2025 (6) TMI 1095 - HC - Service Tax

High Court sets aside order refusing to condone delay under Section 85 of Finance Act 1994

Orissa HC set aside the Commissioner (Appeals) order dated 23.12.2024 that refused to condone delay under Section 85 of Finance Act, 1994. The court found ... Refusal to exercise the power under Section 85 of the Finance Act, 1994 by condoning delay - time limitation - invocation of extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India - HELD THAT:- On perusal of order dated 23.12.2024 passed in appeal, it surfaced that the Order-in-Original dated 09.04.2024 was served on the Petitioner on 12.04.2024. Thus, the period of limitation is to be reckoned from the next date, i.e., 13.04.2024. The last date for presenting the appeal within the specified period of two months from this date (13.04.2024) would fall on 12.06.2024 and the condonable period of one month would lapse on 12.07.2024. Concededly by counsel both the parties, the appeal was presented on 12.07.2024. It is, therefore, abundantly clear that the Appellate Authority has misguided himself and his approach in computation of period of limitation is tainted. The Appellate Order dated 23.12.2024 is faulted with in view of Section 85(3A) of the Finance Act, 1994 read with Section 12 of the Limitation Act, 1963 and Section 9 read with Section 3(35) of the General Clauses Act, 1897. The Appellate Authority has not borne in mind the purport of Section 3(35) read with sub-section (9) of the General Clause Act, 1897, Section 12 of the Limitation Act. Therefore, the conclusion arrived at by the Appellate Authority vide Order dated 23.12.2024 is faulted with. Conclusion - Having thus demonstrated the legal aspect of calculation of period of limitation as envisaged under Section 85(3A) of the Finance Act, 1994, this Court is inclined to interfere with the Order dated 23.12.2024 passed by the Commissioner (Appeals), Bhubaneswar and, having held that the Commissioner (Appeals) has the competence to deal with the proviso to sub-section (3A) of Section 85 of the Finance Act, 1994, on the facts and in the circumstances of the case, the said order is liable to be set aside. The Order-in-Appeal dated 23.12.2024 passed by the Commissioner (Appeals), Bhubaneswar is set aside and the matter is remitted to the Appellate Authority to exercise his conscientious discretion as conferred under Section 85(3A) of the Finance Act, 1994 and adjudicate the matter with respect to limitation afresh - Petition disposed off by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:(a) Whether the Appellate Authority erred in refusing to condone the delay in filing the appeal under Section 85 of the Finance Act, 1994, given the period of limitation and the condonable period prescribed under sub-section (3A) of Section 85;(b) The correct method of computation of the limitation period for filing an appeal under Section 85(3A) of the Finance Act, 1994, specifically whether the date of receipt of the Order-in-Original is to be excluded or included in reckoning the limitation period;(c) Whether the Appellate Authority failed to exercise its discretionary power under the proviso to Section 85(3A) to condone delay in filing the appeal within the extended period;(d) Whether the Appellate Authority was obliged to afford an opportunity of hearing before rejecting the appeal on the ground of delay;(e) The applicability and interpretation of related statutory provisions, namely Section 12 of the Limitation Act, 1963, and Sections 3(35) and 9 of the General Clauses Act, 1897, in the context of limitation computation under the Finance Act.2. ISSUE-WISE DETAILED ANALYSIS(a) Whether the Appellate Authority erred in refusing to condone the delay in filing the appeal under Section 85(3A) of the Finance Act, 1994The relevant legal framework is Section 85(3A) of the Finance Act, 1994, which mandates that an appeal against an adjudicating authority's order must be presented within two months from the date of receipt of the order. The proviso empowers the Commissioner of Central Excise (Appeals) to condone delay for a further period of one month if sufficient cause is shown.The Court examined the timeline: the Order-in-Original was served on 12.04.2024, and the appeal was filed on 12.07.2024. The two-month period from receipt expired on 12.06.2024, and the condonable one-month period expired on 12.07.2024. The appeal was thus filed on the last day of the condonable period.The Appellate Authority had rejected the appeal as barred by limitation, apparently treating the date of receipt as the starting point rather than excluding it. The Court found this to be a miscalculation of the limitation period, contrary to the provisions of Section 12 of the Limitation Act and the General Clauses Act.The Court relied on the authoritative interpretation in State of W.B. v. Rajpath Contractors & Engineers Ltd., and Rameshchandra Ambalal Joshi v. State of Gujarat, which clarified that the day of receipt must be excluded in computing limitation periods. Thus, the limitation period commenced from 13.04.2024, not 12.04.2024.Applying this principle, the appeal filed on 12.07.2024 was within the permissible period including condonable delay. Therefore, the Appellate Authority erred in refusing to condone the delay.