Full statutory pre-deposit subsequently made suffices, requiring appellate adjudication on merits.

The appellant, a registered service-tax assessee providing, inter alia, restaurant services, was audited for the period 2015–16 to 2017–18.

The department alleged inadmissible CENVAT credit, non-reversal under Rule 6(3) of the CENVAT Credit Rules, non-payment of service tax on miscellaneous income, wrongful availment of abatement, and other procedural defaults.

A demand-cum-show cause notice proposed reversal of CENVAT credit of ₹14,01,242, recovery of service tax of ₹3,77,913 with interest, and imposition of penalty under Section 78(1) of the Finance Act, 1994 read with Rule 15(3) of the CENVAT Credit Rules, 2004.

The adjudicating authority confirmed the demand, except for dropping the demand of ₹3,42,786 relating to denial of abatement on service charges.

The Commissioner (Appeals) dismissed the appellant’s appeal for failure to make the mandatory pre-deposit under Section 35F of the Central Excise Act, 1944, as made applicable to service-tax proceedings by Section 83 of the Finance Act, 1994.

Before the Tribunal, the appellant did not appear despite opportunities, but the record showed that it had subsequently deposited ₹2,45,218 and ₹66,135 through challans dated 22 February 2024, representing the disputed 10% pre-deposit.

Whether the appellant’s subsequent deposit of the full 10% of the disputed amount constituted sufficient compliance with Section 35F of the Central Excise Act, 1944, notwithstanding the initial non-payment of the 7.5% pre-deposit before the Commissioner (Appeals)?

Whether dismissal of the appeal solely for non-compliance with the pre-deposit requirement, after the required amount had been deposited, denied the appellant a proper hearing on the merits and violated the principles of natural justice?

Whether the matter should be remanded to the Commissioner (Appeals) for adjudication on the merits?

Section 35F of the Central Excise Act, 1944, as applicable to service-tax matters through Section 83 of the Finance Act, 1994, makes the prescribed pre-deposit a condition for entertaining an appeal.

The provision requires a 7.5% deposit for an appeal before the Commissioner (Appeals) and a further 2.5% for an appeal before the Tribunal, subject to the statutory ceiling of ₹10 crore.

Its Explanation includes an amount of erroneously availed CENVAT credit and amounts payable under Rule 6 of the CENVAT Credit Rules within “duty demanded”.

The Tribunal further applied the principle of natural justice that an appeal should not be denied a determination on merits where the statutory pre-deposit has in substance been complied with.

The Commissioner (Appeals) had dismissed the appeal because the appellant had not made the 7.5% pre-deposit at the time of filing the appeal.

However, the Tribunal found that the appellant had subsequently deposited ₹2,45,218 and ₹66,135, amounting to the entire 10% required for the appellate stages under Section 35F.

Treating these deposits as sufficient compliance, the Tribunal held that refusal to provide an opportunity to contest the substantive tax and CENVAT-credit issues would unjustly deprive the appellant of a hearing on merits and offend the principles of natural justice.

Since the merits had not been examined by the Commissioner (Appeals), the appropriate course was to restore the matter for de novo consideration rather than decide the substantive disputes at the Tribunal stage.

It set aside the dismissal of the appeal on the ground of non-payment of pre-deposit and allowed the appeal by way of remand.

The Commissioner (Appeals) was directed to grant the appellant one opportunity of representation, adjudicate the appeal on its merits, and pass a fresh order within three months of receiving the Tribunal’s order.