2019 (5) TMI 656 - HC - Central Excise

High Court directs appeals on Central Excise Act to Supreme Court

The High Court concluded that the appeals regarding the valuation of goods, applicability of certain rules, and imposition of penalties under the Central ... Appeal to High Court under Section 35G - appeal to Supreme Court under Section 35L - valuation of goods for purposes of assessment - rate of duty of excise - substantial question of law - clubbing of clearances of related manufacturing units - penalty under Rule 25 of the Central Excise Rules, 2002 - penalty under Rule 26 of the Central Excise Rules, 2002Appeal to High Court under Section 35G - appeal to Supreme Court under Section 35L - valuation of goods for purposes of assessment - rate of duty of excise - substantial question of law - Maintainability of appeals under Section 35G where the tribunal's order involves determination of valuation or rate of duty. - HELD THAT: - The Court construed Section 35G(1) of the Central Excise Act, 1944 and held that appeals against tribunal orders which relate to the determination of the value of goods for assessment or the rate of duty of excise are excluded from the jurisdiction of the High Court under Section 35G and must be challenged before the Supreme Court under Section 35L. The appeals in Table-A centrally concern applicability of Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and thus raise questions relating to valuation of goods; on a plain reading of Section 35G(1) such matters are not maintainable before the High Court. The Court accepted the appellants' concession that these appeals ought to have been filed before the Supreme Court and applied the statutory exclusion to direct that those appeals lie under Section 35L.Appeals involving valuation or rate of duty are not maintainable under Section 35G and must be filed before the Supreme Court under Section 35L.Clubbing of clearances of related manufacturing units - penalty under Rule 25 of the Central Excise Rules, 2002 - penalty under Rule 26 of the Central Excise Rules, 2002 - valuation of goods for purposes of assessment - Whether appeals against imposition of penalty that are dependent on valuation or clubbing of clearances are maintainable before the High Court under Section 35G. - HELD THAT: - The Court examined the impugned adjudication which levied penalties under Rules 25 and 26 of the Central Excise Rules, 2002 on findings that valuation was incorrect and clearances of related units should be clubbed. Because the penalties are founded upon and inseparable from the valuation/clubbed-clearances determination, they fall within the scope of matters excluded by Section 35G(1). The Court reasoned that the language of Section 35G is sufficiently wide to include appeals relating to penalty when the penalty is dependent on a determination as to value or rate of duty. In the interest of having issues involving common facts and law decided by one forum, the appeals concerning penalty (Tables B and C) were also held to lie before the Supreme Court.Appeals challenging penalties which are dependent on valuation or clubbing of clearances are not maintainable under Section 35G and must be filed before the Supreme Court under Section 35L.Final Conclusion: All the appeals are not maintainable before the High Court because they involve questions relating to valuation/ rate of duty (and penalties dependent thereon) and are to be preferred to the Supreme Court under Section 35L; Registry directed to return the certified copies of the tribunal orders to enable appropriate remedy, subject to filing photostat copies initialed by counsel to complete the record. Issues Involved:1. Applicability of Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.2. Justification of clubbing the clearances of all the concerns.3. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.4. Imposition of penalty under Rule 26(1) of the Central Excise Rules, 2002.5. Maintainability of appeals under Section 35G of the Central Excise Act, 1944.Detailed Analysis:1. Applicability of Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:The appeals in Table-A primarily deal with the valuation of goods and the consequential determination of duty. The contentious issue posed by the appellants was whether the Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are applicable or not. The adjudicating officer found that the appellants had circumvented legal provisions to evade central excise duty by floating multiple firms under different names but with mutual financial interests and control by a single person, thereby misusing the SSI exemption notification No.08/2003.2. Justification of Clubbing the Clearances of All the Concerns:The adjudicating authority determined that the clearances of all the concerns should be clubbed together as they were essentially part of the same organization, controlled and administered by a single individual. It was found that the firms were floated in the names of family members who were not involved in the business activities, thus evading the payment of central excise duty. The clubbing of clearances was justified based on the mutuality of interest and pervasive control by one entity.3. Imposition of Penalty under Rule 25 of the Central Excise Rules, 2002:The appeals in Table-B involve penalties under Rule 25 of the Central Excise Rules, 2002, inflicted by the adjudicating authority while confirming the demand of duty. The penalties were imposed due to the improper valuation of goods and the evasion of excise duty through the misuse of SSI exemption by floating separate entities.4. Imposition of Penalty under Rule 26(1) of the Central Excise Rules, 2002:The appeals in Table-C question the imposition of penalties upon the directors/partners of the companies/firms under Rule 26(1) of the Central Excise Rules, 2002. The adjudicating authority found these individuals guilty of circumventing and misusing the provisions of the SSI exemption notification No.08/2003, thus imposing penalties for their involvement in the fraudulent activities.5. Maintainability of Appeals under Section 35G of the Central Excise Act, 1944:The primary issue was whether the appeals involving the valuation of goods or the rate of duty should be filed under Section 35G before the High Court or under Section 35L before the Supreme Court. The court concluded that since the basic question in the appeals revolved around the valuation of goods or applicability of Rule 9 or 11 of the Central Excise Valuation Rules, 2000, they are not maintainable under Section 35G. The appellants should challenge these orders before the Supreme Court under Section 35L. Additionally, the appeals related to penalties (Table-B and Table-C) are also dependent on the valuation of goods and should be heard by the Supreme Court to ensure consistency in the decision-making process.Conclusion:The High Court held that the appeals at hand are not maintainable before it and should be preferred under Section 35L of the Central Excise Act, 1944, before the Supreme Court. The Registry was directed to return the certified copies of the tribunal's orders to the appellants' counsel to enable them to take appropriate remedies in accordance with the law. All appeals were disposed of accordingly.