2025 (9) TMI 619 - HC - Central Excise

Central Excise appeal restored; taxpayer not penalized, clear outstanding office objections within two weeks or appeal dismissed.

Commissioner of CGST & Central Excise Versus Birla Sun Life Insurance Company Ltd.

HC allowed the restoration of the Central Excise appeal, declining to impose costs or direct an inquiry into the office default because such measures ... Seeking restoration of Central Excise Appeal which was dismissed for failure to clear the office objections - HELD THAT:- Since the burden of such costs ultimately falls on the taxpayer, we choose not to impose them. Ordering an inquiry is also considered futile because the officials invariably protect the defaulting officials and transfer the burden of costs onto the taxpayer. At the same time, this court cannot be entirely unaware that the Revenue is an impersonal entity operating through its officials. Any prejudice to the revenue due to lapses in procedural compliance also affects the taxpayers. This application is allowed, and the appeal is restored. The office objections, if not cleared, must now be cleared within two weeks of the uploading of this order. If this is not done, the appeal to once again stand dismissed without further reference to this Court. ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal dismissed for failure to clear office objections under Rule 986, High Court (Original Side) Rules, 1980, should be restored where repeated extensions were granted but office objections remained uncleared. 2. The extent to which the Court should apply a liberal approach to restoration applications in revenue matters, particularly where negligence or repeated non-compliance by officials is shown. 3. Whether costs or a formal inquiry should be imposed/ordered against defaulting officials in restoration applications for revenue matters, and how the interests of the Revenue and taxpayers weigh in deciding such measures. ISSUE-WISE DETAILED ANALYSIS Issue 1: Restoration of an appeal dismissed for failure to clear office objections under Rule 986 Legal framework: Rule 986, High Court (Original Side) Rules, 1980 allows rejection/dismissal for non-compliance with office objections; courts possess inherent discretion to restore appeals where appropriate. Precedent Treatment: No specific precedent was cited or relied upon in the judgment; the Court considered established practice of granting restoration in appropriate cases but did not follow, distinguish, or overrule any authority in the text. Interpretation and reasoning: The Court acknowledged its usual liberal approach to restoration but emphasised that multiple opportunities (including a 'super last chance' and a subsequent six-week extension ordered by the Court) had been given and disregarded. The repeated failure to clear office objections even after extensions demonstrated negligence or casual approach by responsible officials, diminishing the suitability of automatic restoration as a remedy. Nonetheless, the Court recognised the impersonal nature of the Revenue and that prejudice from procedural lapses ultimately affects taxpayers as well as the State; balancing these equities, the Court exercised discretion to restore the appeal reluctantly. Ratio vs. Obiter: Ratio - The Court's decision to restore an appeal in such circumstances is discretionary and must weigh the history of default, the number and nature of opportunities given, and the public interest implications; repeated non-compliance reduces the force of the presumption in favour of restoration. Obiter - Observations on the broader trend of matters on board pointing to negligence by officials and general comments on indulgence by courts in restoration applications. Conclusions: The appeal was restored on terms; the office objections must be cleared within two weeks of the order's upload, failing which the appeal will stand dismissed without further reference to the Court. The restoration was granted reluctantly and as an exception after balancing competing considerations. Issue 2: Application of a liberal approach in restoration of revenue appeals where official negligence is alleged Legal framework: Judicial discretion to adopt a liberal approach to enable adjudication on merits, tempered by principles of finality, orderly procedure, and accountability for default. Precedent Treatment: The judgment refers to the Court's customary liberal approach but does not cite or apply specific precedents modifying that approach. Interpretation and reasoning: While courts generally favour adjudication on merits, unbounded liberality risks encouraging laxity by parties and officials who may assume restoration will follow non-compliance. The Court found that this risk is accentuated in revenue matters handled by government officials; therefore, the liberal approach is not absolute and must be curtailed where repeated non-compliance evidences indifference. The decision stresses deterrent effect and administrative responsibility while still acknowledging the public interest in resolution on merits where possible. Ratio vs. Obiter: Ratio - A liberal approach to restoration is legitimate but subject to limitation where repeated procedural default by officials shows inexcusable negligence; courts should condition or refuse restoration to prevent encouragement of casual attitudes. Obiter - Broader policy remarks about systemic negligence and its practical consequences. Conclusions: The Court reaffirmed a qualified liberal stance: restoration is available but may be made conditional and is not warranted as a remedy that absolves repeated official neglect. In this case restoration was granted only on strict short-term conditions to discourage repetition. Issue 3: Imposition of costs and ordering of inquiry against defaulting officials in restoration proceedings Legal framework: Courts may impose costs or initiate inquiries against parties or officials for procedural default; considerations include deterrence, accountability, and the public interest in efficient administration. Precedent Treatment: No precedent was invoked; the Court exercised policy judgment grounded in practical considerations about who ultimately bears costs and efficacy of inquiries. Interpretation and reasoning: The Court considered but declined to impose costs because such costs would ultimately be borne by taxpayers rather than individual defaulting officials, rendering the sanction unjust to the public. Similarly, ordering an inquiry was deemed futile because internal processes often shield defaulting officials and shift the cost burden back to the public. The Court balanced the need for accountability against the practical consequences of sanctions that would penalise third parties (taxpayers) or be ineffective. Ratio vs. Obiter: Ratio - In revenue matters, the imposition of costs or ordering of inquiries against defaulting officials may be declined where such measures would unfairly burden taxpayers or prove ineffective in producing accountability. Obiter - Skeptical comments regarding institutional protection of defaulting officials and systemic deficiencies. Conclusions: The Court declined to impose costs or order an inquiry, choosing instead to set stringent conditions for restoration as the operative measure to address the default while avoiding unfair financial burden on taxpayers. Cross-references and Operational Directions 1. The directions on restoration, the two-week time limit for clearing office objections, and the consequence of dismissal without further reference operate as the Court's conditional exercise of discretion (see Issue 1 and Issue 2 analyses). 2. The decision balances the interest of adjudication on merits against institutional accountability and public interest considerations in revenue litigation (see Issue 2 and Issue 3), forming the practical basis for the remedial order made.