Gujarat High Court Upholds CESTAT's Order Rejecting Plea To Restore Delay Condonation Application Filed After 7 Yrs

The Gujarat High Court upheld an order of the Customs, Central Excise and Service Tax Appellate Tribunal which had dismissed a cooperative society's plea seeking restoration of its condonation of delay application on the ground that it was filed after an inordinate delay of 7 years.

The court noted that the petitioner had not provided any explanation for such delay except that it was facing a financial constraint and thus could not track the proceedings before the tribunal, observing that the same was an "excuse" with no other plausible explanation being given to explain the delay.

The petitioner had challenged an order by the Customs, Central Excise and Service Tax Appellate Tribunal which had dismissed the petitioner's application for restoration of its delay condonation plea filed in an appeal, on the ground that it was filed after a gap of seven years.

The petitioner is a Co-operative Society registered under the Gujarat Co-operative Societies Act, engaged in the manufacturing of sugar and molasses. The petitioner was availing the facility of CENVAT credit on inputs/capital goods/input services under the provisions of the CENVAT Credit Rules, 2004.

The petitioner contended that it was facing a financial crisis for a long time and had become a sick society. Thereafter, the State Government came out with a revival plan for the sick co-operative sugar mills.

The petitioner continued its business. However, in 2013, the Assessing Officer, while examining the monthly returns of excisable goods and availing of CENVAT credit for the period from May 2013 to August 2014, observed that the petitioner had shown duty payable on levy/non-levy sugar amounting to Rs.73,43,319 including sugar cess, education cess and health cess, and on molasses amounting to Rs.38,80,352.

The Assessing Officer opined that the petitioner had not paid the duties either through the Account Current (PLA) or through the CENVAT Credit Account. A show cause notice dated 10.12.2014 was served upon the petitioner calling upon it to pay the Central Excise duty of Rs.1,12,23,672 along with penalty at the rate of one per cent per month for the period from 11.07.2014 onwards.

Thereafter, the respondent no. 2 passed an Order-in-Original dated 23.07.2015, which was received on 19.08.2015, whereby the entire demand raised in the show cause notice stood confirmed. The petitioner did not appear for personal hearing. It thereafter informed respondent no.2 about the payment of Rs.10,00,000 through PLA and Rs.32,32,980 through the CENVAT Credit Account. However, Rs.8,41,780 was paid as pre-deposit for filing an appeal before the CESTAT.

The petitioner also sought seven (7) equal monthly instalments to deposit the remaining duty amount out of its earnings. It appeared that during the intervening period, proceedings by the Provident Fund Commissioner were also undertaken and an amount of Rs.25,28,000 was released from the Bank of India. Accordingly, pursuant to the request of the petitioner, the office of the respondent no. 3 allowed the payment of Government dues of Rs. 69,90,692 in seven (7) equal monthly instalments of Rs. 10,00,000/-.

Thereafter, the petitioner filed an appeal before the CESTAT challenging the Order-in-Original dated 23.07.2015 along with an application for condonation of delay of 98 days on 26.02.2016, contending that the factory was under closure from 22.02.2014 to 21.11.2015 due to acute financial crisis.

The CESTAT in its 19.08.2017 order directed the petitioner to file an affidavit in support of the reasons for the inordinate delay of 98 days in filing the appeal. It appears that since no explanation was tendered, the CESTAT, by an order dated 19.09.2017, dismissed the application for condonation of delay due to failure to file the affidavit and, consequently, the appeal was also dismissed.

The petitioner contended that it remained closed from 2016-2017 to 2020-2021 due to financial crisis and hence the order passed by the CESTAT could not be attended to for further course of action.

Thereafter the petitioner filed an application for restoration of the application for condonation of delay on 01.10.2024 and explained the reasons for delay that it was closed due to financial crisis. The CESTAT rejected the same on the ground that the application for restoration was filed after a long gap of seven years from the 2017 order, without any convincing explanation.

A division bench of Justice AS Supehia and Justice Pranav Trivedi said:

"The afore-noted facts about delay in filing the Excise Miscellaneous Application (ROA) No. 11193 of 2024 in Excise Appeal No.10587 of 2016 after a period of more than seven (7) years are not in dispute. The petitioner – Mandali had preferred an appeal being Excise Appeal No. 10587 of 2016 challenging the Order-in-Original dated 23.07.2015, in which there was a delay of 98 days. The CESTAT gave an opportunity to tender an explanation for the delay in filing the appeal, which was not done, and hence, vide order dated 19.09.2017, the said appeal came to be dismissed. The petitioner – Mandali thereafter went into slumber and did not do anything and all of a sudden, after a period of seven (7) years, an application for restoration being Excise Miscellaneous Application (ROA) No. 11193 of 2024 was filed before the CESTAT and the only explanation put forward before the CESTAT was that the Mandali was financially struggling and was closed down and hence could not keep track of its proceedings before the CESTAT".

The bench noted that the petitioner was represented by an advocate in all the proceedings; however, neither the advocate nor the petitioner was "vigilant enough to pursue the proceedings" of the appeal before CESTAT in which there was a delay of 98 days.

"Thus, Excise Appeal No. 10587 of 2016 was belatedly filed having a delay of 98 days and, when the CESTAT directed the petitioner – Mandali to file an appropriate response explaining the delay, nothing was done. Hence, the CESTAT was constrained to dismiss the appeal vide order dated 19.09.2017. The order dated 19.09.2017 reflects that no one remained present on behalf of the petitioner despite extending an opportunity to the petitioner for filing an affidavit. Thus, the petitioner – Mandali was negligent on four counts, firstly, in filing the appeal belatedly by 98 days; secondly, in not explaining the delay of 98 days despite the directions of the CESTAT; thirdly, in not remaining present in the proceedings; and fourthly, in filing the restoration application after a gap of seven (7) years," the bench added

The bench said that it cannot find any convincing reason to interfere with the CESTAT's order, in view of the fact that the petitioner has been negligent in pursuing the legal remedy before the CESTAT.

"We are not convinced that merely because the petitioner – Mandali was closed down, it lost track of the proceedings which it had filed challenging the Order-in-Original dated 23.07.2015," it added.

The bench noted that Supreme Court has cautioned that care must be taken to distinguish an explanation from an excuse, since an excuse is often offered by a person to deny responsibility and consequences when under attack, and each case for condonation of delay based on existence or absence of sufficient cause has to be decided on its own facts.

"The only “excuse” which the petitioner has tendered for the delay is financial constraint. No other plausible explanation for delay is forthcoming from the petitioner," the court added.

The plea was dismissed.

Case title: SHREE UKAI PRADESH SAHAKARI KHAND UDYOG MANDALI LTD v/s UNION OF INDIA & ORS.

R/SPECIAL CIVIL APPLICATION NO.15499 of 2025

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