and are to be regarded as one legal proceeding. The right of appeal is not a mere matter of procedure, but is a substantive right. The institution of the suit carries with it the implication that the right of appeal

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then in force is preserved to the parties thereto till the rest of the career of the suit. The right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the lis commences, although it may be actually exercised when the adverse judgment is pronounced. Such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or the date of the filing of the appeal. Further, this vested right of appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise. Thus, the Hon’ble Supreme Court has recognized that a vested right of appeal can be taken away by an enactment if it provides so expressly or by necessary implication. If there is no such amendment made to the right of appeal, then it shall continue to be available to a party to a lis.

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b) But in Ganga Bai v. Vijay Kumar [(1974) 2 SCC 393] (Ganga Bai), it has been held as under:-

“There is a basic distinction between the right of suit and the right of appeal. There is an inherent right in every person to bring a suit of civil nature and unless the suit is barred by statute one may, at one’s peril, bring a suit of one’s choice. It is no answer to a suit, howsoever frivolous to claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But the position in regard to appeals is quite the opposite. The right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law. That explains why the right of appeal is described as a creature of statute.” c) In this context, reference could also be made to a later judgment of the Hon’ble Supreme Court in James Joseph Vs. State of Kerala [(2010) 9 SCC 642], wherein the Hon’ble Supreme

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Court has formulated the following principles with reference to appeals. “(i) An appeal is a proceeding where an higher forum reconsiders the decision of a lower forum, on questions of fact and questions of law, with jurisdiction to confirm, reverse, modify the decision or remand the matter to the lower forum for fresh decision in terms of its directions. (ii) The appellate jurisdiction can be limited or regulated by the legislature and its extent has to be decided with reference to the language employed by the statute conferring the appellate jurisdiction. (iii) The width of jurisdiction or the limitations on jurisdiction with reference to an appeal, does not depend on whether the appeal is a first appeal or a second appeal, but depends upon the limitations, if any, placed by the statute conferring the right of appeal. (iv) If the Legislature's intention is to limit the jurisdiction in an appeal, it may indicate such limits in the provision providing for appeal. Alternatively, it may

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expressly or impliedly incorporate the provisions of Section 100 of the Code, into the provision for appeals. (v) Generally statutory provisions for appeals against original orders or decrees (that is, first appeals) will not have any limitations and therefore rehearing on both law and fact is contemplated; and statutory provisions for appeals against appellate orders (that is, second appeals) will be restricted to questions of law. But such restriction is not on account of any legal principle that all second appeals should always be with reference to questions of law, but would depend upon the wording of the statute placing the restrictions upon the scope of second appeal. (vi) Where the statute does not place any limitations or restrictions in regard to the scope and width of the appeal, it shall be construed that the appeal provides a right of rehearing on law as well as facts. If the Legislature enacts a self-contained provision for second appeals, without any limitation upon the scope of the second appeal and excludes the possibility of

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reading the provision of Section 100 of the Code, into such provision, then, it will not be permissible to read the limitations of Section 100 of the Code into the special provision.” d) In the instant case, it can be assumed that the right to file an appeal, which was available to the petitioners herein prior to 6/8/2014 under Sections 35 and 35B of the Act has been preserved intact, despite the enforcement of 2014 Act, which has amended, inter alia, Section 35F of the Act, with which we are concerned in this case. e) However, the contention of the learned counsel for the petitioners was that any change with regard to the conditions for filing of an appeal, which would adversely affect a potential appellant, in substance, affects the vested right to file an appeal. This contention was countered by learned Addl. Solicitor General by contending that conditions stipulated for filing an appeal have no nexus to the right to file an appeal. That in the instant case, all

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that has been done is to mandatorily deposit 7.5% of duty demanded or penalty levied at the time of filing an appeal and the discretion vested with the Tribunal or appellate authority with regard to pre-deposit has been taken away. Re: Hoosein Kasam Dada: 19. Learned counsel for the petitioners placed reliance on Hoosein Kasam Dada to buttress the submission that the pre-existent right to file an appeal under the earlier provision has not been destroyed by the amendment as the right of appeal from the decision of an inferior Tribunal to the superior Tribunal becomes vested in a party when proceedings are first initiated in, and before a decision is given by the inferior court. As the sheet anchor of the petitioners is the ratio of Hoosein Kasam Dada by various High Courts while adjudicating on the amendment made to Section 35F of the Act, it would be necessary to refer to that decision in detail.

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a) The aforesaid case arose under the provisions of the Central Provinces and Berar Sales Tax Act, 1947 (‘1947 Act’) and the amendment made to that Act in the year 1950. Sub-section (1) of Section 22 of the said Act was the bone of contention between the parties therein. Sub-section (1) of Section 22 was originally expressed in the following terms: “22. (1) Any dealer aggrieved by an order under this Act may, in the prescribed manner, appeal to the prescribed authority against the order: Provided that no appeal against an order of assessment, with or without penalty, shall be entertained by the said authority unless it is satisfied that such amount of tax or penalty or both as the appellant may admit to be due from him, has been paid.” The relevant portion of Section 22 as amended i.e., the proviso reads as under: “Provided that no appeal against an order of assessment, with or without penalty

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shall be admitted by the said authority unless such appeal is accompanied by a satisfactory proof of the payment of the tax, with penalty, if any, in respect of which the appeal has been preferred.” From the language of the proviso as it stood prior to the amendment, an aggrieved assessee had to pay only such amount of tax as he might admit to be due from him, whereas under the aforesaid amended proviso before an appeal could be admitted, it had to be accompanied by satisfactory proof of payment of tax in respect of which the appeal had been preferred. The contention of the assessee therein was, as the amendment had not been made retrospective, its right of appeal under the original sub-section (1) of Section 22 had remained unaffected and that accordingly, as it did not admit anything to be due, it was not liable to deposit any sum along with its appeal and the appellate Commissioner was bound to admit its appeal. That the Commissioner had no jurisdiction or power to reject it on the ground that

