2025 (8) TMI 110 - HC - Customs

Appeals on penalty quashing without refund claims are not maintainable under CBIC instructions dated 2 Nov 2023

The HC held that the appeals were not maintainable under the Central Board of Indirect Taxes & Customs instructions dated 2 November 2023, as they did ... Maintainability of appeal - monetary limit involved in the appeal - reliance placed on Central Board of Indirect Taxes & Customs instructions dated 2 November 2023 - HELD THAT:- Clause 2 of the instructions dated 2 November 2023 states that adverse judgments related to amounts, aside from classification and refund issues, which are of a legal and/or recurring nature, should be challenged. However, in the current appeals, there are no refund issues as contemplated under the instructions dated 2 November 2023. The instructions refer to typical refund issues or those arising from the resolution of classification issues in any assessment. Such issues could have broad implications, far beyond the individual assessee’s case. But the instruction would not include cases or situations where the penalty imposed on an individual assessee is quashed, with or without specific directions for refunding the quashed penalty amount. Therefore, these appeals are impacted by instructions dated 2 November 2023 and will have to be disposed of on the grounds of the monetary benefits coupled with a policy of the appellants not to pursue such appeals. Appeal disposed off. ISSUES: Whether appeals involving monetary amounts below Rs. 1 Crore should be entertained by the Revenue in light of Central Board of Indirect Taxes & Customs (CBIC) instructions dated 2 November 2023.Whether penalties quashed by the Tribunal without formal refund directions fall within the scope of refund or classification issues exempted from the CBIC's monetary limit instructions.Whether questions of law arising from quashing of penalties should be adjudicated despite the monetary threshold prescribed by CBIC instructions. RULINGS / HOLDINGS: The appeals involving a total monetary amount not exceeding Rs. 7.5 Lakhs are barred from being pursued by the Revenue under the CBIC instructions dated 2 November 2023, which restrict appeals below Rs. 1 Crore in High Courts.The quashing of penalties without formal refund orders does not constitute 'refund issues' or 'classification issues' as contemplated in the CBIC instructions; therefore, such appeals do not fall within the exceptions to the monetary limit.The Court expressly leaves open the questions of law raised in these appeals and clarifies that disposal on monetary grounds shall not be construed as approval or disapproval of the Tribunal's legal view. RATIONALE: The Court applied the CBIC instructions dated 2 November 2023, which provide a policy framework restricting the Revenue from filing or pursuing appeals in High Courts where the monetary value involved is less than Rs. 1 Crore, except for adverse judgments on classification and refund issues of a legal and/or recurring nature.The Court interpreted 'refund issues' and 'classification issues' narrowly, holding that penalty quashing without explicit refund directions does not engage the exception clause.The Court acknowledged precedent and submissions regarding conflicting Tribunal decisions but refrained from adjudicating on the substantive questions of law due to the monetary threshold and policy considerations.The decision reflects a doctrinal adherence to administrative instructions limiting litigation to significant monetary disputes, while preserving the right to contest legal questions in higher-value cases.