2022 (9) TMI 1472 - HC - Central Excise

Constitutional validity of Rule 8(3A) of the Central Excise Rules, 2002, pending consideration before the Hon ble Supreme Court - HELD THAT - The appeal was admitted for the purpose of scrutinising the effect of the order passed by the Hon ble Supreme Court in UNION OF INDIA VERSUS INDSUR GLOBAL LTD. 2014 (11) TMI 1101 - SC ORDER , which had granted an order of stay and the decision of the High Court of Gujarat in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT . Identical matters came up before this Court on earlier occasion and the Court upon perusal of the material papers found the tax effect in these cases were less than the threshold limit fixed in the Circular issued by the Central Board for pursuing appeals before the High Court. Therefore, the appeals filed by the Revenue were disposed of by observing that the tax effect is less than the threshold limit. However, the legal issue as regards validity of the Rule 8(3A) of the Central Excise Rules, 2002, which was struck down by the Gujarat High Court in the case of Indsur Global Ltd. and which judgment has been stayed by the Hon ble Supreme Court, had been left over - In the instant case from the order-in-original dated January 5, 2016, the demand of Central Excise duty was Rs. 1,57,553/-. If that be so, the Revenue cannot pursue this appeal on the ground of low tax effect subject of course with regard to the legal issue regarding the validity of Rule 8(3A) of 2002 Rules. The finding rendered by the Tribunal with regard to the validity of Rule 8(3A) of the Rule is set aside - the appeal filed by the Revenue has been disposed of on the ground of low tax effect and consequently no recovery can be effected from the respondent/assessee.

Issues:
1. Appeal filed by Revenue under Section 35G of the Central Excise Act, 1944 against order-in-original.
2. Substantial question of law regarding the validity of Rule 8(3A) of the Central Excise Rules, 2002.
3. Scrutinizing the effect of the order passed by the Hon'ble Supreme Court and the decision of the High Court of Gujarat.
4. Tax effect below threshold limit affecting the appeal.
5. Similar view taken in a previous case.
6. Setting aside Tribunal's finding on the validity of Rule 8(3A) and leaving the legal issue open for the Supreme Court's decision.
7. Disposal of appeal on the ground of low tax effect, preventing recovery from the respondent/assessee.

Analysis:
The High Court of Calcutta heard an appeal filed by the Revenue under Section 35G of the Central Excise Act, 1944 against an order-in-original issued by the Customs, Excise and Service Tax Appellate Tribunal. The appeal was admitted based on a substantial question of law concerning the validity of Rule 8(3A) of the Central Excise Rules, 2002. The Court considered the impact of a previous Supreme Court order and a decision by the High Court of Gujarat, which led to the disposal of similar cases due to the tax effect being below the threshold limit specified by the Circular issued by the Central Board for pursuing appeals before the High Court.

In light of this, the High Court noted that the tax effect in the present case was below the threshold limit, making it untenable for the Revenue to pursue the appeal solely on that ground. The legal issue regarding the validity of Rule 8(3A) of the Central Excise Rules, 2002, which was previously struck down by the Gujarat High Court and stayed by the Supreme Court, remained unresolved. Citing a similar case, the Court set aside the Tribunal's finding on the validity of the rule, leaving the legal issue open for the Supreme Court's final decision.

Ultimately, the appeal was disposed of based on the low tax effect, thereby preventing any recovery from the respondent/assessee. The Court emphasized that the decision was made due to the low tax effect and clarified that no recovery could be pursued from the respondent/assessee in this case.

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