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the appeal had not been accompanied by any proof of payment of tax assessed against the appellant therein as required under the amended proviso. That the Board of Revenue and the High Court were in error in not directing the Commissioner to admit the appeal, was the contention of the appellant therein, before the Hon’ble Supreme Court. b) In order to understand that contention, it would be necessary to narrate the relevant facts of the said case. The appellant therein had submitted sales tax return on 28/11/1947. Notice was issued to the assessee to produce evidence in support of the said return. Not being satisfied by the inspection of the account books as per the correctness of the return, the Sales Tax Officer was of the opinion that the taxable turnover exceeded Rs.2.00 lakh and submitted the case to the Assistant Commissioner of Sales Tax for assessment. The Assistant Commissioner heard the matter from 9/6/1949 and on 8/4/1950 made a best judgment assessment. Being

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aggrieved by the order of assessment, the assessee on 10/5/1950 perferred an appeal to the Sales Tax Commissioner, Madhya Pradesh, under sub-section (1) of Section 22 of the aforesaid 1947 Act. The appeal, not having been accompanied by any proof of tax in respect of which the appeal had been preferred, the authorities declined to admit the appeal. The assessee moved the Board of Revenue, Madhya Pradesh, by a revision application contending that the appeal was not governed by the amended proviso to sub-section (1) of Section 22 of the 1947 Act, but was governed by the proviso to sub-section (1) of Section 22 of the said Act as it stood when the assessment proceedings were commenced i.e., prior to the said amendment. The Board of Revenue took the view that as the order of assessment was made after the amendment of the section and the appeal was filed thereafter, such appeal must be governed by the provisions of law as it existed at the time the appeal was actually filed and that the law as it existed before the filing of the appeal could not be applied to the

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case. The assessee thereafter moved the High Court of Madhya Pradesh under Articles 226 and 227 of the Constitution of India. The High Court dismissed the writ petition. The assessee thereupon approached the Hon’ble Supreme Court, which considered the effect of the amendment made to Section 22 of the 1947 Act on the lis therein. The Hon’ble Court noted that the amendment imposed a restriction on the assessee’s right of appeal. It more specifically raised a question as to whether the imposition of such a restriction by amendment of the section affected the assessee’s right of appeal from a decision, in proceedings which commenced prior to such amendment and which right of appeal was free from such restriction under the section as it stood at the time of commencement of the proceedings. c) After referring to Colonial Sugar Refining Company vs. Irving [(1905) AC 369 (PC)] (Colonial Sugar Refining Company), it held that a right of appeal is not merely a matter of procedure, it is a

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substantive right. The right of appeal from the decision of an inferior tribunal to a superior tribunal is vested in a party when the proceedings are first initiated in, and before a decision is given by, the inferior court. Such a vested right cannot be taken away, except by express enactment or necessary intendment. An intention to interfere with or to impair or imperil such a vested right cannot be presumed, unless such intention be clearly manifested by express words or necessary implication. d) More specifically the Hon’ble Supreme Court opined that the pre-existing right of appeal is not destroyed by the amendment, if the amendment is not made retrospective by express words or by necessary intendment. The fact that the pre-existing right of appeal continued to exist must, in its turn, necessarily imply that the old law which created that right of appeal must also exist to support the continuation of that right. As the old law continued to exist for the purpose of supporting the pre-existing

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right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can be no question of the amended provision preventing the exercise of that right. e) According to the Hon’ble Supreme Court, the argument that the authority had no option or jurisdiction to admit the appeal unless it be accompanied by the deposit of the assessed tax, as required by the amended proviso to sub-section (1) of Section 22 of the 1947 Act, overlooked the fact of existence of the old law for the purpose of supporting the pre-existing right and really amounted to begging the question. According to the apex Court, the amended proviso was wholly inapplicable in such a situation and the jurisdiction of the authority had to be exercised under the old law which continued to exist. It was held that the appeal should not have been rejected on the ground that it was not accompanied by satisfactory proof of the payment of the assessed tax. As the appellant in that case did

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not admit any amount was due by it, it was held that under the section as it stood previously, it was entitled to file its appeal without depositing any sum of money. f) In Vithalbhai Naranbhai Patel vs. The Commissioner of Sales Tax, M.P., Nagpur (AIR 1967 SC 344) (Vithalbhai Naranbhai patel), the Hon’ble Supreme Court reiterated the decision in Hoosein Kasam Dada by holding that when a lis commences, all rights get crystallized and no clog upon a likely appeal can be there, unless the law was made retrospective, expressly or by clear implication. g) Thus, what emerges from the aforesaid two decisions is the principle that an amendment made to a provision dealing with right of appeal can only have a prospective operation. It would not affect any right, which was crystallized with regard to the filing of an appeal when the lis commenced. Therefore, such an amendment is always prospective in nature. But the amendment can affect the right of appeal of a party if

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it is made retrospective, by an express provision or by necessary implication. Thus, what follows is that there can be an amendment of a provision dealing with right of appeal at any point of time after a lis has commenced between the parties concerned, but the amended provision concerning the right of appeal must always be applied prospectively i.e., from the date the amendment comes into effect and it would not apply to cases pending before various courts, unless there is a retrospective effect given to an amendment either expressly or by clear implication. h) In Hoosein Kasam Dada, the Hon’ble Supreme Court accepted the contention of the appellant therein, that the amendment to sub-section (1) of Section 22 of 1947 Act had not been made retrospective by any express provision or by necessary implication. Therefore, the amendment took effect from the date of its enforcement and applied to all lis, which commenced on or subsequent

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to that date. It saved all lis, which commenced prior to that date from its applicability. Hence, relief was granted to the appellants therein. The same view was reiterated in Vithalbhai Naranbhai Patel. But no relief was granted in the latter case as the records did not disclose as to when the lis had commenced and unless it was proved as to whether the lis had commenced prior to the amendment, the dictum in Hoosein Kasam Dada would not apply, was the view of the Hon’ble Supreme Court. 20. In light of the submissions made by the respective parties and keeping in mind the amendment in question, the applicability of the principle stated in Hoosein Kasam Dada to the present case shall be considered. But before that, it is necessary to consider and answer point No.1.

