Before staying CESTAT order High Court should have framed substantial questions of law – SC

Before staying CESTAT order the High Court should have framed the substantial questions of law and thereafter could have passed the stay order.

In a recent judgment, Hon’ble Supreme Court has held that before staying order of CESTAT the correct course to be followed by the High Court was to look into the substantial questions of law, convince itself, frame the same and thereafter could have passed the impugned order.

ABCAUS Case Law Citation:
4853 (2025) (11) abcaus.in SC

The Petitioner company had filed its claims for refund before the Central Excise Authorities. It’s claim was rejected without issuance of Show Cause Notice and finally, the refund claims were sanctioned after the Order of the Hon’ble High Court.

However, the Petitioner had to approach the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which directed refund sanctioning authority to pay the interest on the refund sanctioned to the assessee.

The Excise Authorities challenged order passed by the CESTAT before the High Court under Section 35-G of the Central Excise Act, 1944.

When the matter came up for hearing before the High Court a preliminary objection was raised on behalf of the petitioner as regards the very maintainability of the appeal on the ground that in the absence of the appeal being admitted on any substantial question of law, the impugned order could not have been passed. The Hon’ble High Court grated stayed CESTAT order.

Before the Hon’ble Supreme Court the Petitioner stated that without formulating the substantial questions of law the High Court had stayed the operation, implementation and execution of the directions issued by the CESTAT insofar as the refund was concerned which had caused grave prejudice to the petitioner.

On the other hand the Revenue contended that the High Court was yet to look into the substantial questions of law and after further hearing may admit the appeal on the questions of law as suggested by the Revenue or the High Court may dismiss the appeal on the ground that no questions of law arise for the purpose of entertaining an appeal under Section 35-G of the 1944 Act.

The Hon’ble Supreme Court opined that the correct course that the High Court should have followed was to look into the substantial questions of law, convince itself, frame the same and thereafter could have passed the impugned order.

The Hon’ble Supreme Court directed that the High Court shall take up the appeal filed by the revenue and look into the substantial questions of law as suggested by the Revenue. If the High Court finds any merit and admits the appeal and grants relief it shall be open for the petitioner to take future course of action in accordance with law.  If the High Court does not find any merit in the suggested substantial questions of law and dismisses the appeal, the entire issue would come to an end.

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