Whether National Litigation Policy specifying the monetary limit of filing of appeal by Revenue to CESTAT can be applied for period when it was not in force?

PJ/Case Laws/2012-13/1376

Case:-COMM. OF CENTRAL EXCISE & CUSTOMS VISAKHAPATNAM-I COMMISSIONERATE, VISAKHAPATNAM Vs M/s MATRIX LABORATORIES LTD

Citation:-2012-TIOL-1949-CESTAT-BANG

Brief facts:- These appeals of the department are directed against grant of CENVAT credit to the respondent by the lower appellate authority in respect of structural items viz. teflon sheet, ISMB, filter pads, SS coils, shell sheet, channels, angles, flanges, chequered plates, bolts & nuts and beams, all recognized as capital goods under Rule 2(a) of the CENVAT Credit Rules, 2004.The Commissioner (Appeals) chose to hold the various structural items to be ‘Cenvatable' capital goods on the basis of certain photographs produced by the assessee.

Appellant contention:- They contended that the method adopted by the appellate authority cannot be countenanced inasmuch as a photograph per se has no evidentiary value. Where the assessee claimed to have used the structural items to fabricate "technological structures" which were claimed to be ‘Cenvatable' capital goods, the appellate authority ought to have arranged physical inspection of such structures by competent officers of central excise and should have taken a view only after considering the inspection report but his was not done in the case.

Further, the Deputy Commissioner (AR) contests the arguments of the respondent and submits that when the appeals were filed in April 2010, there was no embargo inasmuch as National Litigation Policy was not in force at that time.

Respondent contention:-Respondent submits that the amount of CENVAT credit in dispute is less than Rs.2,00,000/- in each appeal and therefore these appeals were filed in contravention of the National Litigation Policy. In this connection, the learned counsel refers to MF (DR) Instruction F.No.390/Misc./163/2010 dated 20.10.2010 and instruction of even number dated 17.8.2011. It is submitted that, as per the first instruction, the department could not prefer any appeal to the CESTAT where the disputed amount was less than Rs.2,00,000/-. As per the second instruction, the department cannot prefer an appeal to the CESTAT where the disputed amount is less than Rs.5,00,000/-. On this basis, the learned counsel argues that both the appeals are liable to be dismissed as not maintainable. The learned counsel also relies on the Hon'ble High Court's judgment in CCE,Bangalore-II vs. Presscom Products: 2011 (268) E.L.T. 344 (Kar.) = (2011-TIOL-889-HC-KAR-CX).

Reasoning of judgment:-It is not in dispute that, when these appeals were filed, there was no embargo based on monetary limits. Hence it cannot be said that these appeals were filed in contravention of any litigation policy. The National Litigation Policy was brought into force through instructions of Government of India in October 2010 and the same was amended in August 2011. The learned counsel for the respondent has argued, on the basis of Hon'ble High Court's judgment, that the provisions Of the National Litigation Policy should be given retrospective effect. However, before, giving retrospective effect to the policy provisions to the detriment of the Revenue's interests, the conduct of the assessee has got to be examined. The record of past proceedings in these two appeals indicates that these appeals arose before this Bench as many as on six occasions but, at no point of time did the respondent raise any objection of the above kind. It is pertinent to note that all the past proceedings were after the promulgation of National litigation Policy. It is also noteworthy that the respondent submitted themselves to the appellate jurisdiction of the CESTAT by filing a compilation of documents in support of their case on merits. In these circumstances, when the counsel for the respondent all of a sudden wakes up the maintainability issue, the same can hardly be appreciated. In the judgment cited by the learned counsel, the party's conduct was not examined and therefore, it cannot be of any support to the objection raised by the learned counsel. The preliminary objection stands overruled.

Coming to the merits of the case, the learned Commissioner (Appeals) chose to hold the various structural items to be ‘cenvatable' capital goods on the basis of certain photographs produced by the assessee. The method adopted by the appellate authority cannot be countenanced inasmuch as a photograph per se has no evidentiary value. Where the assessee claimed to have used the structural items to fabricate "technological structures" which were claimed to be ‘cenvatable' capital goods, the appellate authority ought to have arranged physical inspection of such structures by competent officers of central excise and should have taken a view only after considering the inspection report. This, however, was not done in this case. The matter therefore requires to be remanded for fresh decision.

As a result, the impugned order is set aside and these appeals are allowed by way of remand to the Commissioner (Appeals) with a request to decide afresh on the relevant issues after obtaining a report of inspection of the respondent's factory and of verification of their records by the Divisional Assistant Commissioner assisted by the Range Officer and after giving the assessee a reasonable opportunity of being heard. Needless to say that a copy of the inspection/verification report should be given to the assessee before personal hearing.

Decision:-Appeals allowed by way Remand.

Comment:- The analogy drawn from this case is that the National Litigation Policy can serve as a help to the assessee only after its introduction date even if there is High Court decision for allowing its retrospective application. It was held that for going against the interests of the revenue, conduct of assessee has to be examined which was not done in the High Court decision.

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PJ/Case Laws/2012-13/1376

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