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Re: Point No.1: Distinction between substantive law and procedural law: 21. At this stage, it would be useful to distinguish between substantive law from the law of procedure as it has been persistently contended by the learned counsel for petitioners that the right to file an appeal is a substantive right and that right cannot be altered with retrospective effect when it has already vested with the parties on the date the lis commenced. Also when conditions with regard to filing an appeal are altered, it would affect the right to file an appeal, which is a substantive right. The aforesaid distinction has been enunciated by the Hon’ble Supreme Court in its later judgments and have a bearing on point No.1. a) The meanings of substantive law and procedural law as stated in Black’s Law Dictionary – ninth edition are as under:

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“Substantive law (seb-sten-tiv). (18c) The part of the law that creates, defines, and regulates the rights, duties and powers of parties.

‘So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.” John Salmond, Jurisprudence 476 (Glanville L. Williams ed., 10th ed. 1947)’.

Procedural law: The rules that prescribe the steps for having a right or duty judicially enforced, as opposed to the law that defines the specific rights or duties themselves.- Also termed adjective law.”

b) The law of procedure or adjective law may be defined as that branch of the law, which governs the process of litigation. It is the law of actions - jus quod ad actionee pertinet – using the term action in a wide sense to include all legal proceedings, civil or

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criminal. All the residue is substantive law, and relates, not to the process of litigation, but to the purposes and subject-matter. In other words, substantive law is concerned with the ends which the administration of justice seeks; procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relation of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated. What facts constitute a wrong is determined by the substantive law; what facts constitute proof of a wrong is a question of procedure. The first relates to the subject-matter of the litigation, the second relates to the process merely.

c) So far as the administration of justice is concerned, with the application of remedies to violated rights, substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the

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other. (source: Salmond on Jurisprudence - Twelfth Edition)

a) In the case of Hitendra Vishnu Thakur vs. State of Maharashtra [(1994)4 SCC 602] (Hitendra Vishnu Thakur), the Hon’ble Supreme Court in the context of substantive and procedural law has laid down the ambit and scope of an amending Act and its retrospective operation in the following terms: “(i) A statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended

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meaning and should be strictly confined to its clearly-defined limits.

(ii) Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature.

(iii) Every litigant has a vested right in substantive law but no such right exists in procedural law.

(iv) A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished.

(v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication.”

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b) Referring to the aforesaid decision in Shyam Sunder vs. Ramkumar [(2001)8 SCC 24] (Shyam Sunder), it has been held that when a repeal of an enactment is followed by a fresh legislation, such legislation does not affect the substantive rights of the parties on the date of the suit or adjudication of the suit, unless such a legislation is retrospective and a court of appeal cannot take into consideration a new law brought into existence after the judgment appealed from has been rendered, because the rights of the parties in an appeal are determined under the law in force on the date of the suit. However, according to Hon’ble Supreme Court, the above position in law would be different in matters which relate to procedural law, but so far as substantive rights of parties are concerned, they remain unaffected by the amendment in the enactment. Thus, while there is a presumption against retrospective operation of a statute dealing with substantive rights; where an amendment affects procedure, it is presumed to be retrospective, unless the amending

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Act provides otherwise. In that case, the Hon’ble Supreme Court was dealing with Panjab Pre-emption Act, 1913 as substituted by Haryana Act 10 of 1995, which is substantive law. It held that the amending Act being prospective in operation, did not affect the rights of the parties to the litigation on the date of adjudication of the pre-emption suit and the appellate court was not required to take into consideration the substituted provision introduced by Section 15 of the amended Act.

Thus, the Hon’ble Supreme Court, in the aforesaid decision has borne in mind the distinction between substantive law and procedural law in the context of the operation of an amending statute or provision. If a piece of substantive law is amended, then such a law would have prospective operation unless made retrospective, either expressly or by necessary intendment. But when it comes to the procedural law, the position is contrary. In the case of an amendment of a procedural law, the amendment

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is always retrospective in operation, unless by a contra indication it is made only prospective.

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in this matter, prescribes the pre-deposit to be made by an aggrieved party while availing an appellate remedy.

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Judicial precedents on pre-deposit at the time of preferring appeals: 26. The relevant citations on the pre-deposit of outstanding dues at the time of preferring an appeal cited at the Bar are as under: a) In The Anant Mills Co. Ltd. vs. State of Gujarat and others [(1975) 2 SCC 175], the Hon’ble Supreme Court had occasion to consider vires of Section 406 (2) (e) of the Bombay Provincial Municipal Corporations Act, as amended by Gujarat Act No.5 of 1970 with regard to the entertainment of an appeal by a person, who had not deposited the amount of tax due from him and who had not been able to show to the appellate Judge that the deposit of the amount would cause him undue hardship, arising out of his own omission or default.

While considering the said provision, the Hon’ble Supreme Court held that the requirement about the deposit of the amount claimed as a condition precedent to the entertainment of the appeal which

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seeks to challenge the imposition or the quantum of tax, did not have the effect of nullifying the right of appeal, especially keeping in view the fact that discretion was vested in the appellate judge to dispense with compliance of the above requirement. All that the statutory provision sought to do was to regulate the exercise of the right of appeal. The object being, to balance the right of appeal, which is conferred upon all persons who are aggrieved against the determination of tax or rateable value and the right of the corporation to speedy recovery of the tax. Hence, it was held that such a provision was not offensive to Article 14 of the Constitution.

It was held that the right of appeal being creature of a statute without a statutory provision creating such a right, an aggrieved person is not entitled to file an appeal. It was also observed that the legislature while granting the right of appeal could impose conditions for the exercise of such right. For example, it was permissible to prescribe a condition in

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criminal cases that, unless a convicted person is released on bail, he must surrender to custody, before his appeal against the sentence of imprisonment would be entertained. Likewise, it was permissible to enact a law that no appeal shall lie against an order relating to an assessment of tax unless a tax, had been paid. Such conditions merely regulate the exercise of the right of an appeal, so that the same is not abused by a recalcitrant party and there is no difficulty in the enforcement of the order appealed against, in case the appeal is ultimately dismissed were the observations of the Supreme Court.

It further held that it is open to the Legislature to impose an accompanying liability upon a party upon whom a legal right is conferred or to prescribe conditions for the exercise of the right. Any requirement for the discharge of that liability or the fulfillment of that condition in case the party concerned seeks to avail of the said right is a valid piece of legislation.

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b) In Seth Nand Lal and another vs. State of Haryana and others [1980 (supp) SCC 574], a Constitution Bench of the Supreme Court held that the right of appeal is a creature of statute and there is no reason why the legislature while granting that right cannot impose conditions for the exercise of that right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory.

