2025 (10) TMI 1129 - HC - Central Excise

Refusal to entertain rectification application as time-barred overturned; appellant granted liberty to file fresh rectification plea

Rajsahnti Metals Pvt. Ltd. Versus The Commissioner Of Customs

HC held that treating the rectification application as barred by limitation was incorrect and granted liberty to the appellant to file a fresh application ... Treating the rectification application as barred by limitation - liberty granted to the appellant to file a fresh application for rectification of mistake in the ex-parte order - HELD THAT:- As per the facts emerging from the record, once the CESTAT has granted liberty to the appellant to prefer applications for rectification of mistakes, the CESTAT could not have rejected such applications on the ground of limitation as the applications for rectification of mistakes were pursuant to the liberty granted by the CESTAT itself. The questions of law admitted by this Court answered in negative and in favour of the appellant and against the Revenue. ISSUES PRESENTED AND CONSIDERED 1. Whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), having granted liberty to appellants to file fresh applications for rectification of mistake in an ex-parte order, was justified in treating such subsequently filed rectification applications as barred by limitation. 2. Whether an application for rectification of mistake filed pursuant to an express liberty granted by the CESTAT is to be regarded as time-barred under Section 35C(2) when filed after the original ex-parte order. 3. Ancillary issue: Whether the remedy of restoration (recall/re-hearing) and the remedy of rectification of mistake are interchangeable or distinct for the purposes of limitation and procedural propriety where liberty to file rectification is granted after an ex-parte decision. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether CESTAT could treat rectification applications as barred by limitation after having granted liberty to file them Legal framework: Rectification of mistake in orders of the Tribunal and time limits for such applications are governed by the Tribunal's rules and by statute; Section 35C(2) was invoked by the CESTAT to hold the applications time-barred. The proceedings involved an earlier ex-parte disposal and a later order permitting withdrawal of restoration applications with liberty to file rectification applications. Precedent Treatment: No specific judicial precedents are cited in the judgment. The Court's reasoning proceeds from statutory and procedural principles rather than distinguishing or following earlier authorities. Interpretation and reasoning: The Court emphasised the factual sequence: (a) appeals were disposed of ex-parte; (b) applicants sought recall/restoration; (c) CESTAT allowed withdrawal of restoration applications but expressly granted liberty to file rectification of mistake applications; and (d) applicants filed rectification applications pursuant to that liberty. The Court reasoned that once the Tribunal itself granted liberty to file rectification applications, it was inconsistent and procedurally impermissible for the Tribunal subsequently to repudiate that grant by treating the rectification applications as time-barred. The liberty granted by the Tribunal created an expectation and a procedural pathway which the applicants followed; to treat the ensuing applications as barred would be contrary to the purpose of granting the liberty and would undermine principles of fairness and the effective exercise of rights conferred by the Tribunal's order. Ratio vs. Obiter: Ratio - The definitive legal proposition laid down is that the Tribunal, having granted liberty to file rectification of mistake applications, cannot thereafter dismiss those applications as barred by limitation; rectification applications filed pursuant to such express liberty must be entertained and not rejected on limitation grounds premised on an earlier ex-parte order. This forms the operative ratio of the judgment. There is no substantive obiter on other aspects of limitation computation beyond this principle. Conclusion: The Court answered the substantial question of law negatibely against the Tribunal's action and in favour of the appellants, holding that the CESTAT erred in dismissing the rectification applications as barred by limitation after having granted liberty to file them. Issue 2 - Whether rectification applications filed after an ex-parte order but pursuant to Tribunal's liberty are barred under Section 35C(2) Legal framework: Section 35C(2) (as referenced in the CESTAT order) prescribes limitation for certain applications to the Tribunal. The procedural course involved an initial ex-parte adjudication, a subsequent permission to withdraw restoration applications with liberty to file rectification applications, and the filing of the rectification applications within a short interval thereafter (filed 19.12.2007 after liberty order dated 15.11.2007). Precedent Treatment: The judgment does not rely upon or distinguish prior authorities on Section 35C(2); it treats the statutory limitation in the light of the Tribunal's own order granting liberty and the doctrine of estoppel by conduct of the Tribunal. Interpretation and reasoning: The Court reasoned that limitation under Section 35C(2) cannot be mechanically applied to defeat an application that is filed pursuant to express liberty granted by the Tribunal itself. The Tribunal's order granting liberty effectively reframed the procedural context for the applicants and invited them to file rectification applications; to then invoke the statutory limitation against those applications is inconsistent with the Tribunal's earlier direction and would amount to procedural unfairness. The Court treated the rectification applications as properly before the Tribunal because they were a direct consequence of the liberty it accorded. Ratio vs. Obiter: Ratio - Statutory limitation prescribed by Section 35C(2) cannot be applied so as to defeat applications filed in obedience to an express liberty granted by the Tribunal; the Tribunal must consider such applications on merits rather than reject them summarily as time-barred. This is a binding component of the judgment's outcome. Any remarks regarding the nature of Section 35C(2) beyond this application are obiter. Conclusion: The submissions that rectification applications filed pursuant to the Tribunal's liberty are barred under Section 35C(2) were repelled; the Court held that such applications ought to have been considered on merits and not dismissed as time-barred. Issue 3 - Distinction between restoration/recall and rectification remedies for limitation and procedural effect Legal framework: Remedies of restoration/recall (seeking re-hearing after ex-parte disposal) and rectification of mistake serve different procedural functions. The Tribunal, instead of deciding restoration on merits, permitted withdrawal with liberty to file rectification applications - thereby distinguishing the two remedies in practice. Precedent Treatment: No prior decisions were analysed; the Court relied on the factual record and accepted the Tribunal's grant of liberty as operative. Interpretation and reasoning: The Court accepted that the applicants initially sought restoration but the Tribunal allowed withdrawal and granted liberty to file rectification applications. That procedural concession by the Tribunal narrowed the permissible remedy to rectification. The core legal consequence identified by the Court is that where the Tribunal itself channels a party to the rectification remedy by granting liberty, the Tribunal cannot later dismiss the rectification application on limitation grounds as if the party had forfeited the right to seek relief; the procedural act of granting liberty must be given effect to. The Court thus treated the distinction between restoration and rectification as immaterial to the extent that the Tribunal's own direction substitutes one remedial route for another; the Tribunal must honour the consequences of its direction. Ratio vs. Obiter: Ratio - Where an appellate Tribunal permits withdrawal of a restoration application with liberty to file rectification of mistake applications, the rectification route so permitted must be entertained and cannot be rejected as time-barred by reference to the earlier ex-parte order. This finding forms part of the core ratio. Observations about the interchangeability of remedies beyond this practical consequence are obiter. Conclusion: The Court held that the Tribunal's grant of liberty to file rectification applications effectively precluded dismissal of those applications on limitation grounds; the remedies are distinct only insofar as the Tribunal's direction prescribes a particular procedural path, which must be respected. Disposition The Court answered the substantial question of law in the negative against the Tribunal's limitation finding and in favour of the appellants, directing that the rectification applications filed pursuant to the Tribunal's liberty should not have been dismissed as barred by limitation and that the Tax Appeals are accordingly disposed of in accordance with that conclusion.