High Court Jurisdiction is Excluded Under Section 35G for Disputes Relating to Exemption Notifications

The Revenue filed several tax appeals against the respondent, Reliance Industries Ltd., challenging orders passed by the Customs, Excise and Service Tax Appellate Tribunal (Tribunal).

The dispute concerned the availability of Cenvat credit on fuel (Gas Turbine Fuel) used to generate electricity, which was subsequently used for both manufacturing (dutiable) and non-manufacturing/exempted activities.

The Tribunal had remanded the matter for quantification or held the issue to be revenue neutral.

During the hearing before the High Court, a preliminary objection was raised regarding the maintainability of these appeals under Section 35G of the Central Excise Act, 1944.

1. Whether the High Court has jurisdiction under Section 35G of the Central Excise Act, 1944, to entertain appeals where the dispute pertains to an exemption notification and the rate of duty.

2. Whether the appropriate forum for such appeals is the Supreme Court of India under Section 35L of the Central Excise Act, 1944.

Section 35G excludes High Court jurisdiction for appeals "relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment".

The Court relied on the precedent Commissioner of CE and CGST, Bhavnagar v. Krishna Construction [2024] 125 GSTR 240 (Gujarat), and the Punjab and Haryana High Court decision in Commissioner of Central Excise, Panchkula v. Special Machine [2009] 242 E.L.T. 330, which established that disputes involving exemption notifications are directly related to the "rate of duty".

The Court analyzed the nature of the dispute, noting that the core controversy involved the applicability of Rule 6(2) of the Cenvat Credit Rules, 2004, and the impact of exemption notifications on the duty liability of fuel used captively.

Applying the statutory framework, the Court reasoned that since the dispute pertains to whether the assessee is covered by an exemption—an issue "directly and proximately" related to the rate of duty—Section 35G of the Act expressly bars the High Court from entertaining the appeal.

Consequently, the Court found that the legal questions raised regarding Cenvat credit and duty quantification in the context of exempted products fall within the exclusive appellate jurisdiction of the Supreme Court under Section 35L.

The Court concluded that the Revenue’s remedy lies in filing appeals before the Hon’ble Supreme Court under Section 35L of the Act.

Accordingly, the Court disposed of the appeals and directed the Registry to return the appeals to the appellant for presentation before the competent Court.