2022 (2) TMI 1071 - HC - Central Excise

Maintainability of appeal - quantum of penalty involved in the appeal - Validity of Rule 8(3)A of the Central Excise Rules - HELD THAT - Admittedly, the quantum of penalty which was imposed by the original authority is far below the threshold limit fixed by the CBEC in their circular instruction. Therefore, the appellant cannot pursue this appeal. Learned standing counsel for the appellant submitted that the Commissioner of Appeals has rendered certain findings touching upon the validity of Rule 8(3)A of the Central Excise Rules and referred to certain decisions of other Courts which struck down the rule as being ultra vires and also referred to one of the decisions 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 - such a course need not be adopted for more than one reasons firstly, as pointed out that there is no dispute to the fact that the circular instruction issued by the CBEC would prevent the department from pursuing the appeal as the penalty imposed was ₹ 6,33,022/-. If the legal issue with regard to the validity of Rule 8(3)A is left open, then the interest of the revenue will stand protected and at the same time if we hold that the appeal cannot be pursued by the revenue on account of the low tax effect, the interest of the assessee would also be safeguarded - the appeal filed by the revenue is dismissed on the ground that the amount of penalty imposed is lesser than the threshold limit fixed in the circular instruction by CBEC as part of the national litigation policy. Application dismissed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Interpretation of Rule 8(3A) of the Central Excise Rules, 2002.
3. Monetary limit for pursuing appeals before High Courts.
4. Imposition of penalty below the threshold limit.
5. Validity of Rule 8(3)A of the Central Excise Rules.

Analysis:

1. Condonation of Delay in Filing the Appeal:
The appellant sought to condone a delay of 898 days in filing the appeal, citing an order by the Supreme Court. However, the Court found that the benefit of the Supreme Court's decision could not be extended due to the expiration of the limitation period in March 2019. Despite the lack of explanation for the delay, the Court exercised discretion and condoned the delay based on exceptional circumstances.

2. Interpretation of Rule 8(3A) of the Central Excise Rules, 2002:
The appellant argued that the interpretation of Rule 8(3A) was a crucial issue pending before the Supreme Court, justifying the appeal despite the low tax effect. The Court acknowledged this argument but emphasized that the circular instruction by the CBEC prevented pursuing the appeal due to the penalty amount being below the prescribed threshold. The Court decided to dismiss the appeal to safeguard both the revenue's and the assessee's interests, leaving the legal issue of Rule 8(3)A validity open.

3. Monetary Limit for Pursuing Appeals Before High Courts:
The respondent contended that the revenue could not pursue the appeal due to the national litigation policy's monetary limit of ?20 lakhs. The Court noted the circular instruction preventing the appeal based on the penalty amount being below the threshold. However, the appellant's argument regarding the exceptional clause and the pending issue before the Supreme Court led the Court to exercise discretion and condone the delay in filing the appeal.

4. Imposition of Penalty Below the Threshold Limit:
The adjudicating authority imposed a penalty below the threshold limit fixed by the CBEC, preventing the appellant from pursuing the appeal. Despite arguments regarding the validity of Rule 8(3)A and references to other court decisions, the Court emphasized that the penalty amount was below the prescribed limit, leading to the dismissal of the appeal to uphold the national litigation policy.

5. Validity of Rule 8(3)A of the Central Excise Rules:
The appellate authority made observations on the validity of Rule 8(3)A, which was a key issue in the appeal. While the Court dismissed the appeal due to the penalty amount being below the threshold, it left the legal issue regarding the validity of Rule 8(3)A open for future consideration, ensuring both parties' interests were protected.

In conclusion, the Court balanced the interests of the revenue and the assessee by considering the monetary limits, legal interpretations, and the national litigation policy, leading to the dismissal of the appeal while keeping the legal issue of Rule 8(3)A validity open for further examination.