Facts of the Case

The present appeal was filed by the Commissioner of CGST Delhi South challenging the order dated 24.11.2022 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which allowed the respondent’s appeal and granted refund under Section 142(3) read with Sections 54 and 49(6) of the CGST Act.

The respondent raised a preliminary objection regarding maintainability of the appeal on the ground of low tax effect, stating that the refund amount involved was ₹30,48,272.47, which is significantly below the prescribed monetary limit of ₹1 crore for filing appeals before the High Court.

Issues Involved

  1. Whether the appeal filed by the department is maintainable despite being below the prescribed monetary limit.
  2. Whether the case falls under exceptions permitting appeal irrespective of low tax effect.
  3. Whether the Tribunal erred in granting refund under Section 142(3) of the CGST Act. 

Petitioner’s Arguments

  • The department contended that the Tribunal erred in not applying the second proviso to Section 142(3) of the CGST Act.
  • It was argued that the issue involved a substantial question of law, thereby justifying the filing of the appeal despite low tax effect.
  • The department sought to bring the case within exceptions provided under CBIC instructions.

Respondent’s Arguments

  • The respondent argued that the appeal is not maintainable due to low tax effect.
  • Reliance was placed on CBIC instructions dated 22.08.2019, which prescribe a monetary limit of ₹1 crore for filing appeals before High Courts.
  • It was emphasized that the case does not fall under any exception such as:
    • Constitutional validity challenge, or
    • Declaration of any notification/circular as ultra vires.

Court’s Findings / Order

  • The Court observed that:
    • The tax effect involved is below ₹1 crore, making the appeal hit by CBIC monetary limit instructions.
    • The exceptions under Para 1.3 of Instruction dated 17.08.2011 are not applicable, as:
      • No constitutional validity issue is involved.
      • No notification/circular has been declared illegal or ultra vires.
  • The Tribunal had granted refund based on peculiar facts of the case, and not on any broader legal principle.
  • Accordingly, the Court held:

The appeal is barred due to low tax effect and is therefore dismissed.

  • The Court clarified that the question of law is left open. 

Important Clarification

  • Even if a substantial question of law exists, the monetary threshold prescribed by CBIC instructions must be respected, unless the case falls within specified exceptions.
  • The dismissal of appeal on the ground of low tax effect does not amount to affirmation of the legal issue on merits.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/SAS13022024CEAC92023_122110.pdf

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