Deposit of certain percentage of duty demanded or penalty imposed before filing appeal [Section 35F] :
(i) The Commissioner (Appeals) shall not entertain any appeal under section 35(1), unless the appellant has deposited 7.5% 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 deci sion or an order passed by an officer of Central Excise lower in rank than the Principal Commissioner/ Commissioner of Central Excise;
(ii) The Tribunal shall not entertain any appeal against the decision or order passed by Principal Commissioner/ Commissioner of Central Excise under section 35B(1)(a), unless the appellant has deposited 7.5% 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) The Tribunal shall not entertain any appeal against the decision or order passed by Commissioner (Appeals) under section 35B(1)(b), unless the appellant has deposited 10% of the duty, in case where duty or duty and penalty are in dispute, or penalt y, where such penalty is in dispute, in pursuance of the decision or order appealed against:
(iv) The amount of pre-deposit shall not exceed ` 10 crores.
(v) Duty demanded shall include,—
(a) amount determined under section 11D;
(b) amount of erroneous CENVAT credit taken;
(c) amount payable under rule 6 of the CENVAT Credit Rules, 2004.
Thus, all the above-mentioned items would also be included within the ambit of expression ‘duty demanded‘ in addition to the duty specified under section 3 of the Central Excise Act, thereby making their pre-deposit necessary as a condition for hearing appeal.
The provisions relating to making pre-deposits at first and second appellate stages are summarized as under:
| Stage of appeal | Appellate Authority | Quantum of pre-deposit |
| First Appeal | Commissioner (Appeals)
or CESTAT |
7.5% of the duty where only duty or both duty and penalty are in dispute
OR 7.5% of the penalty where only penalty is in dispute |
| Second Appeal | CESTAT | 10% of the duty where only duty or both duty and penalty are in dispute
OR 10% of the penalty where only penalty is in dispute |
Points to be noted:
- Pre-deposit shall be computed as a percentage of only duty demanded even in cases where dispute involves both duty demanded and penalty levied. Only when penalty alone is in dispute, would the pre-deposit be computed on the basis of penalty.
- New section 35F does not include interest payable within the ambit of duty demanded. Thus, pre-deposit of 7.5%/10% would exclude interest, if any, payable on the duty demanded.
It has been clarified by CBEC vide its Letter DOF No. 334/15/2014 TRU dated 10.07.2014 that another 10% of the duty or penalty is to be paid at the time of filing second appeal before CESTAT.
CBEC has issued Circular No. 984/08/2014 CX dated 16.09.2014 which clarifies the following:
Quantum of pre-deposit
- Where an appeal is made against the order of Commissioner (Appeals) before the Tribunal, 10% is to be paid on the amount of duty demanded or penalty imposed by the Commissioner (Appeals). This amount may or may not be same as the amount of duty demanded or penalty imposed in the Order-in-Original in the said case.
- Where penalty alone is in dispute and penalties have been imposed under different provisions of the Act, pre-deposit would be calculated based on the aggregate of all penalties imposed in the order sought to be appealed against.
Payments made during investigation
- Payment made during the course of investigation or audit, prior to the date on which appeal is filed, to the extent of 7.5% or 10% (subject to a limit of ` 10 crore), will be considered as payments towards pre-deposit for filing the appeals.
- Date of filing of appeal will be deemed to be the date of deposit of such payments.
Recovery of the amounts during the pendency of appeal
- No coercive measures for the recovery of balance amounts of demands of tax and penalties can be taken if the party/ assessee shows the proof of payment of pre-deposit (7.5% / 10%) and the copy of appeal memo.
- Recovery can be initiated only after the disposal of the case by the Commissioner (Appeals)/Tribunal in favour of the Department unless order of Commissioner (Appeals) or CESTAT is stayed by authority/higher court. The amount to be recovered will include interest calculated from the date duty became payable till the date of payment.
Refund of Pre-Deposit
- Refund of pre-deposit is not refund of duty and hence the same will not be governed by provisions of section 11B of Central Excise Act/section 27 of Customs Act, 1962. Therefore, once the appeal is decided in favour of the assessee, he can apply for refund of pre-deposit.
- Refund of pre-deposit along with interest will have to be made within 15 days of receipt of the letter of the appellant seeking refund, irrespective of whether order of the appellate authority is proposed to be challenged by the Department or not.
- Refund of pre-deposit should not be withheld on the ground that Department is proposing to file an appeal or has filed an appeal against the order granting relief to the party.
- In the event of a remand, refund of the pre-deposit shall be payable along with interest.