‘Comedy of Errors’: Delhi HC Slams CESTAT for Issuing Contradictory Orders in Appeal Barred by Monetary Limits [Read Order]

In a recent decision, the Delhi High Court criticized the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) for passing several contradictory calling it “comedy of errors” and pointed out that the Department’s appeal should not have been entertained at all because it involved a small amount much below the official limit for filing such appeals.

The issue began back in 2011 when Jai Durga, the petitioner imported semi-finished coaxial cables. Customs officers claimed that the company had under-reported the value of the goods to pay less duty and seized the goods. Later, they were released on the condition that the petitioner would provide a bank guarantee. The Department then issued a show cause notice and demanded around Rs. 29.66 lakhs in customs duty, along with a fine of Rs. 20 lakhs.

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The company challenged this before the Commissioner (Appeals) who ruled in their favor in 2014. The Commissioner said the Department had not given proper evidence to prove the undervaluation. The Department then filed an appeal with CESTAT to challenge this decision.

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But things got confusing. In 2016, CESTAT dismissed the appeal not because of any legal issue but just because Jai Durga (not the appellant in that hearing) did not appear. Then in 2017, the case was restored for hearing. In 2018, CESTAT reviewed the matter and stated that the Commissioner’s order was not correct, yet again dismissed the appeal instead of allowing it which created a contradiction in the order.

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To fix this, CESTAT passed another order in 2019, saying it would re-hear the case properly. Instead of hearing the case again, the CESTAT just changed a paragraph in its old order to say that the Department’s appeal was allowed. When the company asked the tribunal to recall this confusing order, CESTAT refused, saying it wasn’t a big mistake and didn’t justify recalling the order.

When the case came before the High Court, the bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta, described the entire sequence of proceedings as a "comedy of errors" and held that CESTAT’s handling of the matter was procedurally unsustainable.

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Most importantly, the court pointed out that as per a government instruction issued by the Central Board of Indirect Taxes and Customs (CBIC) in November 2023, the Department should not even file appeals in the CESTAT if the total amount involved is less than Rs. 50 lakhs because this case involved around Rs. 29.66 lakhs in duty and Rs. 20 lakhs in fine, it was under the limit.

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The Court stated that continuing the case would serve no useful purpose and the Department’s own rules didn’t support the appeal. So, the matter should be closed. The court invoked Article 227 of the Indian Constitution to dismiss the Department’s appeal once and for all. The Court also ordered that the bank guarantee, which Jai Durga had provided more than 14 years ago, should be returned within eight weeks.

To Read the full text of the Order CLICK HERE

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