In this case, the Hon’ble Supreme Court found that the condition regarding pre-deposit was not onerous as the amount sought to be deposited was meager and that too was confined to the landholding tax payable in respect of the disputed area “i.e., the area or part thereof which is declared surplus by the prescribed authority”, (emphasis supplied) after leaving the permissible area to the appellant.

In the above circumstances, it was also found that even in the absence of a discretion conferred on

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the Appellate Authority to waive or reduce the amount of pre-deposit, it was considered to be valid.

c) In Vijay Prakash D.Mehta and another vs. Collector of Customs (Preventive), Bombay [(1988) 4 SCC 402], the Hon’ble Supreme Court was considering Section 129-A of Customs Act, 1962, which provides a right of appeal against the duty demanded or penalty levied. It was held that it was obligatory on the appellant to deposit the duty or penalty, pending the appeal, failing which, the Appellate Tribunal was competent to reject the appeal. The proviso to Section 129-E of Customs Act, 1962 as it stood prior to its amendment made under 2014 Act, gave power to the Appellate Authority to dispense with such deposit unconditionally or subject to such conditions, in case of undue hardship as was the proviso prior to the amendment in the instant case.

The Hon’ble Supreme Court held that the observations made in Hossen Kasam Dada and Vittal Bhai Narang Bhai Patel, had no application as the right

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to file an appeal was granted with a condition in Section 129-E of the Customs Act, 1962 and the Parliament in its wisdom had imposed the condition. The Hon’ble Supreme Court also held that the right to file an appeal is a statutory right and it can be circumscribed by the conditions in the grant. It was also held that the right to file an appeal under Section 129-A of the Customs Act, 1962 was circumscribed or controlled by Section 129-E of the Act and that right was with a condition and thus, a conditional right and not an absolute right. The aforesaid provisions are in pari materia with the provisions under consideration.

It was also observed that the purpose of requirement of a pre-deposit was to act in terrorem to make the people comply with the provisions of law. On the facts of that case, the Hon’ble Supreme Court held that the rejection of the appeal for non- compliance of Section 129-E of the Customs Act, 1962 was proper and justified.

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d) In Shyam Kishore and others vs. Municipal Corporation of Delhi and another [(1993) 1 SCC 22], judicial dicta on right of appeal was considered in extenso. Reference was made to Ganga Bai, wherein it was observed that there is a basic distinction between the right of suit and the right of appeal.

Reference was also made to Laxmirathan Engineering works Limited and two decisions of the Bombay and Calcutta High Court namely, M/s.Elora Construction Company v. The Municipal Corporation of Gr. Bombay and others [AIR 1980 Bom. 162] and Chatter Singh Baid and others vs. Corporation of Calcutta and others [AIR 1984 Cal. 283] (Chattar Singh Baid). In both those cases, the validity of a provision banning the entertainment of the appeal altogether, where the tax was not paid had been upheld. In fact, in the decision of the Bombay High Court, the validity of Section 217, as amended by Bombay Municipal Corporation Act, 1988,

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wherein the right to appeal was similarly restricted, that too, retrospectively, was upheld.

In Chatter Singh Baid, Section 183(3-A) of the Calcutta Municipal Act, 1951 was considered. It was held that merely because that section impairs the right of appeal by imposing an onerous condition of deposit of consolidated rate payable up to the date of presentation of appeal on the valuation determined, it could not be said that section was unfair, oppressive and arbitrary. It was held that the condition of deposit at the time of filing the appeal did not make the right of appeal under Section 183(1) of the aforesaid Act as nugatory or illusory.

e) In the case of State of Haryana vs. Maruti Udyog Limited and Others ((2000) 7 SCC 348) the Hon’ble Supreme Court was considering the case under Section 39(5) of the Haryana General Sales Tax Act, 1953. The said section along with the proviso dealt with payment of the admitted amount and stay of recovery of the balance amount at the

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time of filing of appeal. It was held that only when the conditions specified under Section 39(5) were complied with, the appeal was born for being disposed of on merits after hearing both sides.

f) The expression “shall not entertain an appeal” as inserted Section 35F of the Act is of significance. In Lakshmi Ratan Engineering works Limited vs. CST (AIR 1968 SC 488), while interpreting the word “entertain” under Section 39(5) of the Haryana General Sales Tax Act, 1953, it was held that the dictionary meaning of the word “entertain” was “to deal with or admit to consideration”. Then the question arose as to at what stage could the appeal be said to be entertained for the purpose of the application of Section 39(5) of the aforesaid Act. Is it entertained when it is filed or it is ‘entertained’ when it is admitted and the date is fixed for hearing or is it finally ‘entertained’ when it is heard and disposed of? After distinguishing the word “entertain” from the words “file” or “receive”, it was

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held that the correct view of the word “entertain”, was “admit to consideration.” This would be when the case is taken up by the court for the first time also or the first occasion on which the court takes up the matter for consideration. It may be at the admission stage or if by the rules of the Tribunal the appeals are automatically admitted, it would be the time of hearing the appeal. But on the first occasion the court accepts the matter for consideration, satisfactory proof must be presented, that the tax had been paid within the period of limitation available for the appeal. Thus, when the proviso to Section 39(5) of the aforesaid Act used the expression entertainment of appeal, it meant that the appeal shall not be admitted for consideration, unless there was satisfactory proof available of the making of the deposit of admitted tax.

