2025 (5) TMI 1017 - HC - Central Excise

Refund claim - Area Based Exemption - refund amount should be computed on the basis of total duty paid (from both PLA and CENVAT credit) collectively for all products falling under Serial No.16 of Notification No. 33/2008-CE or not - no appeal would lie in view of the issue already having being decided by Commissioner (Appeals) by order dated 25.03.2009 which has achieved finality - HELD THAT - The adjudicating authority has sanctioned the refund to the petitioner for subsequent period taking into consideration the total duty paid in PLA and total duty paid utilising Cenvat Credit together for arriving at percentage on all the products together. The department being aggrieved has challenged the same before the Commissioner (Appeals) though no appeal would lie in view of the issue already having being decided by Commissioner (Appeals) by order dated 25.03.2009 which has achieved finality. Therefore the action of the department to challenge the refund order before the Commissioner (Appeals) was an exercise in futility. Above reasons given by respondent no.2 is required to be deprecated by all means in view of the fact that respondent no.2 could not have taken a different view than what was taken by his predecessor in order dated 25.03.2009. Respondent no.2 being Commissioner (Appeals) could not have differed with his coordinate rank Commissioner (Appeals) who was his predecessor by observing that the said appellate order of the predecessor not being an order from higher authority is not binding precedent for successor. Such an opinion of the Commissioner (Appeals) is contrary to the judicial discipline as any order passed by the same ranking officer is binding upon the successor when the said order of his predecessor has achieved finality. Conclusion - i) The Commissioner (Appeals) order dated 25.03.2009 in favor of the petitioner is final and binding on the department and all authorities of equal rank including respondent no.2. ii) The petitioner is justified in invoking writ jurisdiction to challenge the impugned order which violated binding precedent and judicial discipline. The impugned order passed by Commissioner (Appeals) dated 18/19.5.2023 is hereby quashed and set aside and the order granting refund to the petitioner is hereby restored - petition allowed.

Summary

The core legal questions considered in this judgment are:

1. Whether the Commissioner (Appeals), in allowing the departmental appeal against refund orders granted to the petitioner, was justified in taking a view contrary to the earlier order passed by a coordinate authority (Commissioner (Appeals)) dated 25.03.2009, which had attained finality.

2. Whether the refund amount should be computed on the basis of total duty paid (from both PLA and CENVAT credit) collectively for all products falling under Serial No.16 of Notification No. 33/2008-CE or whether the duty paid should be computed product-wise separately to determine the correct value addition and refund amount.

3. Whether the respondent authority was legally entitled to differ with the binding precedent of a coordinate appellate authority and set aside refund orders granted on that basis.

4. Whether the petitioner was entitled to challenge the impugned order under writ jurisdiction or should have been relegated to alternative remedies under the statutory appeal provisions.

Issue-Wise Detailed Analysis

Issue 1: Finality and Binding Effect of Earlier Commissioner (Appeals) Order dated 25.03.2009

Legal Framework and Precedents: The principle of judicial discipline mandates that orders passed by a coordinate authority of the same rank, once attained finality, are binding on the successor authority. The Supreme Court in Union of India v. Kamlakshi Finance Corporation Ltd emphasized that subordinate and appellate authorities must follow binding appellate orders to avoid harassment and chaos in tax administration. The Court further explained that even if the department disagrees with such orders, the remedy lies in further appeals and not in ignoring or reversing binding orders. Similarly, the Bombay High Court in Tejus Rohitkumar Kapadia v. Union of India reiterated the importance of judicial discipline and adherence to binding precedents by coordinate benches.

Court's Interpretation and Reasoning: The Court noted that the Commissioner (Appeals) order dated 25.03.2009 in favor of the petitioner had attained finality after the department withdrew its appeal before the CESTAT on monetary grounds. This order directed the lower authority to compute refund by taking total duty paid from PLA and CENVAT credit together for all goods under Serial No.16 at a prescribed rate of 36%. The respondent no.2 Commissioner (Appeals) however took a contrary view, holding that the earlier order was not binding precedent and that refund should be computed product-wise. The Court held that such a stance is contrary to judicial propriety and discipline, as a coordinate authority cannot differ with a predecessor's final order. The Court relied on the principle that final orders of coordinate authorities are binding on successors unless set aside by a higher authority.