(b) Correct method of computation of limitation period under Section 85(3A) of the Finance Act, 1994The Court analyzed the interplay of Section 85(3A), Section 12 of the Limitation Act, and Sections 3(35) and 9 of the General Clauses Act. Section 12(1) of the Limitation Act mandates exclusion of the day from which the limitation period is reckoned. Section 3(35) defines 'month' as a calendar month according to the British calendar, and Section 9 clarifies the inclusion and exclusion of days in a period.The Court referred to the Supreme Court's ruling in Rameshchandra Ambalal Joshi, which held that 'month' means a calendar month, not a fixed number of days, and that the period runs from the day following the triggering event, excluding the date of receipt.Thus, the limitation period for filing the appeal commenced from 13.04.2024, the day after service of the Order-in-Original. Two calendar months from that date ended on 12.06.2024, and the condonable one-month period ended on 12.07.2024. The appeal filed on 12.07.2024 was therefore within the permissible timeframe.(c) Whether the Appellate Authority failed to exercise its discretionary power under proviso to Section 85(3A)The Court observed that the Appellate Authority did not apply its discretion conscientiously as mandated by the statute. Instead, it miscalculated the limitation period and rejected the appeal as barred by time without considering the condonable period properly.The Court held that the Appellate Authority has the competence and duty to exercise discretion under the proviso to Section 85(3A) to condone delay up to one month beyond the two-month period if sufficient cause is shown. The failure to do so, especially without affording an opportunity to the appellant to explain the delay, was a procedural lapse.(d) Whether the Appellate Authority was obliged to afford an opportunity of hearing before rejecting the appeal on the ground of delayThe petitioner contended that no opportunity was given to explain the delay. The Court agreed that the Appellate Authority ought to have provided an opportunity to the appellant to demonstrate sufficient cause for delay and to explain the computation of the limitation period.The Respondent argued that since the appeal was barred by limitation on record, granting opportunity would be a futile exercise. However, the Court rejected this, emphasizing that the power to condone delay is discretionary and must be exercised after hearing the appellant.(e) Applicability and interpretation of related statutory provisionsThe Court extensively examined the application of Section 12 of the Limitation Act, 1963, which governs exclusion of the day of receipt in computing limitation, and Sections 3(35) and 9 of the General Clauses Act, 1897, which define 'month' and prescribe rules for inclusion and exclusion of days in time periods.It also relied on several precedents, including State of W.B. v. Rajpath Contractors & Engineers Ltd., Rameshchandra Ambalal Joshi v. State of Gujarat, and Himachal Techno Engineers, which clarified that a 'month' is a calendar month and that the day of receipt is excluded in computing limitation. The Court emphasized that the legislature's use of 'months' rather than 'days' in the statute is deliberate and must be interpreted accordingly.The Court rejected the argument that the limitation period should be computed as a fixed number of days (e.g., 90 days), instead holding that calendar months must be used in calculation.3. SIGNIFICANT HOLDINGS'The next day of receipt of Order-in-Original, subject-matter of appeal, shall be construed to be the commencement date of limitation for the purpose of Section 85(3A) of the Finance Act, 1994.''The Appellate Authority has the competence to apply his discretion to condone the delay in terms of proviso to sub-section (3A) of Section 85 of the Finance Act, 1994.''The Appellate Authority erred in treating the date of receipt of the Order-in-Original as the starting point of limitation, thereby miscomputing the limitation period and wrongly rejecting the appeal as barred by limitation.''The period of limitation for filing an appeal under Section 85(3A) of the Finance Act, 1994 is to be computed by excluding the date of receipt and reckoning calendar months as defined under Section 3(35) of the General Clauses Act, 1897.''The Appellate Authority ought to have afforded the appellant an opportunity of hearing before rejecting the appeal on the ground of delay.'The Court set aside the Order dated 23.12.2024 passed by the Commissioner (Appeals), Bhubaneswar, and remitted the matter to the Appellate Authority for fresh adjudication on limitation, directing the Authority to exercise its discretion under Section 85(3A) of the Finance Act, 1994 in accordance with the legal principles elucidated.