Referring to Section 39(5) of the aforesaid Act, it was held that it regulated the exercise of right of appeal conferred upon an assessee, the object being to keep in balance the right of the aggrieved person

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and the right of the State to speedy recovery of tax. Approving the opinion of the Full Bench of the Punjab and Haryana Court in Emerald International Limited vs. State of Punjab (STI 1997 P&H 113 (FB) it was held, that the appeal is a creature of a statute and in case a person wants to avail of the right of appeal, he has to accept the conditions imposed by the statute. The right of appeal being a creature of statute, the legislature could impose conditions for exercise of such a right. Neither there is a constitutional nor legal impediment for imposition of such a condition. The right of appeal is neither natural nor inherent to litigation and such a right neither exists nor can be assumed, unless expressly given by the statute.

g) In Narayan Chandra Ghosh v. UCO Bank and Others [(2011) 4 SCC 548] the Hon’ble Supreme Court, while dealing with Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002,

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which requires making of a deposit in terms of second proviso of that Section, before entertaining an appeal against the order passed by the Debts Recovery Tribunal, it was observed that when a statute confers a right of appeal, while granting the right, the legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. It was held therein that having regard to the object of the aforesaid Act the conditions hedged in the said proviso to Section 18(1) of the said Act was not onerous.

h) On an analysis of the amendment of Section 35F in light of judgments of the Hon’ble Supreme Court subsequent to Hoosein Kasam Dada, it is held that Section 35F of the Act is not in the realm of right to file an appeal and thus, not a piece of substantive law. It is a condition to be complied with by an aggrieved party while instituting an appeal, which is in the realm of procedure. As held by the

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Hon’ble Supreme Court in subsequent decisions, a party does not have a vested right in procedural matters.

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7.5% of the disputed amount exceeds Rs.10.00 crore. In which event, only Rs.10.00 crore has to be deposited as a pre-deposit. The above reasoning also applies where the section mandates a pre-deposit of 10%. Thus, point No.1 is answered by holding that the condition of pre-deposit in the instant case does not adversely affect the right of appeal of an aggrieved party and the said condition is not unreasonable.

Re: Point No.2:

amended Section

35F

the Act has retrospective operation. The point to be considered is as to whether amended Section 35F of the Act is prospective and thus, the rule against retrospectivity applies. While answering that question

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the applicability of the ratio of Hoosein Kasam Dada and other decisions of the Hon’ble Supreme Court would have to be considered. In this regard, the relevant principles of statutory interpretation would have to be adverted to at this stage.

Relevant principles of Statutory Interpretation:

a) It is noted that in the instant case, Section 35F, which has been amended by the Act of 2014 is by way of substitution and therefore, the principles of statutory interpretation dealing with the amendment of provision by substitution would have to be borne in mind while ascertaining as to whether, the amendment in question has a retrospective operation or not, in light of contention of the learned counsel for the petitioners that the impugned amendment has no retrospective operation. For this purpose, it would be necessary to delineate on certain relevant principles of statutory interpretation by placing reliance on “Principles of Statutory Interpretation” by Justice G.P.Singh - Ninth Edition (Reprint) on which, the

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Hon’ble Supreme Court has relied upon in the case of Zile Singh Vs. State of Haryana [(2004)8 SCC 1] (Zile Singh).

b) In the instant case, Section 35-F as it stood on the statutory book has been repealed by 2014 Act, the repeal is by way of substitution of the earlier provision. Therefore, what has to be considered in the instant case is the effect of repeal of Section 35-F and in its place, a new section being substituted. Power to make a law with respect to subjects enumerated in the three lists of VII Schedule of the Constitution carries with it the power to amend or repeal a law on those subjects. An Act or a provision in an Act may be repealed by a later, distinct and repealing enactment or provision as the case may be, which could be inconsistent with the existing Act or provision. A repeal of a provision may be by express words in a later enactment made by way of an amendment or, may be implied on considerations of inconsistency or irreconcilability of an earlier provision

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with those of a later provision. Normally, there is no real distinction between repeal and amendment. The legislative practice in India is that when a provision is omitted from the statute book, it is a case of repeal. But there can be a repeal by way of an amendment of the existing provision and the said provision being replaced by enactment of a new provision. Substitution of a provision results in repeal of the earlier provision by a new provision. Substitution combines both repeal and fresh enactment. Thus, when an existing provision is substituted by a fresh enactment, it is a case of express repeal.

c) In Government of India v. Indian Tobacco Association [(2005)7 SCC 396], the question that fell for the consideration of the Hon’ble Supreme Court was as to what would be the effect of subsequent notification, ‘substituting’ the list of places specified in the original notification. The Hon’ble Court in its judgment at paragraph 15, considered the word substitute and observed thus :

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“15. The word “substitute” ordinarily would mean “to put (one) in place of another”, or “to replace”. In Black’s Law Dictionary, 5th Edn., at p.1281, the word “substitute” has been defined to mean “to put in the place of another person or thing”, or “to exchange”. In Collins English Dictionary, the word “substitute” has been defined to mean “to serve or cause to serve in place of another person or thing”; “to replace (an atom or group in a molecule) with (another atom or group)”; or “a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague”.

d) It would be relevant to notice the following observations made by the Supreme Court in Zile Singh while dealing with the amendment by way of substitution in paragraph 25 of the judgment: “….Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p.565)………In West U.P.Sugar Mills Assn. case a three-Judge Bench of this

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Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centering around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative…..”

e) In Sham Rao V.Parulekar v. The District Magistrate Thane, Bombay & two others (AIR 1952 SC 324), the following observation made by the Hon’ble Supreme Court, in paragraph-7 are relevant: “The rule is that when a subsequent Act amends an earlier one in such a way as to incorporate itself, or a part of itself, into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all.”

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f) ‘Commencement‘, used with reference to an Act, means the day on which an Act comes into force. Unless provided otherwise, a Central Act comes into operation on the day it receives the Presidential assent and is construed as coming into operation immediately on the expiration of the day preceding its commencement – Section 5 of General Clauses Act, 1897. In Zile Singh the Hon’ble Supreme Court has at paragraphs 13 and 15 opined as under:

“13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the Legislature to affect existing rights, it is deemed to be prospective only ‘nova constitutio futuris formam imponere debet non praeteritis’ – a

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new law ought to regulate what is to follow not the past. (See:Principles of Statutory Interpretation by Justice G.P.Singh, Ninth Edition, 2004 at p.438). It is not necessary that an express provision be made to make a statute retrospective and the presumption against retrospectivity may be rebutted by necessary implication especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole (ibid, p.440).

