2008 (5) TMI 89 - HC - Central Excise

Appeal by department - CEGAT dismissed an appeal solely on the ground that the CCCE has failed to use the words not legal or proper - Merely because he said that the order against which the appeal is proposed to be filed was bad in law instead of not legal or proper it could not have been held that the appeal was not maintainable - order of the CEGAT is set aside and directed to decide the appeal on merits Authorization holding impugned order as bad in law is valid

Issues involved:
1. Interpretation of Section 35B(2) of the Central Excises and Salt Act regarding the grounds for filing appeals by the Commissioner of Central Excise.
2. Determining whether the phrase 'bad in law' used by the Commissioner of Customs & Central Excise is equivalent to 'not legal or proper' as required by the statute.
3. Analysis of the decision-making process of the Commissioner in directing the filing of an appeal.
4. Comparison of the present case with the Supreme Court judgment in Collector of Central Excise, Vadodara v. Rohit Pulp Paper Mills regarding the pre-requisite of forming an opinion by the Commissioner that the order appealed against is 'not legal or proper.'

Detailed Analysis:

1. The judgment revolves around the interpretation of Section 35B(2) of the Central Excises and Salt Act, which allows the Commissioner of Central Excise to direct an appeal to be filed if they believe that the order passed by the Appellate Commissioner or the Commissioner (Appeals) is 'not legal or proper.' The Customs Excise Gold (Control) Appellate Tribunal dismissed an appeal citing the absence of the specific phrase 'not legal or proper' in the Commissioner's decision.

2. The Commissioner (Appeals) in Mumbai had allowed Modvat credit to the respondent, which was later deemed 'bad in law' by the Commissioner of Customs & Central Excise, Goa. The issue arose when the CEGAT dismissed the appeal, stating that the Commissioner can appeal only if the judgment is 'not legal or proper,' not if it is 'bad in law.' The High Court, after careful consideration, disagreed with CEGAT's interpretation, emphasizing that the purpose of the provision is to require the Commissioner to form an opinion that the order is not legal or proper before directing an appeal.

3. The High Court scrutinized the decision-making process of the Commissioner and concluded that the phrase 'bad in law' used by the Commissioner is interchangeable with 'not legal or proper' as required by the statute. The Court highlighted that the Commissioner had valid reasons for directing the appeal, as he believed the Commissioner (Appeals) had wrongly allowed Modvat credit on inadmissible items by applying a notification retrospectively.

4. Drawing a comparison with the Supreme Court judgment in Collector of Central Excise, Vadodara v. Rohit Pulp Paper Mills, the High Court differentiated the present case by noting that the Commissioner in this case had provided clear reasons for forming the opinion that an appeal should be filed. The Court emphasized that the mere use of 'bad in law' instead of 'not legal or proper' does not render the appeal not maintainable, contrary to the circumstances in the Supreme Court case. Consequently, the High Court set aside the CEGAT's order and directed the Tribunal to decide the appeal on its merits.

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