JANUARY 11, 2016

By Priyanka Kalwani, Advocate

IT is common knowledge that the Government is the largest litigant in our country. In order to curtail litigation arising out of indirect tax and ease the pressure on our overburdened judiciary, the Central Board of Excise & Customs (CBEC) first introduced monetary limits in 2010 for filing appeals by the Department before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), the High Court and the Supreme Court. This meant that when the duty amount involved in the matter, with or without penalty and interest, is less than the monetary limit prescribed, no appeal can be filed by the Department, unless the dispute fell under the exclusion criteria enumerated by the Board.

The CBEC vide Instruction F. No. 390/Misc./163/2010-JC, dated 20.10.2010 fixed the monetary limit of Rs.1 lakh for filing appeal before the CESTAT, Rs. 2 lakhs for filing appeal before the High Court and Rs.5 lakhs for filing appeal before the Supreme Court.The said Instructions were to be adhered to for appeals filed on or after 01.11.2010. These monetary limits were revised by the CBEC in 2011 vide Instructions 390/Misc/163/2010-JC dated 17.08.2011 wherein the monetary limit for filing appeal before the CESTAT, High Court and Supreme Court was increased to Rs.5 lakhs,Rs.10 lakhs and Rs.25 lakhs respectively. These limits were made applicable w.e.f 01.09.2011.

A question which arises here is, which monetary limit would be applicable if the appeal is filed before 01.09.2011, however it comes up for hearing after 01.09.2011, i.e when the revised monetary limit is in force. In the case of Commissioner of Central Excise & Customs v Stovec Industries reported at - 2013-TIOL-214-HC-AHM-CX, the appeal was filed by the Department on 05.08.2011, wherein the duty amount involved was Rs. 2,02,472/-. The Hon'ble Gujarat High Court after taking into consideration the Instructions dated 17.08.2011 dismissed the appeal filed by the Department. However, it is pertinent to note that the appeal was filed by the Department when the monetary limit of Rs. 2 lakhs was in force. Thus, in effect, the revised monetary limit of Rs. 5 lakhs was given retrospective effect by the Hon'ble Gujarat High Court at the time of hearing of the appeal.

The same proposition was laid down in the context of income tax, in the case of CIT, Bangalore v Ranka & Ranka reported at - 2012-TIOL-178-HC-KAR-IT. Similar instructions (No. 3/2011 dated 09.02.2011) were issued by the Central Board of Direct Taxes (CBDT) revising monetary limits for filing appeal before the Tribunal, High Court and Supreme Court, w.e.f 09.02.2011. It was held by the Hon'ble Karnataka High Court that the said instructions cannot be held to be prospective as then it would defeat the very purpose of the National Litigation Policy, which is reducing pendency of cases. The Hon'ble High Court observed that one of the ways of giving effect to the said policy is to make the instructions applicable retrospectively to all pending appeals as on the date of the circular.

Further, in the case of Commissioner of Central Excise & Customs, Ahmedabad-III v Fine Care Bio Systems the Hon'ble Gujarat High Court, while dismissing the appeal of the Department held that even though the appeal was filed and notice was issued prior to the circular dated 20.10.2010, when it comes up for consideration and hearing, the contents of the circular and the limits prescribed therein apply in that light.

The above decisions of the High Courts are diametrically opposite to the judgment of the Hon'ble Supreme Court in the case CIT-VII, New Delhi v Suman Dhamija reported at - 2015-TIOL-195-SC-IT. In this case, the orders of the High Court dismissing appeals filed before 09.02.2011 were set aside by the Hon'ble Supreme Court on the ground that the Instructions of CBDT clearly indicate that they would govern only those appeals filed after 09.02.2011.

However, the aforesaid decision of the Hon'ble Supreme Court in Suman Dhamija (supra) has been distinguished by the CESTAT, Mumbai in the case of CCE, Pune-I v Sunny Enterprises reported at - 2016-TIOL-37-CESTAT-MUM on the ground that the CBDT instructions dated 09.02.2011 explicitly mention at para 11 that that they shall not govern cases which have been filed before 09.02.2011, unlike the CBEC instructions which do not indicate that they shall not govern cases which have been filed before 2011. In result, the Departmental appeal was dismissed. Another departmental appeal in the case of CCE, Allahabad v U.P State Yarn Co. Ltd. reported at - 2015-TIOL-2699-CESTAT-ALL met the same fate, on the same grounds.

One can argue that the rationale in the aforesaid decisions of the CESTAT is flawed, inasmuch as the CBEC instructions dated 17.08.2011 also clearly indicate at para 5 that - 'The revised monetary limits shall come into force from 1-9-2011'. If the interpretation adopted by the Hon'ble CESTAT in the aforesaid decisions is accepted, then the existence of para 5 in CBEC instructions dated 17.08.2011, becomes redundant.

In the above legal background, the CBEC has now issued fresh instructions 390/Misc/163/2010-JC dated 17.12.2015 amending previous instructions dated 17.08.2011 and revising the monetary limit for filing appeal before CESTAT, High Court and Supreme Court to Rs. 10 lakhs, Rs. 15 lakhs and Rs. 25 lakhs respectively. Further, the CBEC has clarified vide Instruction 390/Misc/163/2010-JC dated 01.01.2016 that the said revised monetary limits would be applicable to all pending appeals in the CESTAT / High Court.

The controversy that is likely to arise now is whether the Department should follow the law laid down by the Apex Court or the Instructions issued by the Board. In view of the judgment of the Constitutional Bench of the Supreme Court in CCE, Bolpur v Ratan Melting & Wire Industries reported at - 2008-TIOL-194-SC-CX-CB, it is settled law that the law laid down by the Supreme Court / High Court would prevail over a departmental clarification.

In view of the above, it is clear that the main purpose of fixing monetary limits, which is making the Government an efficient and responsible litigant, is being defeated. Thus, the need of the hour is amendment of the relevant statutory provisions in the Central Excise Act, 1944 [viz. s.35R] made applicable to the Finance Act, 1994 vide Section 83, as well as s. 131BA of the Customs Act, 1962,for filing departmental appeals which would in effect put to rest all doubts regarding the retrospective applicability of various Instructions being issued by the Board from time to time.

(The author is Senior Associate, Lakshmikumaran & Sridharan, Ahmedabad.)