Excise Act | Cross-Objection Can’t Be Heard Before Admission of Main Appeal: Calcutta High Court

The Calcutta High Court has held that a cross-objection filed under Order 41 Rule 22 of the Code of Civil Procedure (CPC) cannot be heard prior to the admission of the main appeal under Section 35G of the Central Excise Act, 1944. The Bench of Justice Rajarshi Bharadwaj and Justice Uday Kumar dismissed as premature the cross-objection filed by M/s. MSTC Limited in a service tax dispute initiated by the Commissioner of Service Tax, Kolkata. The department had filed an appeal under Section 35G challenging the order dated August 6, 2024, passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata. At the outset, a procedural issue arose when the Registry incorrectly calculated a delay of 57 days in filing the appeal by applying a 120-day limitation period. The High Court clarified on March 19, 2025, that Section 35G prescribes a 180-day limitation period. Consequently, the appeal was held to be filed within time and no condonation application survived. Subsequently, MSTC Limited sought to file a Memorandum of Cross-Objection along with an application for condonation of delay of 124 days. The delay was condoned on October 28, 2025, and the cross-objection was registered as OCOT 6 of 2025. The assessee raised a preliminary issue, contending that the cross-objection should be heard first. The company argued that despite succeeding before the Tribunal, it was aggrieved by an adverse finding that the 1% mark-up on High Sea Sales constituted a taxable service. It contended that such a finding, if allowed to attain finality, could have serious fiscal implications in subsequent assessment years. Relying on Supreme Court decisions including Hardevinder Singh v. Paramjit Singh, Mahant Dhangir v. Madan Mohan, and Venture Global Engineering v. Satyam Computer Services Ltd., MSTC asserted that Order 41 Rule 22 CPC conferred a substantive right to challenge adverse findings even when the ultimate decision was in its favour. It further argued that by virtue of Section 35G(9), the CPC provisions were applicable to appeals under the Central Excise Act. Rejecting the assessee’s plea, the Division Bench underscored the unique structure of appeals under Section 35G. The Court emphasized that such appeals are not regular first appeals but restricted statutory appeals that can be entertained only if they involve a “substantial question of law.” The Bench observed that until the Court formally admits the appeal by framing substantial questions of law, the proceedings remain at a preliminary stage. It held that a cross-objection is essentially a derivative right—an appendage to a validly admitted appeal—and can be pressed only after the main appeal crosses the threshold of admission. The Court cautioned that permitting a cross-objection to be heard prior to admission of the main appeal would effectively require adjudication on merits without first determining whether the appeal itself is maintainable. Such a course, the Bench remarked, would “put the cart before the horse” and undermine the statutory scheme. The Court further clarified that at the stage of hearing on admission, the judicial inquiry is confined solely to determining whether a substantial question of law arises. The Respondent does not have the locus standi at that stage to invite the Court into a detailed examination of merits. Holding that the main appeal had not yet been admitted, the Court dismissed the cross-objection (OCOT 6 of 2025) as premature. The Bench directed the department to be prepared with proposed substantial questions of law, particularly concerning the Tribunal’s findings on invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994. The matter has been listed for hearing on admission on February 26, 2026. Case Details Case Title: Commissioner Of Service Tax, Kolkata Vs. M/S. MSTC Limited Case No.: OCOT 6 OF 2025 Date: 11.02.2026 Counsel For Petitioner: Adv. B.P. Banerjee Counsel For Respondent: Adv. Vinay Shraff Click Here To Read Order

Excise Act | Cross-Objection Can’t Be Heard Before Admission of Main Appeal: Calcutta High Court

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