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having been expressly given, the Courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the Statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated (p.388). The rule against retrospectivity does not extend to protect from the effect of a repeal a privilege which did not amount to accrued right (p.392) (emphasis supplied)

g) In contrast to statutes dealing with substantive rights, statutes dealing with merely matters of procedure are presumed to be retrospective unless such a construction is textually impermissible, Gardner vs. Lucas [(1878) 3 AC 582 (HL)]. According to Lord Denning: “The rule that an Act of Parliament is not to be given retrospective effect applies only to statutes which

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affect vested rights. It does not apply to statues which only alter the form of procedure or the admissibility of evidence, or the effect which the courts give to evidence” - Blyth v. Blyth [(1966)1 All.E.R.524]). If the new Act affects matters of procedure only, then, prima facie, “it applies to all actions pending as well as future.” According to Maxwell: “Interpretation of Statutes”, 11th Edition, p.216 “No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the time being by or for the Court in which the case is pending, and if, by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode”.

h) Thus, in deciding the question of applicability of a particular statute to past events, the language used is a crucial factor to be taken into account; but it cannot be stated as an inflexible rule. The real issue in each case is as to the dominant

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intention of the Legislature to be gathered from the language used, the object indicated, the nature of rights affected, and the circumstances under which the statute is passed.

i) In view of the aforesaid principles regarding statutory interpretation, the amended Section 35F would have to be interpreted in light of the submissions made by learned counsel for the respective parties. In the earlier part of this order, the changes brought about by the amendment to Section 35F have been noted. The contention of learned counsel for the petitioners is that the said amendment does not have a retrospective operation and therefore, cannot be applied to a lis, which has commenced prior to the date on which the amendment came into effect i.e., 6/8/2014.

Interpretation of Second proviso of amended Section 35F:

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second proviso to amended Section 35F. That proviso categorically states that Section 35F would not apply to stay applications and appeals pending before any appellate authority, filed prior to the commencement of the 2014 Act, which means, that in respect of those appeals filed and pending as on 6/8/2014, the earlier provision would apply. Thereby implying, that the discretion vested with the appellate authority for dispensing with the deposit of duty or penalty subject to certain conditions under the first proviso thereof could be exercised in favour of an appellant. In this context, the significance and interpretation to be given to the second proviso of amended Section 35F would have to be considered in light of the main proviso of Section 35F of the Act. But prior to that, it would be necessary to understand the scope of a proviso vis-à- vis the main provision in a section in the context of the decisions of the Hon’ble Supreme Court and in light of the principles of interpretation of proviso.

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a) The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which, but for the proviso, would be within the purview of the enactment. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. In other words, a proviso qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Further, a proviso cannot be construed as nullifying the enactment or as taking away completely a right conferred by the enactment.

b) In this regard, learned Author, Justice G.P.Singh has, in “Principles of Statutory Interpretation”, enunciated certain rules collated from judicial precedents. Firstly, a proviso is not to be construed as excluding or adding something by

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implication i.e., when on a fair construction, the principal provision is clear, a proviso cannot expand or limit it. Secondly, a proviso has to be construed in relation to which it is appended i.e., normally, a proviso does not travel beyond the provision to which it is a proviso. A proviso carves out an exception to the main provision to which it has been enacted as a proviso and to no other. However, if a proviso in a statute does not form part of a section but is itself enacted as a separate section, then it becomes necessary to determine as to which section the proviso is enacted as an exception or qualification. Sometimes, a proviso is used as a guide to construction of the main section. Thirdly, when there are two possible construction of words to be found in the section, the proviso could be looked into to interpret the main section. However, when the main provision is clear, it cannot be watered down by the proviso. Thus, where the main section is not clear, the proviso can be looked into to ascertain the meaning and scope of the main provision.

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c) The proviso should not be so construed as to make it redundant. In certain cases, “the legislative device of the exclusion is adopted only to exclude a part from the whole, which, but for the exclusion, continues to be a part of it”, and words of exclusion are presumed to have some meaning and are not readily recognized as mere surplusage. As a corollary, it is stated that a proviso must be so construed that the main enactment and the proviso should not become redundant or otiose. This is particularly so, where the object of a proviso sometimes is only by way of abundant caution, particularly when the operative words of the enactment are abundantly clear. In other words, the purpose of a proviso in such a case is to remove any doubt. There are also instances where a proviso is in the nature of an independent enactment and not merely, an exception or qualifying what has been stated before. In other words, if the substantive enactment is worded in the form of a proviso, it would be an independent legislative provision concerning

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different set of circumstances than what is worded before or what is stated before. Sometimes, a proviso is to make a distinction of special cases from the general enactment and to provide it specially.

d) At this stage, the construction or interpretation of a proviso could be considered:-

(a) In Ishverlal Thakorelal Almaula v. Motibhai Nagjibhai [AIR 1966 SC 459], while dealing with the Bombay Tenancy and Agricultural Lands Act, 1948, the Hon’ble Supreme Court held, that a proper function of a proviso is to except or qualify something enacted in the substantive clause, which but for the proviso, would be within that clause.

(b) In Kaviraj Pandit Durga Dutt Sharma v. Navaratna Pharmaceutical Laboratories [AIR 1965 SC 980], while considering proviso to Section 6 of Trade Marks Act, 1940, it was observed that it would not be a reasonable construction for any statute, if a proviso which in terms purports to create

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an exception and seeks to confer certain special rights on a particular class of cases included in it should be held to be otiose and to have achieved nothing.

(c) In Kedarnath Jute Manufacturing Co. Ltd., v. The Commercial Tax Officer and Others [AIR 1966 SC 12], it was observed that “the effect of an excepting or qualifying proviso, according to the ordinary rules of construction, is to except out of the preceding portion of the enactment or to qualify something enacted therein, which, but for the proviso, would be within it”. [See “Craies” on Statute Law – 6th Edition – P.217]. In this case, the Court was considering Section 5(2) (a) (ii) of Bengal Finance Sales Tax Act, 1941 and Rule 27-A of Bengal Sales Tax Rules.

(d) In Dattatraya Govind Mahajan and Others v. The State of Maharashtra and another [AIR 1977 SC 915], a Constitution Bench of the Apex Court, while considering the amendment made to Maharashtra Agricultural Lands (Ceiling on

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Holdings) Act, 1961, in the context of Article 31B of the Constitution and the second proviso thereto, reiterated what was stated in Ishverlal’s case, supra.

