Limitation Not “Extinguishing Engine' For Substantive Rights: Calcutta High Court Condones 2262 Day Delay In Filing Appeal

The bench condoned the delay of 2262 days in filing the CESTAT appeal, holding that the assessee's bona fide pursuit of settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) was a valid ground and that condonation of delay could not be denied on such a basis.

Justices Rajarshi Bharadwaj and Uday Kumar emphasised that the law of limitation is not meant to be an "extinguishing engine" for substantive rights. Once it is shown that the subsequent delay was rooted in a bona fide pursuit of a settlement scheme, a slightly broader view must be taken of the preceding period.

In the case at hand, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) had refused to condone a delay of 2262 days in filing the statutory appeal against the order-in-original, resulting in a summary dismissal of the Assessee's plea upon the characterisation of their inaction as “total negligence”.

The statutory limitation for filing the appeal expired on 10.04.2018; however, the appeal was eventually preferred only on 28.03.2024.

The assessee's primary explanation for this delay was their participation in the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS).

The assessee contended that, having applied for the scheme in December 2019, they were under a bona fide belief that the dispute would be settled. It was only in late 2023 that they allegedly realised their application had been rejected on the portal.

The Tribunal dismissed the application on the ground that the period between the expiry of the limitation (April 2018) and the filing of the SVLDRS application (December 2019) remained unaccounted for.

The Tribunal held that the rejection status was available on a public web portal as of 20.01.2020; hence, the plea of ignorance was deemed unsustainable in the eyes of the law.

The revenue argued that the failure to verify the publicly accessible online status for nearly four years evinced a profound lack of diligence, justifying the finding of “total negligence” under the rigours of Section 5 of the Limitation Act, 1963.

The issue before the bench was whether the Tribunal was justified in adopting a hyper-technical approach by refusing to condone the delay, thereby extinguishing the assessee's right to challenge a significant financial penalty on merits, especially when the delay was attributed to the pursuit of a State-sponsored Amnesty Scheme.

The bench opined that in matters of taxation, the State should not be seen as a litigant interested in benefiting from the procedural lapses of its citizens. The SVLDRS, 2019, was a beneficial, State-sponsored mechanism intended to clear the backlog of “legacy” disputes. Even if the assessee's application was ultimately found to be ineligible—being a co-noticee—the act of applying for such a scheme is a clear manifestation of an intent to resolve the liability. It cannot be termed as a "dilatory tactic" or mala fide conduct.

The bench stated that the Order-in-Original imposes a penalty of Rs. 10,23,864/-. To deny a citizen the right to test the legality of such a penalty on the grounds of a non-deliberate delay would be unconscionable. Law is not meant to be an extinguish any substantive rights. Justice should not be a casualty of procedural rigidity.

In view of the above, the bench allowed the appeal and condoned the delay of 2262 days in filing the appeal before the CESTAT, subject to the assessee paying a cost of Rs. 10,000/- to the Revenue.

Case Title: Shree Shyam Steel Co. v. Commissioner of Central Tax, CGST and Central Excise

Case Number: CEXA 60 OF 2024

Counsel for Appellant/Assessee: N.K. Chowdhury, Nilotpal Chowdhury, Prabir Bera

Counsel for Respondent/Department: Vipul Kundalia, Anurag Roy, Dhirodatta Chaudhuri

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