2025 (5) TMI 1937 - AT - Customs

Classification of the goods Martech DHA - Non-determination of classification - HELD THAT - As per the judgment of the Apex Court delivered in the case of Union of India Vs Kamalakshi Finance Corporation 1991 (9) TMI 72 - SUPREME COURT there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal as the case may be even where he may have some reservations on its correctness. He has to follow the order of the higher Appellate Authority. In this case there was no reservations on the correctness of the Tribunals Order as Revenue had communicated the acceptance of the said CESTAT order to the appellant and no appeal has been shown to have been filed against our order before the Hon ble Supreme Court by either of the parties. The issue of classification of Martech DHA on identical set of facts has hence become final. The appellant cannot be made to face the same kind of litigation twice over the same set of facts because such a process would be contrary to considerations of fair play and justice. Principles of constructive res judicata would hence apply. Once the Ld. Commissioner in his order has gone by the order of the Tribunal which has become final with no appeal being filed against it a discussion on the relevancy of judgments cited therein becomes redundant. Thus we dismiss the appeal filed by the Revenue with consequential relief if any as per law. The appeal is disposed of accordingly.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this judgment are:

(a) Whether the Adjudicating Authority erred in not determining the classification of the goods 'Martech DHA' on merits, merely relying on the prior order of the Tribunal;

(b) Whether the case laws relied upon by the Adjudicating Authority in the impugned order were applicable and correctly applied;

(c) Whether the principle of finality and binding effect of the Tribunal's earlier order on classification applies, thereby precluding re-litigation of the same issue on identical facts;

(d) The applicability of the doctrine of res judicata, including constructive res judicata, in preventing the Revenue from reopening the classification issue already decided by the Tribunal;

(e) The legal effect of the Revenue's acceptance and communication of the Tribunal's earlier order, and the absence of any appeal against that order before the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Non-determination of classification issue by the Adjudicating Authority

The Revenue contended that the Adjudicating Authority failed to decide the classification of the impugned goods on merits and merely referred to the Tribunal's ruling. The Tribunal noted that the classification of 'Martech DHA' had been the subject matter of a prior appeal before the Tribunal, which had been conclusively decided in Final Order No. 40930/2024 dated 23.7.2024, rejecting the Revenue's appeal and holding the goods classifiable under tariff heading 2916 1590.

The Adjudicating Authority's order, as reproduced, acknowledged the long history of the classification dispute and correctly applied the Tribunal's final ruling. The Tribunal emphasized the principle that once the Tribunal has decided an issue and no appeal has been filed against it, the decision becomes final and binding on all authorities. This principle was supported by the Apex Court judgment in Union of India Vs Kamalakshi Finance Corporation (1991), which mandates that subordinate authorities must follow the orders of the higher appellate authorities, even if they have reservations on correctness.

Accordingly, the Tribunal rejected the Revenue's contention that the classification issue was not decided on merits, holding that adherence to the binding Tribunal order was proper and legally mandated.

Issue (b): Applicability of case laws relied upon by the Adjudicating Authority

The Revenue challenged the applicability of the case laws cited by the Adjudicating Authority in the impugned order. However, the Tribunal observed that since the Adjudicating Authority's order was based on the binding and final order of the Tribunal, which had not been appealed against, any discussion on the relevance of the cited case laws was redundant. The Tribunal's final ruling itself constituted the authoritative precedent on the classification issue.

Issue (c) and (d): Finality of the Tribunal's order and application of res judicata

The Tribunal extensively analyzed the principle of finality of judicial decisions and the doctrine of res judicata, including constructive res judicata, to address the Revenue's attempt to re-litigate the classification issue on identical facts. The Tribunal referred to the Supreme Court's ruling in Dr. Subramanian Swamy Vs State of Tamil Nadu & Ors (2014), which elucidates the doctrine of res judicata as a rule of conclusiveness of judgments, rooted in the maxim "interest reipublicae ut sit finis litium" (it concerns the State that there be an end to lawsuits) and "nemo debet bis vexari pro uno et eadem causa" (no man should be vexed twice over for the same cause).

The Tribunal reiterated that even an erroneous decision on a question of law operates as res judicata between the parties. The correctness of the decision does not affect its binding nature. Therefore, the Revenue's attempt to reopen the classification issue, which had been conclusively decided by the Tribunal, was barred by the doctrine of res judicata. The Tribunal emphasized that the appellant (Revenue) cannot be subjected to repeated litigation on the same facts and issue, as it would violate principles of fair play and justice.

Issue (e): Effect of Revenue's acceptance and communication of the Tribunal's order and absence of appeal

The Tribunal noted that the Revenue had formally communicated acceptance of the Tribunal's classification order to the respondent and had not filed any appeal against it before the Supreme Court. This acceptance underscored the binding nature of the Tribunal's order. The Tribunal cited the earlier Supreme Court precedent in Union of India Vs Kamalakshi Finance Corporation to reinforce that subordinate authorities cannot refuse to follow the appellate order even if they have reservations.

Thus, the Revenue's present appeal against the Principal Commissioner's order, which followed the Tribunal's ruling, was without legal basis.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"I find that the issue of classification of Martek DHA has had a long and chequered history. Since the department originally ruled that the goods are classifiable under heading 1302, it appears that the importer changed the classification to this heading. However, now the department felt that heading 2106 is the appropriate heading, and so demands were raised on all the consignments classified under heading 1302. Anyhow, the original dispute has attained finality with the CESTAT ruling that the classification of the goods "Martek DHA" falls under CTI 2916 1590) which is outside the ambit of classification under CTI 2106 9099 proposed in the SCN's. Since the correct classification of the goods is under a heading other than that proposed in the show cause notice, in terms of the ruling of the Hon'ble Supreme Court in the case of Warner Hindustan Limited Vs Collector of CE, Hyderabad (1999 (113) ELT 24 (SC), and the ruling of the CESTAT in the case of Sunrise Traders Vs Commissioner of Customs, Mundra (2022 (381) ELT 393 (Tri. Amd.) which was affirmed by Supreme Court in 2022 (382) ELT 23 (SC), I hereby drop the duty demand raised vide SCNs dated 11.04.2012 and 04.10.2017."

Core principles established include:

(i) The finality and binding nature of the Tribunal's order on classification, which must be followed by subordinate authorities;

(ii) The doctrine of res judicata applies to bar re-litigation of the same issue on identical facts, even if the prior decision is erroneous;

(iii) Revenue's acceptance and communication of the Tribunal's order, coupled with the absence of any appeal, reinforces the binding effect of the order;

(iv) The Adjudicating Authority's reliance on the Tribunal's final order is legally correct, and failure to re-determine classification on merits in such circumstances does not constitute error;

(v) The Revenue cannot reopen settled disputes contrary to principles of fair play and justice.

Accordingly, the Tribunal dismissed the appeal filed by the Revenue with consequential relief, if any, as per law.