(e) In S.Sundaram Pillai, etc, v. V.R.Pattabiraman [AIR 1985 SC 582], while dealing with the scope of a proviso and explanation to sub-section (2) of Section 10 of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, the Hon’ble Supreme Court held that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or qualifying some thing enacted therein which, but for the proviso, would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment, nor can it be used to nullify or set at naught the real object of the main enactment. Sometimes, a proviso may exceptionally have the effect of a substantive enactment.

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After referring to several legal treatises and judgments, the Apex Court held in the above judgment as under:- “43. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes:

(1) qualifying or excepting certain provisions from the main enactment;

(2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable;

(3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and

(4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision.

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(f) The approach to the construction and interpretation of a proviso are enunciated in the following cases:-

(a) In M.Pentiah & others v. Muddala Veeramallappa & others (AIR 1961 SC 1107), it was observed that while interpreting a section or a proviso, as in the instant case, if the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result.

(b) In Superintendent & Remembrancer of Legal Affairs to Govt. of West Bengal v. Abani Maity (AIR 1979 SC 1029), the Apex Court observed that the statute is not to be interpreted merely from the lexicographer’s angle. The Court

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must give effect to the will and inbuilt policy of the Legislature as discernible from the object and scheme of the enactment and the language employed therein. The words in a statute often take their meaning in the context of a statute as a whole. They are, therefore, not to be construed in isolation.

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appeal by an aggrieved party. As submitted by Additional Solicitor General, there has been innumerable litigations under the first proviso to Section 35F as it stood prior to amendment. Any order passed by the appellate authority regarding the hardship pleaded by the appellant with regard to pre- deposit, who sought dispensation of such deposit would be a subject matter of further litigation and until that aspect was settled finally, the main appeal would not be taken up for hearing. As a result, there would be considerable delay in disposing of the appeal by the appellate authorities. Parliament must have thought that discretion vested with the appellate authorities with regard to dispensation of deposit to be made by an aggrieved appellant at the time of filing the appeal was not in the interest of revenue. It is in order to overcome the aforesaid mischief, that Parliament thought it fit to amend Section 35F. It is in the aforesaid background that the object and intendment of amending Section 35F by the Parliament has been considered.

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amendment, only in respect of those appeals pending before the appellate authority as on 6/8/2014. In all other cases, the main amended provision would apply. The reason for such a proviso was necessitated so as to obviate a situation whereby, applications pending before the appellate authority or tribunal would become infructuous on account of the amendment made to Section 35F as the amendment has a retrospective effect. Parliament was also conscious of the fact that as on 6/8/2014, many appeals would be pending before various appellate authorities throughout the country where applications for exercise of discretion of such appellate authorities regarding pre-deposit of duty or penalty had to be considered and disposed of. Therefore, Parliament was vigilant to ensure that the appellate authority or tribunal would continue to have jurisdiction to exercise discretion in respect of the applications filed under the proviso to Section 35F as it stood prior to amendment. Thus, if prior to 6/8/2014, an appeal had been preferred by an aggrieved party and the application and appeal were

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pending before the appellate authority, then the appellate authority could exercise its discretion with regard to the pre-deposit to be made by such a party under the provision as it stood prior to amendment. But if no appeal had been filed prior to 6/8/2014, then the amended Section 35F would apply although the lis had commenced prior to 6/8/2014 as the amendment has a retrospective effect. The amendment, thus, has no bearing on the date on which the particular lis had commenced. This is for the obvious reason that in each case, the lis would commence on a different date. But the commencement of the amendment must be certain and from a particular date in respect of all lis. In order to ensure that object and in order to have a uniformity in the matter, Parliament has enacted the second proviso to the amended Section 35F. This would mean that in all cases not covered under the second proviso, the main amended Section 35F would apply, irrespective as to when the lis has commenced. Thus, the date on which the lis has commenced in each case has no bearing on the

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amendment as it has a retrospective effect. Even if the lis had commenced prior to the date of amendment and an appeal had not been filed on that date, even in such a situation, the main amended Section 35F would apply and a pre-deposit as per amended provision would have to be made.

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a) In Hoosein Kasam Dada, the fine distinction between substantive and procedural law and amendment made thereto, as well as the operation of such an amendment namely, as to whether an amendment made to a procedural law could have retrospective operation did not come up for consideration in the manner the same has been considered in subsequent decisions of the Hon’ble Supreme Court. Therefore, reliance placed on the observations of the Hon'ble Supreme Court in Hoosein Kasam Dada cannot be of any assistance to the petitioners. The same cannot be applied to the facts of the present case, having regard to second proviso of amended Section 35F of the Act. In Hoosein Kasam Dada, a proviso such as the second proviso under consideration was conspicuous by its absence. The second proviso of Section 35F in the instant case

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clearly distinguishes the provision amended in that case.

b) In Hoosein Kasam Dada, the Hon’ble Supreme Court placed reliance on a decision of the Privy Council in Colonial Sugar Refining Company. It was held therein that the right to file an appeal was a substantive right and not a mere matter of procedure. It is a vested right which inheres in a party from the commencement of the action in the Court of first instance and such a right cannot be taken away except by an express provision or by a necessary implication. In the aforementioned case, the Privy Council was considering a situation wherein the right to file an appeal from a Supreme Court of Australia to the Privy Council given by the Order in Council of 1860 was taken away and the only appeal therefrom was directed to lie to the High Court of Australia. In that case, it was in fact held, to deprive a suitor in a pending action of an appeal to a superior tribunal, which belonged to him as of right, is a very different

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thing, from regulating procedure. It was held that there was no difference between abolishing an appeal altogether and transferring the appeal to the new tribunal. In either case, there is an interference with existing rights, which was contrary to the well-known general principle. Also statutes are not to be held to act retrospectively, unless a clear intention to that effect is manifested. The matter in the aforesaid case was in the realm of substantive law concerning the right to file an appeal and the available forum and not in the realm of procedural law as in the instant case.

c) Similarly, in Garikapati Veerayya, when a suit was instituted on 22/4/1949 it was held that the right of appeal vested in the parties thereto on that date and was to be governed by the law as it prevailed on that date. That is, on that date, the parties acquired the right, if unsuccessful, to go on in an appeal from the special Court to the High Court and from the High Court to the Federal Court, provided the conditions thereof were satisfied in that

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case. This was so, unless that right had been taken away only by a subsequent enactment, if it so provided expressly or by necessary intendment, and not otherwise. This case was also regarding an amendment made to a provision concerning the availability of a forum to file an appeal, which is related to the right to file an appeal which is a substantive right, which is not so in the instant case.

