CESTAT Kolkata Rejects Revenue appeal based on the National Litigation Policy of CBIC helps to mitigate unwanted litigation

The Central Board of Indirect Taxes and Customs (CBIC) issued Instruction F. No. 390/Misc./30/2023-JC on November 2, 2023, as part of the National Litigation Policy to reduce government litigation in customs matters.

This instruction sets revised monetary thresholds for filing appeals by the department before various judicial forums.

Key Highlights of the Instruction:

Monetary Limits for Appeals:
- Supreme Court: Appeals will not be filed where the tax amount is below ₹2 Crore.
- High Courts: Appeals will not be filed where the tax amount is below ₹1 Crore.
- Customs, Excise, and Service Tax Appellate Tribunal (CESTAT): Appeals will not be filed where the tax amount is below ₹50 Lakh.

Exceptions: The instruction specifies that adverse judgments should be contested irrespective of the amount involved in cases concerning:
- Constitutional validity of provisions of an Act or Rule.
- Notifications, Instructions, Orders, or Circulars declared illegal or ultra vires.
- Classification and refund issues of legal and/or recurring nature.

This instruction aims to streamline litigation processes and focus departmental resources on significant legal matters, thereby reducing unnecessary litigation and promoting a more efficient dispute resolution mechanism.

Detailed Analysis of National Litigation Policy – Instruction/Circular F. No. 390/Misc./30/2023-JC Dated 02.11.2023 (Customs)

1. Introduction

The National Litigation Policy (NLP) was introduced by the Government of India with the objective of reducing litigation and ensuring that the government becomes a responsible and efficient litigant. In pursuance of this policy, the Central Board of Indirect Taxes and Customs (CBIC) issued Instruction/Circular F. No. 390/Misc./30/2023-JC dated 02.11.2023, specifically focusing on litigation in the Customs Department.

This instruction aims to streamline litigation management, reduce the burden on courts, and promote a structured approach for handling disputes effectively. It also emphasizes the need for rational decision-making in the filing of appeals and prioritization of significant legal matters over trivial disputes.

This analysis provides an in-depth examination of the key provisions of this Instruction and its potential benefits for tax assessees in mitigating litigation in the Customs Department.

2. Key Points of Instruction F. No. 390/Misc./30/2023-JC

The CBIC Instruction provides several directives aimed at reducing unnecessary litigation and ensuring effective dispute resolution. The key points are:

2.1. Prioritization of Litigation

The Instruction directs Customs officers to avoid unnecessary appeals in cases where the issue has been settled by higher courts or is covered under a binding precedent.
It mandates a cost-benefit analysis before filing an appeal, considering the financial impact and the probability of success.
Matters involving recurring revenue implications, legal interpretation, or constitutional issues should be given priority over routine cases.

2.2. Threshold Limits for Appeals

The Instruction reiterates the prescribed monetary limits for filing appeals before various judicial forums:
- CBIC will not file appeals in cases where the tax amount is below the monetary threshold set by the government.
- This ensures that litigation efforts are directed towards high-value disputes.

The monetary limits are subject to revision periodically, ensuring that appeals are filed in cases where significant revenue is involved.

2.3. Withdrawal of Pending Appeals

Cases pending before different courts where the issue is already settled in favor of taxpayers should be reviewed and withdrawn to avoid unnecessary litigation.
The department is advised to take a proactive stance in withdrawing cases that are against the spirit of the Supreme Court or High Court rulings.

2.4. Alternative Dispute Resolution Mechanisms (ADRM)

Encourages the use of dispute resolution mechanisms such as:
- Settlement Commission for speedy resolution of disputes.
- Advance Rulings to provide clarity to taxpayers in complex matters.
- Pre-notice consultations to resolve issues before litigation arises.

2.5. Ensuring Uniformity in Legal Interpretations

The Instruction emphasizes consistency in decisions across different field formations.
Customs officers must follow decisions of Supreme Court and High Courts and apply them consistently to avoid contradictory rulings.

2.6. Accountability of Customs Officers

The department will introduce accountability measures for officers who pursue frivolous litigation despite clear judicial precedents.
It promotes better legal training and guidance for field officers to reduce misinterpretation of legal provisions.

2.7. Use of Technology in Litigation Management

Introduction of online tracking mechanisms to monitor pending cases.
Use of data analytics to assess patterns in litigation and identify areas where disputes can be reduced.

3. How This Instruction Helps Tax Assessees in Mitigating Litigation

The Instruction aims to bring significant relief to tax assessees by reducing unnecessary litigation and ensuring a more taxpayer-friendly dispute resolution process. The following are key ways in which it benefits taxpayers:

3.1. Reduction in Unnecessary Appeals Against Assessees

The clear guidelines to Customs officers on avoiding appeals in settled matters prevent unnecessary harassment of tax assessees.
Ensuring that monetary limits are respected means small-value disputes will not be dragged into long litigation battles.

3.2. Faster Resolution of Disputes

The withdrawal of pending appeals in settled cases helps tax assessees avoid unnecessary compliance costs and prolonged litigation.
The emphasis on alternative dispute resolution mechanisms (like Settlement Commission and Advance Rulings) provides quicker solutions to disputes without reaching courts.

