2018 (12) TMI 1291 - HC - Central Excise

Revenue appeal - Monetary limit - Recovery of CENVAT Credit - Can the department without pointing out applicability of any of the exceptions in circular dated 11th July, 2018 of CBIC, continue to press the appeal on merits? - Held that - As is well known by way of its policy for reduction of litigation, the Central Board of Direct Taxes i.e. CBDT and CBIC have been issuing circulars from time to time instructing the department not to file and in some cases if so filed, not to press appeals before Higher Authorities, Tribunal, High Court or Supreme Court as the case may be unless the tax effect involved is higher than the minimum threshhold respectively prescribed in such circulars - In the present case, we are governed by the latest circular of CBIC dated 11th July, 2018. Circular is issued in exercise of powers under Section 35R of the Central Excise Act, 1944, which pertains to appeal not to be filed in certain cases. Subsection (1) of Section 35R provides that the Central Board of Excise and Customs may from time to time issue orders or instructions or directions fixing such monetary limits as it may deem fit for the purposes of regulating the filing of the appeal, applications, revision or reference by the Central Excise Officers under the provisions of Chapter VIA of the Central Excise Act, pertaining to appeals. Thus, this circular has a statutory force. In the present case, the department does not point out that the monetary limit is higher than one prescribed by CBIC in its circular dated 11th July, 2018 or that the case falls within any of the exceptions provided in the circular dated 17th August, 2011. The letter of the Assistant Commissioner, Raigad to the counsel for the department only conveys that it is wholly discretionary within the powers of the Commissioner whether to withdraw certain appeal or not - If the tax effect is less than the monetary limit prescribed, the department can pursue the appeal only it falls in any of the exceptions; not otherwise. This would give rise to wholly arbitrary application of the Government policy which is simply not permissible in law. Excepting the stand of the department would permit the authorities to withdraw appeals against one assessee, whereas without citing any reasons, pursue the appeal against the another assessee situated identically as the former. The appeal is dismissed as involving low tax effect.

Summary

Issues:
Challenge to CESTAT judgment based on tax effect below prescribed limit.

Analysis:
The High Court heard an appeal filed by the revenue challenging a CESTAT judgment. The respondent-assessee argued that the tax effect in the appeal was below the prescribed limit of ?50 lakhs set by the CBIC in its circular. The department acknowledged the tax effect was less than ?50 lakhs but did not receive instructions to withdraw the appeal. The adjudicating authority had confirmed a Cenvat credit amount to be recovered from the respondent. The main issue was whether the department could continue to press the appeal without pointing out exceptions in the circular.

The circular issued by the CBIC set monetary limits for filing appeals before different forums. It stated that appeals below the prescribed limits should not be filed or pressed unless exceptions applied. The circular had statutory force under Section 35R of the Central Excise Act, 1944. The High Court noted that the department could pursue appeals only if falling within the exceptions outlined in the circular. The court referred to a similar case where the Supreme Court held that revised monetary limits applied even to pending cases.

The department failed to show that the monetary limit was higher than prescribed or that any exceptions applied. The court emphasized that the circular's provisions were not subject to the Commissioner's discretion. Allowing arbitrary application of the policy would be legally impermissible. Consequently, the appeal was dismissed due to the low tax effect involved, in line with the circular's guidelines.