HC Ruling Stayed by SC cannot be used as a Precedent to allow Appeal: Calcutta HC sets aside CESTAT's Order [Read Order]

The Calcutta High Court in a recent case held that High Court Rulings stayed by the Supreme Court cannot be used as a precedent to base decisions as long as the Supreme Court hasn’t delivered its final verdict on the matter.

The case began with an appeal by M/s Rustech Products Private Limited, the assessee before the Customs,Central Excise, and Service Tax Appellate Tribunal (CESTAT), East Zonal Bench, Kolkata.

The appeal was against an order passed by the Commissioner of CGST and Cx, Howrah Commissionerate,  involving the interpretation of Rule 8(3A) under the Central Excise Rules, 2002.

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Section 8(3A) in Central Excise Rules, 2002 gives that:

If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.

On 13th October 2023, CESTAT allowed the appeal by the assessee, relying heavily on a previous ruling by the Gujarat High Court in Indsur Global Ltd. vs. Union of India [2014 (310) E.L.T. 833 (Guj.)], who had interpreted Rule 8(3A) of the Central Excise Rules, 2002, in favor of the assessee.

Later on, the decision in Indsur Global Ltd. was challenged by the Union of India in the Supreme Court through a Special Leave to Appeal (SLP)

On 24th September 2015, the Supreme Court granted a stay on the Gujarat High Court’s judgment. This stay meant that the judgment by the Gujarat High Court could not be used as a precedent until the Supreme Court delivered its final verdict on the matter.

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Consequently, the Revenue (Commissioner of CGST and Cx, Howrah Commissionerate) filed an appeal under section 130 of the Customs Act, 1962 against the CESTAT’s decision on the grounds that the tribunal erred in following a precedent that was stayed by the Supreme Court.

After examining the contents of the case, the bench of Justice TS Sivagnanam and Justice Hiranmay Bhattacharya observed that when similar appeal came up before the Court on earlier occasion, the Court set aside the order of the Tribunal and remanded the matter back to be kept pending, and only to be taken up for decision after the judgment is rendered by the Supreme Court.

The bench further directed to refer to the order in the case of Commissioner of Central Excise, Bolpur Vs.

M/s. KIC Metaliks Ltd., in CEXA/20/2023 dated 24th May, 2024.

In light of the above observations, the appeal filed by the department  was allowed, remanding the matter back to the tribunal and directing that the same be judged after a verdict is delivered in the SLP.

To Read the full text of the Order CLICK HERE

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