M/S Schevaran Laboratories vs. The Union Of INDIA

Held

The Court held that the petitioner ought to have kept the legal proceedings alive by filing a regular appeal before the CESTAT under Section 35B of the Central Excise Act, 1944, against the order of the Commissioner of Central Excise (Appeals). The Court found the petitioner's argument that the demand was unenforceable because Rule 8(3A) was struck down by the Gujarat High Court to be fallacious. The Court reasoned that as long as the order passed by the Commissioner of Excise (Appeals) remained in effect, the demand was recoverable from the petitioner. Consequently, the Court directed that the petitioner may belatedly file a regular appeal before the Tribunal within four weeks from the date of the order. The Tribunal was directed to entertain this appeal without raising an objection of limitation, subject to the petitioner satisfying other conditions for maintaining such an appeal. The writ petition was disposed of with these directions.

Facts

The petitioner, M/s Schevaran Laboratories Pvt. Limited, challenged a recovery notice dated January 9, 2018, issued by the Assistant Commissioner of Central GST and Central Excise (Respondent No. 2). This notice sought to recover an amount of ₹59,95,387/- from Axis Bank Limited, Mysuru, through garnishee proceedings under Section 11 of the Central Excise Act, 1944, read with Section 79(1) of the CGST Act, 2017. The petitioner had not challenged the order dated November 21, 2014, passed by the Commissioner of Central Excise (Appeals) under Section 35B of the Central Excise Act, 1944, before the Central Excise and Service Tax Appellate Tribunal (CESTAT). The petitioner's primary contention for not filing the appeal was that Rule 8(3A) of the Central Excise Rules, 2002, which formed the basis of the demand, was struck down by the Gujarat High Court, and they believed the demand could not be enforced.

Key Issues

1. Whether the petitioner was justified in not filing a regular appeal before the CESTAT against the order of the Commissioner of Central Excise (Appeals) dated November 21, 2014, based on their belief that Rule 8(3A) of the Central Excise Rules, 2002, was rendered inoperative due to a Gujarat High Court judgment? Petitioner's contention: The petitioner argued that since Rule 8(3A) of the Central Excise Rules, 2002, was struck down by the Gujarat High Court in *Indsur Global Ltd. vs. Union Of India* (2014) 310 ELT 833 (Guj), even though the matter was pending before the Supreme Court with a stay on the Gujarat High Court's judgment, the demand raised under that rule could not be enforced against them. This belief led them to forgo filing an appeal before the Tribunal. Revenue's contention: The respondents argued that the petitioner's appeal before the Tribunal was time-barred, having not been filed for over three years. They contended that the petitioner's belief that Rule 8(3A) was inoperative was baseless, as the Supreme Court had stayed the Gujarat High Court's judgment. Therefore, the petitioner had no good reason to avoid filing a regular appeal before the Tribunal, and the writ petition should be dismissed.