Application of Law to Facts: The respondent no.2's action in reversing the refund orders granted on the basis of the 2009 order was held to be an impermissible departure from binding precedent. The Court emphasized that the department's challenge to the refund orders before the Commissioner (Appeals) was an exercise in futility after the 2009 order became final.

Treatment of Competing Arguments: The respondent argued that the departmental appeal was withdrawn on low tax effect and hence the 2009 order did not achieve finality. The Court rejected this, clarifying that withdrawal on monetary grounds does not affect the finality or binding nature of the order. The respondent's reliance on alternative remedy provisions was also considered but did not justify ignoring binding precedent.

Conclusion: The Court concluded that the respondent no.2 Commissioner (Appeals) was not justified in taking a different view and reversing refund orders based on the final 2009 order of a coordinate authority.

Issue 2: Methodology for Computing Refund - Collective vs. Product-wise Computation

Legal Framework and Precedents: Notification No. 39/2001-CE as amended by Notification No. 33/2008-CE governs the refund of excise duty on value addition for units in Kutch district. Clause 2 specifies that duty payable on value addition shall be a percentage of total duty payable on excisable goods as per the table annexed. Clause 2B requires submission of statements of total duty paid and duty paid by utilization of CENVAT credit on each category of goods cleared under the notification.

Court's Interpretation and Reasoning: The 2009 Commissioner (Appeals) order held that since all goods manufactured by the petitioner fell under Serial No.16 (a residual entry covering all goods other than those specified in Serial Nos. 1 to 15), and a single rate of 36% was prescribed, the refund should be computed on the total duty paid (PLA plus CENVAT) collectively for all such goods. The lower authority's approach of computing duty separately for each product and then applying the percentage was held to be incorrect and not justified.

The respondent no.2 Commissioner (Appeals), however, opined that correct value addition can only be determined if duty payment is computed product-wise separately, and that computing refund on total duty paid collectively ignores value addition on individual products, which is against the intention of the Government.

Application of Law to Facts: The Court found that the 2009 order's approach was consistent with the notification's provisions and the prescribed rate for Serial No.16. The respondent no.2's contrary view was not supported by the law or the notification. The Court emphasized that the refund is regulated on the basis of value addition, but where a single rate applies to a category covering multiple products, the total duty paid on all such products can be aggregated for refund computation.

Treatment of Competing Arguments: The Court noted the respondent's argument about the need to consider individual product value addition but held that the notification's language and the 2009 order clearly supported collective computation under the residual category. The respondent's interpretation was held to be without authority of law.

Conclusion: The refund amount must be computed on the basis of total duty paid collectively (PLA and CENVAT) for all products under Serial No.16 at the prescribed rate of 36%, as held in the 2009 order.

Issue 3: Legality of Respondent No.2 Commissioner (Appeals) Differing with Coordinate Authority

Legal Framework and Precedents: The doctrine of judicial discipline requires that coordinate benches or authorities of the same rank should follow each other's decisions to maintain consistency and certainty in the law. The Supreme Court in Commissioner of Central Excise, Mumbai v. Mahindra & Mahindra Ltd held that conflicting views by coordinate benches should be referred to a larger bench rather than differing outright. The Court in Claris Lifesciences Ltd. v. Union of India emphasized that quasi-judicial authorities are bound by binding precedents and orders of superior jurisdiction. The Bombay High Court in Viacom 18 Media Pvt. Ltd v. State of Maharashtra held that an appellate authority cannot reject an earlier appellate order without any change in facts or law.