As already noted, a right to file an appeal is a substantive right, but the conditions accompanying the filing if an appeal is in the realm of procedure and therefore, Colonial Sugar Refining Company and Garikapati Veerayya are not applicable to these cases. On the other hand, the decisions of the Hon’ble Supreme Court with regard to pre-deposit of disputed amounts to be made by an aggrieved party before the appellate authority are squarely applicable to these cases.

d) Thus, the judgment of the Hon’ble Supreme Court in Hoosein Kasam Dada does not apply

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to the present case having regard to the provisions considered in both these cases being distinct, different and not being in pari materia. As already noted, the insertion of the second proviso, being of significance in the provision under consideration, the ratio in Hoosein Kasam Dada is distinguished and therefore, cannot be relied upon in these matters by the petitioners. Similarly, the observations made by the Hon’ble Supreme Court in Garikapati Veerayya are not applicable to the present case. Those observations are in the context of an amendment made to a substantive legislation and not to an amendment made to a procedural law, which is under consideration in the instant case. Infact, in State of Bombay v. Supreme General Films Exchange Ltd., (Supra) and in Ramesh Singh v. Cintadevi (Supra), it has been categorically held by the Hon’ble Supreme Court that where an onerous condition is imposed in the matter of filing of appeals, it is not retrospective, unless it says so expressly or by necessary intendment. This is because the right to file an appeal

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is crystallized on the institution of the application of the suit in the first instance. The aforesaid decisions are not applicable to these cases in view of the second proviso in Section 35F of the Act. In Allied motors (P) Ltd. v. Commissioner of Income Tax, Delhi (supra), it has been held that a proviso, is inserted to remedy unintended consequences and to make the provision workable. A proviso has to be read into the section to give it a reasonable interpretation when the section requires to be treated as retrospective in operation so that the reasonable interpretation can be given to the section as a whole. In M/s. National Traders v. State of Karnataka [2008 (64) KLJ 225 (SC)], it was held that the requirement of the assessee to make prior payment of one half of tax or other amount disputed and to produce proof of having made payment while filing appeal was a condition, which was restrictive and impaired the right of filing an appeal and in those circumstances, it was held to be prospective and not retrospective in operation. The aforesaid decision is also not applicable to the present

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present case having regard to the nature of Section 35F of the Act amended in the instant case and the requisite amount to be deposited as a pre-deposit.

e) The judgments of the High Court of Madras, Kerala and Andhra Pradesh relied upon by learned counsel for petitioners cannot also apply although they are rendered on Section 35F or on similar provisions, which is under consideration in these matters. The reason being, those judgments have followed the reasoning in Hoosein Kasam Dada, which has been distinguished herein and held to be not applicable to the present cases. Those judgments were rendered in the cases of Deputy Commercial Tax Officer, Tirupur v. Cameo Experts [(2006)147 STC 218(Mad)], and Fifth Avenue Sourcing (P) Ltd. v. Commissioner of Service Tax Chennai, (W.P.No.12546/2015 disposed on 12/6/2015); Muthoot Finance Limited v. Union of India and M/s. K.Rama Mohana Rao and Co. v. Union of India (Interim Order) respectively.

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Accordingly, Point No.2 is answered by holding that amended Section 35F of the Act has a retrospective operation. Summary of conclusions: 34. Thus, from the aforesaid discussion the findings and the conclusions arrived at could be summarized as under:

(1) It is held that in the instant case, the right to file an appeal, which is a substantive right granted under Sections 35 and 35B of the Act has not been amended and remains intact. That Section 35F of the Act as amended, consists of a mandatory requirement of pre-deposit for entertaining an appeal before the Appellate Authority i.e., before the Commissioner (Appeals) or the Appellate Tribunal as the case may be, is a piece of procedural legislation and does not fall within the realm of substantive law. Thus, Sections 35 and 35B do not confer an absolute right to file an appeal, but are subscribed or controlled by Section 35F of the Act. Hence, in the instant case, the

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right to file an appeal under Section 35 or 35B as the case may be is not an absolute right, but a conditional one.

(2) In view of a plethora of decisions of the Hon'ble Supreme Court, it is held that in the instant case, the right to file an appeal under Sections 35 and 35B of the Act is in no way affected by the amendment made to Section 35F of the Act requiring pre-deposit to be made at the time of preferring the appeal. Such a condition regarding pre-deposit is made with a view to regulate the exercise of the right of appeal so as to enforce the order appealed against in case the appeal is ultimately dismissed.

(3) Section 35F of the Act has retrospective operation and is not restricted to only prospective cases. It applies to all lis which have commenced prior to or after the enforcement of the amendment, except to cases covered under the second proviso thereof.

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(4) That in view of the insertion of second proviso to amended Section 35F of the Act, it is held that the same is in the nature of a saving clause, keeping intact the earlier provision of Section 35F to be made applicable to circumstances noted under the second proviso. That in all other cases not covered under the second proviso, the amended Section 35F is applicable as it has a retrospective operation. Such a legislation by amendment having a retrospective operation is a valid piece of legislation.

(5) It is reiterated that the second proviso in amended Section 35F is significant, which was absent in the provisions considered in Hoosien Kasam Dada and Garikapati Veerayya. The provisions of law considered by the Hon'ble Supreme Court in the aforesaid cases being not in pari materia to Section 35F of the Act under consideration and in view of the later judgments of the Hon’ble Supreme Court it is held

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that the ratio of those decisions are not applicable to the present case.

(6) As the amended Section 35F has a retrospective operation and none of the petitioners herein has filed an appeal prior to 6/8/2014 before the appellate authority or if the appeal has been preferred subsequently has not deposited the requisite pre- deposit before the appellate authority, as the case may be, they are required to comply with the conditions of the amended Section 35F.

(7) The circulars dated 16/9/2014 and 4/10/2014 are also upheld insofar as they are in consonance with this order.

In view of the aforesaid findings and conclusions, writ petitions are dismissed.

Parties to bear their respective costs.

Sd/- JUDGE *mvs/msu/s*