Principal Commissioner Of CGST And Central Excise, Howrah Commissionerate vs. M/S Fenasia LTD And Anr

Held

The Court decided to condone the delay in filing the appeal, exercising discretion despite finding no satisfactory explanation for the inordinate delay, due to the contention raised by the revenue regarding the interpretation of Rule 8(3A) of the Central Excise Rules, 2002, and its pendency before the Supreme Court. However, the Court dismissed the appeal filed by the revenue. The primary reason for dismissal was that the amount of penalty imposed (Rs.6,33,022/-) was below the threshold limit fixed by the CBEC in its circular instructions as part of the national litigation policy. The Court noted that the subject-matter of challenge before the authorities and the Tribunal was only with regard to the imposition of penalty. The Court explicitly stated that any observations made by the appellate authority touching upon the validity of Rule 8(3A) were left open, thereby protecting the interest of the revenue on the legal issue while safeguarding the interest of the assessee by not allowing the appeal due to the low tax effect. The application for stay was also dismissed.

Facts

The Principal Commissioner of CGST and Central Excise, Howrah Commissionerate (appellant/revenue) filed an appeal against an order dated 07.12.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT had dismissed the revenue's appeal against an order dated 04.12.2017 by the Commissioner of CGST and Central Excise (Appeals)-II, Kolkata, which had set aside a penalty of Rs.6,33,022/- imposed on M/s. Fenasia Ltd. (respondent no.1) by the adjudicating authority on 20.12.2016. The revenue sought condonation of a delay of 898 days in filing the appeal before the High Court. The respondent argued that the appeal should not be pursued due to the national litigation policy's monetary limit of Rs.20 lakhs for High Court appeals.

Key Issues

1. Whether the delay of 898 days in filing the appeal by the revenue should be condoned, considering the Supreme Court's order in SMW(C) No. 3 of 2020 and the respondent's contention regarding the national litigation policy's monetary limit of Rs.20 lakhs for High Court appeals? 2. Whether the CESTAT erred in dismissing the revenue's appeal solely on the grounds of the monetary limit, despite the appellant's contention that the issue involved the interpretation of Rule 8(3A) of the Central Excise Rules, 2002, which was subject to pending litigation before the Supreme Court in the case of M/s. Indsur Global Ltd. v. UOI? 3. Whether the CESTAT's order violated principles of natural justice by ignoring decisions of the Apex Court and the adjudicating authority's reasoning for imposing a penalty? Petitioner/Appellant's Arguments: The revenue argued that the delay should be condoned, referencing the Supreme Court's order and circulars (CBEC dated 17.08.2011) that allow appeals in cases where notifications/orders are held illegal or ultra vires, irrespective of the amount. They contended that the interpretation of Rule 8(3A) of the Central Excise Rules, 2002, was a key issue, and this matter was pending before the Supreme Court, thus falling under an exceptional clause. Respondent's Arguments: The respondent argued that the revenue cannot pursue the appeal due to the national litigation policy, which sets a monetary limit of Rs.20 lakhs for appeals before High Courts, and the penalty amount of Rs.6,33,022/- was below this limit. They also argued that the CESTAT's decision was based on the monetary limit.