Court's Interpretation and Reasoning: The Court deprecated the respondent no.2 Commissioner (Appeals) for disregarding the binding precedent of his predecessor and taking a contrary view. The Court held that the respondent no.2 was not at liberty to differ with the coordinate authority's final order. The Court emphasized that such conduct violates judicial discipline and leads to harassment and uncertainty.

Application of Law to Facts: The respondent no.2's order reversing refund was based on the premise that the earlier order was not binding as it was not from a higher authority. The Court rejected this, holding that a coordinate authority's final order is binding on successors of the same rank unless set aside by a higher authority.

Treatment of Competing Arguments: The respondent's argument that the departmental appeal was pending or withdrawn on monetary grounds was held irrelevant to the binding nature of the earlier order. The Court also noted that the petitioner had alternative remedies but that did not justify ignoring binding precedent.

Conclusion: The respondent no.2 Commissioner (Appeals) was not legally entitled to differ with the binding precedent of his coordinate authority and set aside refund orders granted on that basis.

Issue 4: Availability of Alternative Remedy and Jurisdiction of the Court

Legal Framework and Precedents: Section 35B of the Central Excise Act, 1944 provides for appeals to the Tribunal. The Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks held that availability of alternative remedy is not an absolute bar to writ jurisdiction but the High Court imposes restrictions and entertains writ petitions only in exceptional circumstances such as violation of fundamental rights, natural justice, jurisdictional errors, or constitutional validity challenges.

Court's Interpretation and Reasoning: The respondent argued that the petitioner should have availed the alternative remedy of appeal under section 35B and that the writ petition should not be entertained. The Court observed that the petitioner challenged the impugned order on grounds of violation of judicial discipline and binding precedent, which are issues of legal propriety and correctness. The Court found that the petitioner was justified in approaching the High Court under writ jurisdiction as the impugned order was contrary to settled legal principles and binding precedent.

Application of Law to Facts: The Court exercised its extraordinary jurisdiction under Articles 226 and 227 of the Constitution to quash the impugned order and restore the refund orders granted earlier.

Treatment of Competing Arguments: The Court noted that the respondent did not demonstrate that the petitioner's challenge fell outside the recognized exceptions to alternative remedy rule. Hence, the writ petition was maintainable.

Conclusion: The Court entertained the writ petition and set aside the impugned order, restoring the refund orders.

Significant Holdings

"It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities."

"The Commissioner (Appeals) being of coordinate rank could not have differed with his predecessor who had passed a final order in favour of the petitioner. Such an opinion of the Commissioner (Appeals) is contrary to judicial discipline as any order passed by the same ranking officer is binding upon the successor when the said order has achieved finality."

"Where all the eligible products fall under one category under entry No.16 of the Table annexed to the Notification No.33/2008 and one single rate is specified for all the products under this category, the percentage of total duty paid should be based on total duty paid in PLA and CENVAT in respect of all the products covered under this category."

"The departmental appeal having been withdrawn on monetary grounds does not affect the finality of the earlier Commissioner (Appeals) order which is binding on the department and subordinate authorities."

"The writ jurisdiction of the High Court can be exercised where there is violation of judicial discipline and binding precedent by quasi-judicial authorities, even if alternative remedy is available."

Final Determinations on Each Issue

1. The Commissioner (Appeals) order dated 25.03.2009 in favor of the petitioner is final and binding on the department and all authorities of equal rank, including respondent no.2.

2. Refund computation must be done on the basis of total duty paid collectively from PLA and CENVAT credit for all products under Serial No.16 at the prescribed rate of 36% as per the notification and the 2009 order.

3. The respondent no.2 Commissioner (Appeals) was not entitled to differ with the coordinate authority's final order and set aside the refund orders granted to the petitioner.

4. The petitioner was justified in invoking writ jurisdiction to challenge the impugned order which violated binding precedent and judicial discipline.

5. The impugned order dated 18/19.5.2023 passed by respondent no.2 Commissioner (Appeals) is quashed and set aside, and the refund orders granted to the petitioner are restored.