Madras High Court Quashes CESTAT Chennai Order For Deciding Issues Not Under Appeal

The Madras High Court has pulled up the Customs, Excise and Service Tax Appellate Tribunal, Chennai for overstepping its mandate, quashing its order and holding that the Tribunal cannot decide issues that were never appealed before it.

A Bench of Justices Anita Sumanth and K. Govindarajan Thilakavadi said that although Section 129-B of the Customs Act, 1962 confers wide powers on the Customs, Excise and Service Tax Appellate Tribunal, those powers are not unbridled.

"It is true that Section 129-B which deals with 'Orders of Appellate Tribunal' vests in the tribunal, wide powers. The section says that the appellate tribunal may, after giving the parties a personal hearing, pass such orders thereon 'as it thinks fit'. However, the width of the powers that enure to the tribunal can relate only to those grounds of appeals laid by the party before it," opined the bench.

In the case at hand, the appellant imported a consignment of organic chemicals/drugs through the Chennai Air Cargo Complex. The goods were seized on the ground that they did not have a valid import licence and were subsequently confiscated by the Commissioner of Customs under Section 111(d) of the Customs Act, 1962, read with provisions of the Drugs and Cosmetics Act, 1940 and Rules, 1945.

The Commissioner, however, permitted the company to redeem and re-export goods if a redemption fine of Rs. 7 Lakhs is paid. Unhappy, the appellant moved the CESTAT challenging the confiscation, penalties and interest.

The tribunal took a much harsher stance than the original authority. It made "scathing remarks," accusing the appellant of being part of an organized smuggling racket and committing fraud against the nation. Consequently, the tribunal set aside the permission for re-export and ordered the absolute confiscation of the goods, meaning the company lost the right to send them back to the supplier, even if they paid the fine, prompting the appeal before the High Court.

The High Court observed that when the Department had consciously chosen not to challenge the direction relating to redemption on payment of fine, the direction given by the Commissioner had attained finality at that stage.

Therefore, the bench concluded that CESTAT went beyond the scope of the appeal by ordering absolute confiscation and allowed the appeal.