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

Held

The High Court dismissed the appeal filed by the revenue. Regarding the delay, while initially expressing dissatisfaction with the explanation, the Court exercised its discretion and condoned the 950-day delay, acknowledging the revenue's submission that the case involved the interpretation of Rule 8(3A) of the Central Excise Rules, 2002, and its pendency before higher courts. However, the Court held that the appeal could not be pursued on merits due to the low tax effect. The penalty imposed was Rs. 86,461/-, which is significantly below the threshold limit fixed by the CBEC in its circulars as part of the national litigation policy. The Court found no dispute that this circular instruction would prevent the department from pursuing the appeal. The Court also noted that the subject matter of challenge before the authorities and the Tribunal was solely the imposition of penalty. While the first appellate authority made observations regarding the validity of Rule 8(3A) and referred to decisions striking down the rule, the Court decided to leave these observations regarding the validity of Rule 8(3A) open, thereby protecting the interest of the revenue. The Court stated that by holding the appeal cannot be pursued due to low tax effect, the interest of the assessee would also be safeguarded. The application for stay was also dismissed.

Facts

The appellant, Principal Commissioner of CGST & Central Excise, Howrah Commissionerate, filed an appeal against an order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The appeal was filed with a delay of 950 days. The revenue sought condonation of this delay, citing a Supreme Court order and a circular regarding the contestation of cases where notifications/instructions/orders are held illegal or ultra vires. The respondent/assessee argued that the appeal should be dismissed due to the national litigation policy, which sets a monetary limit of Rs. 20 lakhs for pursuing appeals before High Courts. The original adjudication order imposed a penalty of Rs. 86,461/- under Section 11A(1) of the Central Excise Act, 1944. The Commissioner of Appeals had allowed the assessee's appeal and set aside the penalty.

Key Issues

1. Whether the delay of 950 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 revenue's contention that the case involves interpretation of Rule 8(3A) of the Central Excise Rules, 2002, which has been a subject of litigation and stayed by the Supreme Court in another matter. 2. Whether the CESTAT was justified in dismissing the revenue's appeal on the grounds of the monetary limit prescribed by the national litigation policy, despite the issue involving the validity of Rule 8(3A) of the Central Excise Rules, 2002, and a stay granted by the Supreme Court in a related matter. Contentions of the Appellant/Revenue: The revenue argued that the interpretation of Rule 8(3A) of the Central Excise Rules, 2002, was a key finding of the first appellate authority and that the issue is pending before the Supreme Court. They relied on CBEC circulars dated 17.08.2011 and subsequent ones, clarifying that cases concerning the illegality or ultra vires nature of notifications/instructions/orders must be contested irrespective of the amount involved. They also referred to the Gujarat High Court's decision in Indsur Global Limited v. UOI and submitted that the case falls within the exceptional clause. Contentions of the Respondent/Assessee: The respondent/assessee contended that the revenue cannot pursue the appeal due to the national litigation policy, which sets a monetary limit of Rs. 20 lakhs for High Court appeals. They also argued that the penalty imposed was Rs. 86,461/-, which is far below this threshold.