3.3. Clarity and Predictability in Taxation

With uniform legal interpretation across different Customs offices, tax assessees can expect consistent rulings, reducing uncertainty in compliance.
Businesses can plan better without fear of arbitrary legal interpretations by field officers.

3.4. Reduced Compliance Burden

If tax disputes are resolved at an early stage, businesses can focus on operations rather than legal battles.
Lesser litigation means lower legal costs for tax assessees.

3.5. Accountability of Customs Officers – Prevention of Harassment

The increased accountability of officers ensures that they do not initiate frivolous litigation against taxpayers.
Any misinterpretation or unwarranted tax demand that results in litigation will be scrutinized, ensuring that officers act fairly and judiciously.

3.6. Encouragement of Voluntary Compliance

A litigation-free environment encourages greater compliance by businesses, as they are assured of a fair and predictable tax regime.
Pre-notice consultations and advance rulings provide opportunities for tax assessees to address concerns proactively rather than reacting to litigation.

3.7. Use of Technology for Transparency

Digital tracking of cases ensures greater transparency in litigation management, allowing taxpayers to monitor their disputes online.
Data analytics help in identifying recurring issues, leading to better policymaking and fewer disputes.

4. Challenges in Implementation

While this Instruction is a welcome move, certain challenges remain in its implementation:

4.1. Effective Monitoring of Litigation Reduction

The success of this policy depends on strict implementation at the ground level.
There should be regular audits to ensure that unnecessary litigation is actually being avoided.

4.2. Resistance from Field Officers

Customs officials may hesitate in withdrawing pending appeals due to fear of audit objections or accountability measures.
Proper training and awareness programs are needed to change the mindset of officers.

4.3. Ensuring Consistency in Legal Interpretations

Although the Instruction calls for uniform legal application, in practice, different field formations may interpret the same ruling differently.
A central mechanism for tracking and clarifying legal interpretations is necessary.

5. Conclusion

The Instruction/Circular F. No. 390/Misc./30/2023-JC dated 02.11.2023 is a progressive step towards reducing litigation in the Customs Department. It reinforces the National Litigation Policy by promoting responsible litigation, withdrawal of unnecessary appeals, uniform legal interpretations, and alternative dispute resolution mechanisms.

For tax assessees, this instruction brings greater predictability, lower compliance costs, faster dispute resolution, and reduced harassment by tax authorities. While its successful implementation will require strong monitoring, accountability, and cooperation from Customs officers, it is a significant move towards a more efficient and business-friendly tax administration in India.

CESTAT KOLKATA Case Overview:

Tribunal: Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, Regional Bench – Court No. 2.
Applications: Customs Miscellaneous [COD] Application Nos. 77499 and 77500 of 2019 (on behalf of Appellant/Revenue)
Appeal: Customs Appeal No. 77435 of 2019
Order-in-Appeal: Nos. KOL/CUS(Port)/AA/477-487/2019 dated 04.07.2019
Applicant/Appellant: Commissioner of Customs (Port), Kolkata
Respondent: M/s. V.R. Overseas Private Limited, Kolkata

Contentions of the Parties:

Applicant/Revenue:

Filed applications for condonation of delay in filing the appeal.
Filed a stay petition which was deemed routine and dismissed by the Tribunal.

Respondent:

The issue pertains to 11 Bills of Entry.
The litigated amount for each Bill of Entry is below the threshold limit of Rs. 50,00,000/- as per the National Litigation Policy.
The total litigated amount for all 11 Bills of Entry is Rs. 13,37,264/-.
Submitted a statement supporting the claim that the total litigated amount is below the threshold limit.

Tribunal’s Findings and Order:

Condonation of Delay:

The Tribunal was satisfied with the explanation provided by the Authorized Representative of the Revenue for the delay in filing the appeal.
The delay was condoned, and the petition for condonation of delay was allowed.

2. Stay Petition:

The stay petition filed by the Revenue was found to be routine and did not require interference.
The stay petition was dismissed.

3. Litigated Amount:

The Tribunal reviewed the case records and confirmed the respondent’s claim that the total litigated amount is Rs. 13,37,264/-.
This amount is below the threshold limit of Rs. 50,00,000/- as prescribed under the National Litigation Policy (Instruction/Circular F. No. 390/Misc./30/2023-JC dated 02.11.2023).

4. Final Order:

Based on the findings, the Tribunal dismissed the appeal filed by the Revenue under the National Litigation Policy.

Conclusion:

a. The appeal filed by the Revenue was dismissed due to the litigated amount being below the threshold limit set by the National Litigation Policy.

b. The Tribunal condoned the delay in filing the appeal but dismissed the stay petition as routine and unnecessary.

This synopsis provides a detailed overview of the above case, the contentions of the parties involved, and the final order given by the CESTAT Kolkata.

Source: CBIC & CESTAT Kolkata

Download the CESTAT Kolkata Order Below:

CESTAT OrderDownload

CBIC Instruction Nov-2023

CBIC Litigation PolicyDownload

This Article is Authored by: Mr. Ravi Shekhar Jha, BALLB/Mob: +91-9999005379 & his email id is intelconsul@gmail.com

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