Facts of the Case

This is not a GST case — it concerns the pre-GST Central Excise regime and is being covered here purely for informational completeness. The Commissioner of Customs, Central Excise and Service Tax, Hyderabad-IV (now the Commissioner of Central Tax, Central Excise & Service Tax, Medchal GST Commissionerate) filed an appeal under Section 35-H of the Central Excise Act, 1944, read with the transitional provisions under Section 142 of the CGST Act, against an order of the CESTAT, Hyderabad, dated 28.10.2019, in favour of the assessee, M/s Lokesh Machines Limited. The dispute traced back to an Order-in-Original dated 28.02.2013 concerning alleged short-payment of excise duty and the applicability of Rule 8(3A) of the Central Excise Rules, 2002, which required duty to be paid consignment-wise in cash if there was a default in monthly payment. The appeal was decided by the High Court on 06.11.2023.

Issues Involved

  1. Whether the CESTAT erred in holding that Rule 8(3A) of the Central Excise Rules, 2002 could not be invoked against the assessee.
  2. Whether the matter should be remanded for verification of the department's earlier, subsequently withdrawn, rectification application regarding excess excise duty paid by the assessee.

Petitioner's Arguments

  • The Department argued that the CESTAT's finding was in contravention of Rule 8(3A) of the Central Excise Rules, 2002.
  • It also sought remand for verification of an application for rectification of mistake concerning excess excise duty paid by the assessee, which the Department had itself withdrawn on 26.06.2020 in light of the present appeal.

Respondent's Arguments

  • The order does not record separate arguments advanced on behalf of the assessee-respondent beyond relying on the binding precedent that Rule 8(3A) had already been struck down as unconstitutional.

Court Order / Findings

  • The Court noted that in a connected case (C.E.A. No. 17 of 2020, decided 12.09.2023) it had already dismissed a similar Departmental appeal on identical facts, following the High Courts of Gujarat, Punjab & Haryana, Madras, and Bombay, all of which had held Rule 8(3A) of the Central Excise Rules, 2002 to be ultra vires and unconstitutional.
  • Following that view, the Department's ground on Rule 8(3A) was rejected and the appeal failed on that count.
  • On the remand prayer, the Court held that since the Department had itself withdrawn its rectification application, no merit survived in seeking a remand on that ground, though it reserved the Department's right to revive that application before the appropriate authority if it wished.
  • The appeal was rejected, with no order as to costs; pending miscellaneous applications were closed.

Important Clarification

Because this dispute is governed entirely by the pre-GST Central Excise law and turns on a rule (Rule 8(3A)) already declared unconstitutional by multiple High Courts, it has no application to present-day GST compliance. The only point of overlap is procedural — the appeal itself was filed with reference to Section 142 of the CGST Act (a transitional provision), but the substance of the dispute is excise, not GST.

Sections Involved

  • Central Excise Act, 1944 — Section 35-H (appeal to High Court).
  • Central Excise Rules, 2002 — Rule 8(3A), held ultra vires.
  • Central Goods and Services Tax Act, 2017 — Section 142, the transitional provision under which the appeal was technically routed.

Decision – In Favour of

Decided in favour of the Respondent-assessee, M/s Lokesh Machines Limited; the Department's excise appeal was dismissed on merits, though the finding is one of pre-GST excise law, not GST.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Central Excise Appeal No. 16 of 2020
Coram: Justice P. Sam Koshy and Justice N. Tukaramji
Date of Judgment: 06.11.2023

Link to Download the Order

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