CBIC approves withdrawal of pending litigations along with imposing monetary limit for classification & refund issues

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In an attempt to reduce the number of litigations, the Central Board of Indirect Taxes and Customs(“CBIC”) vide Instruction F No 390/Misc./116/2017-JC dated April 4, 2018, decided to curb the litigation on classification and refund issues which are of legal and/or recurring nature and has approved to extend withdrawal of cases pending in the CESTAT/ High Court as well as Departmental cases with the Commissioner (Appeals) wherein the Supreme Court has already decided on an identical matter and the decision has been accepted by the department.

This exercise has been undertaken as an endeavour to reduce litigations so that cases on similar questions of law or identical case on facts pending in the field can be expeditiously decided.

Deletion of sub clause ‘c’ of para 3 of the Instruction dated August 17, 2011, introduced vide Instruction dated December 17, 2015:

In exercise of the powers conferred by Section 35R of the Central Excise Act, 1944 made applicable to Service Tax vide Section 83 of the Finance Act, 1994 and Section 131BA of the Customs Act, 1962 and in partial modification of earlier Instruction dated December 17, 2015 from F No 390/Misc/163/2010-JC, the CBIC has decided to omit para 2 thereunder. This para introduced a sub clause ‘c’ in the instruction dated August 17, 2011 from F No 390/Misc/163/2010-JC that was an exclusion clause that operated as an exception to the general monetary limits instruction. By this exception, adverse judgements pertaining to “classification and refunds issues which are of legal and/or recurring nature”, were to be contested irrespective of the amount involved. This sub clause ‘c’ stands withdrawn with effect from the date of this instruction.

Withdrawal of Departmental cases from Commissioner (Appeals) on the basis of decision of the Supreme Court upon an identical matter

As per Instruction dated December 18, 2015, from F No 390/Misc/67/2014-JC, field formations had been directed to withdraw cases pending in High Court/CESTAT, where the Supreme Court has decided on an identical matter and the decision has been accepted by the Department. This was only in respect of High Court and CESTAT cases. The CBIC has decided to extend this decision to Departmental cases with the Commissioner (Appeals) as well.

Other conditions

Para 1 above, is applicable to legacy matters only. Both paras 1&2 would be applicable to pending matters as well. Except for above mentioned changes, all other terms and conditions of concerned earlier instructions shall continue.

Our Comments:

The economic survey which was recently released in January 2018 said that there were approximately 1.45 Lakh indirect tax cases under consideration by the Appellate Tribunals, High Courts and Supreme Courts. This was increasing the work load of the judiciary and resulting in pendency of cases. This in fact was taking a great toll on the economy in terms of stalled projects, mounting legal costs, contested tax revenues and low investments.

The effort of the CBIC through this instruction is a welcome step. Earlier there was a limit set vide instruction F No 390/Misc/163/2010-JC, where the monetary limit was given for filing appeals by the department before CESTAT/High Court, but classification and refund issues which are of recurring nature were kept out of the purview of the monetary limitation vide sub clause ‘c’ in the instruction dated August 17, 2011 from F No 390/Misc/163/2010-JC. That was an exclusion clause that operated as an exception to the general monetary limits instruction.

Vide the stated instructions, this clause has been deleted to reduce litigation on issue of the classification and refund matters. Secondly, the CBIC has also instructed to withdraw Departmental Appeals where a case has been disposed off by the Supreme Court and the judgement has been accepted by the Tax Department in the similar matter. Earlier only CESTAT/High Courts were given this power but now the Commissioner (Appeals) have also been extended this power of withdrawal.

Hopefully, these steps may reduce litigation in Central Excise and Service Tax and the burden of the judiciary will be lifted off, so that the judiciary can expeditiously dispose off the pending cases.

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