2013 (4) TMI 76 - HC - Central Excise

Appeal Dismissed for Not Following CBEC Circulars

Commissioner of Central Excise & Customs Versus M/s Sanoo Fashion Pvt. Ltd

The appeal was dismissed based on the monetary limits set by the CBEC circulars, emphasizing adherence to departmental circulars to avoid unnecessary ... Refund claim pursuant to the circular related to Reduction of Government litigation - providing monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme Court - Respondent-assessee, an independent processor of textile fabrics and engaged in manufacturing was working under the Compounded Levy Scheme in terms of Section 3A of the Central Excise Act, 1944, applicable to it. Held that - In our opinion, since in the instant appeal the amount involved is Rs. 5,50,000/- only, In view of the circular dated 17.08.2011, the appeal could not have been preferred by the Central Excise and Customs Department before this Court. As on being informed from the side of the Department after circular dated 17.08.2011 no other circular has been issued by the Ministry of Finance, Department of Revenue Central Board of Excise and Customs, Government of India, New Delhi, authorizing the Department to file appeals where the amount is less than Rs. 10 lacs. It cannot be gainsaid that the Department is bound by its own circulars. Though the appeal has been admitted, we did not go into the substantial question of law formulated by this Court. For the aforesaid reasons, this appeal is dismissed keeping the questions open to be decided in an appropriate case. Issues Involved:1. Validity of Tribunal's Decision on Rule 3 of Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 19982. Eligibility for Abatement under Rule 96-ZQ of the Central Excise Rules, 1944Detailed Analysis:Issue 1: Validity of Tribunal's Decision on Rule 3 of Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998The first issue revolves around whether the Tribunal erred in law by holding that the demand for short-paid duty, interest, and penalty under Rule 9(2) with Rule 96-ZQ of the Central Excise Rules, 1944, and Section 11A(1) of the Central Excise Act, 1944, is unsustainable after Rule 3 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998, was declared ultra vires by the Madras High Court in the case of Beauty Dyers Vs. Union of India (2004 (166) ELT 27 (Mad.)).The court noted that the declaration of a rule as ultra vires by a High Court does not extend beyond the territorial jurisdiction of that court. Therefore, the Tribunal's reliance on the Madras High Court's decision to invalidate the demands was a substantial error of law.Issue 2: Eligibility for Abatement under Rule 96-ZQ of the Central Excise Rules, 1944The second issue concerns whether the Tribunal committed a substantial error of law in granting the benefit of abatement to the respondent despite the conditions prescribed in Rule 96-ZQ of the Central Excise Rules, 1944, not being satisfied.The respondent, an independent processor of textile fabrics, was working under the Compounded Levy Scheme as per Section 3A of the Central Excise Act, 1944, and was paying excise duty at a fixed rate. A show-cause notice was issued to the respondent for short payment of duty, leading to an order for recovery by the Deputy Commissioner, which was upheld by the Commissioner (Appeals) due to delay in filing the appeal. The Tribunal later condoned the delay and remanded the matter, ultimately confirming the demand for differential duty of Rs. 5,55,000/- with interest and an equal amount of penalty.Monetary Limit and CircularsThe court also considered the monetary limits for filing appeals as per the circulars issued by the Central Board of Excise & Customs (CBEC). The circular dated 20.10.2010, and the subsequent circular dated 17.08.2011, which set monetary limits for filing appeals, were pivotal. According to these circulars, appeals should not be filed if the duty involved is below Rs. 10 lakhs for High Courts. Since the amount involved in the present case was Rs. 5,50,000/-, the appeal should not have been filed by the Department.The court emphasized that the Department is bound by its own circulars and noted that if the circular dated 17.08.2011 had been brought to the court's notice earlier, the appeal would not have been admitted. Therefore, the appeal was dismissed based on the monetary limits prescribed in the circulars, without delving into the substantial questions of law.ConclusionThe appeal was dismissed due to the monetary limits set by the CBEC circulars, keeping the questions of law open for future cases where the monetary threshold is met. The court underscored the importance of adhering to departmental circulars to avoid unnecessary litigation.