2016 (5) TMI 674 - HC - Central Excise

High Court remands case, emphasizes substantial questions, upholds statutory limitation period

Phoenix Plasts Company Versus Commissioner of Central Excise (Appeal-I)

The High Court set aside the impugned order of the first appellate authority and the Single Judge, remanding the case to the Additional Commissioner of ... Delay in filing an appeal before the Commissioner (Appeals) - Section 35 of the Act - Condonation of delay of 118 days - Writ jurisdiction under Article 226 of the Constitution - Held that:- If the two aspects, one, regarding the case law prevailing earlier and two, interpretation of the word 'as such' and thereafter, the amendment and the decision of this Court, in case of CCE v. Solectron Centum Electronics Ltd.[2014 (10) TMI 596 - KARNATAKA HIGH COURT], would go to show that there was a substantial question to be considered even by the first authority. We do not propose to make any final observations on the ultimate merit of the demand, since we find that it might prejudice the case of either side. But in our considered view, if the aforesaid vital defence is not to be considered by the first appellate authority, the resultant effect would be gross miscarriage of justice. Under these circumstances, we find that it would be an appropriate case to exercise power under Article 226 of the Constitution to interfere with the order of the first appellate authority and to direct the first appellate authority to consider the matter in light of the observations made by this Court in the present order as well as after giving opportunity of hearing the appellant herein. Therefore, the absence of consideration of the case of the appellant by the first appellate authority has resulted in a failure of justice or gross miscarriage of justice, as per the view taken by the Full Bench of High Court of Gujarat in case of Panoli Intermediate (India) (P.) Ltd. (supra). Hence, the petition under Article 226 of the Constitution could be maintained and it was a fit case to exercise power under Article 226 of the Constitution to interfere with the order of the first appellate authority and the interference not being made, has resulted in failure of justice. But at the same time, even if it becomes a case for exercise of the power under Article 226 of the Constitution, the Court may ensure that no litigant or the assessee takes any undue benefit of the power under Article 226 of the Constitution. If the case is considered in favour of invoking the appellate power, the requisite condition would be to deposit 7.5% of the duty demanded. Further, it cannot be said that the appellant was vigilant about its right to pursue the matter in time and there is delay also in filing this appeal. If the appellant has not pursued the remedy well in time, though we may keep in mind the real merits of the matter, the appellant cannot get away from paying appropriate cost, by way of compensation, by the delay caused in pursuing the litigation up to this Court. Hence, we find that even if the order of the first appellate authority is to be interfered with, it should be on a condition that the appellant deposits 7.5% of the demand of duty, plus pay the cost of ₹ 25,000/- to the respondent. - Matter remanded back - Decided in favour of appellant to some extent Issues Involved:1. Exercise of power by the statutory authority within the scope and ambit of the statute.2. Exercise of power by the High Court under Article 226 of the Constitution of India.3. Interpretation of statutory provisions regarding the limitation period for filing an appeal under Section 35 of the Central Excise Act, 1944.4. Consideration of substantial questions and defenses in the appellate process.5. Conditions for invoking appellate power and ensuring no undue benefit is taken by the litigant.Detailed Analysis:1. Exercise of Power by the Statutory Authority:The statutory authority, namely the first appellate authority, acted within the confines of the statute by returning the appeal filed by the appellant beyond the prescribed period of ninety days. The statutory limitation period under Section 35 of the Central Excise Act, 1944, allows for an appeal to be filed within sixty days, with a possible extension of thirty days. The authority committed no error in adhering to this statutory limit and rejecting the appeal filed after this period.2. Exercise of Power by the High Court under Article 226:While the High Court under Article 226 of the Constitution cannot compel the statutory authority to condone delays beyond the statutory limit, it can intervene if the original adjudicating authority's order falls under specific categories such as lack of jurisdiction, excess of jurisdiction, flagrant disregard of law, or violation of principles of natural justice. The High Court can exercise its discretion to ensure justice and address gross injustice resulting from the statutory authority's decision.3. Interpretation of Statutory Provisions on Limitation Period:Referring to the Full Bench decision of the Gujarat High Court in Panoli Intermediate (India) (P) Ltd. v. Union of India, it was clarified that the limitation period for filing an appeal under Section 35 of the Central Excise Act cannot be extended beyond the outer limit of ninety days. The High Court cannot condone delays beyond this period through a writ petition under Article 226, except under specific circumstances that warrant judicial intervention.4. Consideration of Substantial Questions and Defenses:The impugned Order-in-Original lacked consideration of crucial aspects such as the interpretation of 'goods as such' and the amendments reducing cenvat credit liability. The Division Bench of the Karnataka High Court in CCE v. Solectron Centum Electronics Ltd. clarified that prior to the amendment on 13.11.2007, used capital goods were not liable for duty. This substantial question should have been considered by the first appellate authority, and its absence led to a gross miscarriage of justice.5. Conditions for Invoking Appellate Power:Even if the High Court decides to invoke its appellate power under Article 226, it must ensure that no undue benefit is taken by the appellant. The appellant is required to deposit 7.5% of the duty demanded and pay costs of Rs. 25,000 to the respondent. This ensures that the appellant does not evade responsibility due to procedural delays while still allowing for a fair reconsideration of the case.Conclusion:The High Court allowed the writ appeal to the extent that the impugned order of the first appellate authority and the learned Single Judge were set aside, subject to the appellant fulfilling the conditions of deposit and cost payment. The matter was remanded to the Additional Commissioner of Central Excise for reconsideration in light of the High Court's observations, ensuring a fair hearing and addressing the miscarriage of justice. All rights and contentions of both sides remain open for further adjudication.