Low tax effect

Section 131BA of the Customs Act, 1962 provides that the Board may, from time to time, issue orders or instructions or directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of appeal, application, revision or reference by the Principal Commissioner of Customs or Commissioner of Customs under the provisions of this Chapter.

The CBIC issued instructions on 02.11.2023 to reduce the Government setting monetary limits for filing appeals before CESTAT, High Court and Supreme Court.  This instruction has been issued in partial modification of its earlier instructions dated 17.11.2011.  In this instruction the CBIC fixed the following monetary limits below which appeal shall not be filed in the CESTAT, High Court and the Supreme Court-

• CESTAT – monetary limit Rs.50 lakhs;
• High Court – monetary limit Rs.1 crore; and
• Supreme Court – monetary limit Rs.3 crore.

In the following case, irrespective of the monetary limit, appeal shall be filed by the Department-

• Where the Constitutional validity of the provisions of the Act or Rules is under challenge;
• Where the Notification/Instruction/Order has been held illegal or ultra vires;
• Classification and refund issues which are legal and/or recurring nature.

This low tax effect has been followed strictly by appellate authorities including Supreme Court.

Case laws

In COMMISSIONER OF CUSTOMS (IMPORT) VERSUS M/S ATLAS MERCANTILE PVT. LTD. - 2023 (11) TMI 1178 - SC ORDER, the CESTAT held that the initial report by the Textile Committee favoring the assessee and indicated lower rate of duty could not be brushed aside as Committee was a specialized agency.  The said report was preferred over subsequent report of New Customs House Laboratory.  The Revenue filed appeal challenging the order of CESTAT.  The Supreme Court dismissed the appeal filed by the Revenue holding that at the relevant time monetary limit for filing appeal had been raised to Rs.2 crore.  In the instant case the tax effect was only Rs.75 lakhs.  The Supreme Court further directed that the question of law was to be kept open to be agitated vis-à-vis assessee in respect of any subsequent assessment year.

In DEPUTY COMMISSIONER OF CUSTOMS (PREVENTIVE) & ANR. VERSUS BRIJEESH MOHAMMED AND ORS. ETC. - 2023 (12) TMI 799 - SC ORDER, the question raised in the appeal before the Supreme Court was as to whether recovery of Government dues could be made from property of defaulter’s wife and children.  The High Court, in the impugned order, held that recovery of Government dues from defaulter’s wife and children was not sustainable without issuing any notice to them.  The Revenue filed appeal challenging the order of High Court, before Supreme Court.  The Supreme Court that the appeal filed by the Revenue cannot survive for consideration on account of low tax effect.

In COMMISSIONER OF CUSTOMS, CHENNAI VERSUS M/S GODAVARI DRUGS LTD. - 2023 (11) TMI 579 - SC ORDER, the issue involved in this case is on duty free impower of Sodium Metal for export of sulphamethaxol.  The CESTAT set aside the demand of duty and confiscation of import goods by holding that since import licence did not make any correlation between value/quantity of goods imported duty free and value/quantity of goods to be utilized as inputs in manufacture of export goods, the Revenue could not sit in judgment on quantity used in export goods.  The High Court upheld the orders of CESTAT.  The Revenue filed appeal before the Supreme Court challenging the order of High Court.  The Supreme Court dismissed the appeal filed by the Revenue on account of low tax effect.

In COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY, PONDICHERRY VERSUS M/S. M.R.F. LTD. THROUGH MANAGING DIRECTOR, ERIPAKKM VILLAGE, PONDICHERRY - 2023 (12) TMI 781 - SC ORDER, the CESTAT, in the impugned order upheld the computations done by the assessee for claiming deduction from assessable value in respect of turnover discount and sales tax and surcharge thereon.  It was also held that for value of captive consumed goods, CAS 4 was applicable even prior to 13.03.2003.  The Revenue filed appeal before the Supreme Court.  The Revenue submitted that appeal could be disposed off in view of low tax effect with regard to Notification dated 08.08.2019 was taken on record.  The Supreme Court, accordingly, held that the appeal did not survive for consideration and was to be dismissed.

In C.C.E., KOLKATA III VERSUS M/S. KALYANI SPINNING MILLS LTD. - 2023 (11) TMI 680 - SC ORDER, the Revenue challenged the order of CESTAT in which CESTAT held that cotton yarn in cross reel hanks was not leviable to Additional Duty of excise, since basis duty on it was NIL.  The Revenue filed appeal against CESTAT order.  The assessee placed on records low tax effect.  The Supreme Court dismissed the appeal since the amount involved in appeal was less than the prescribed limit of Rs.2 crore.

In COMMISSIONER OF CUSTOMS VERSUS M/S. LAVEENA COMBERS - 2023 (11) TMI 272 - SC ORDER the question was raised as to whether for the purpose of classification, imported goods would be treated as acrylic fibre or acrylic soft waste.  The CESTAT had upheld the orders of first appellate authority holding imported goods as acrylic soft was and not acrylic fibre and the same were to be classified accordingly.  The Revenue filed appeal against this before the Supreme Court.  The Supreme Court held that the appeal could not be considered in view of the low tax effect and dismissed the appeal.

In PRINCIPAL COMMISSIONER OF CUSTOMS VERSUS CMR NIKKEI INDIA PVT. LTD. - 2024 (1) TMI 291 - SC ORDER the Revenue filed appeal against the order of First Appellate Authority.  The CESTAT dismissed the appeal filed by the revenue on the ground of low tax effect.  However, the Revenue filed appeal against the order of CESTAT before the Supreme Court.  The Supreme Court held that in view of CBI&C’s instructions dated 02.11.2023 the Revenue’s appeal was to be dismissed on account of low tax effect.