TMI Blog1981 (4) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... n at its factory at Kota. The company's plant at Kota has been installed under an industrial licence granted for the manufacture of nylon yarn which is said to have an integrated and continuous process production. The raw material used for the manufacture of nylon yarn is a chemical known as Caprolactam which is described as a monomer. The basic process of manufacture consists in polymerising the above raw material and then melting and spinning, the polymer in a continuous process. After spinning the same is stretched and treated to obtain the desired qualities and grades of nylon yarn. The dispute in the present writ petition relates to the assessment of excise duty in respect of what is described as 2-ply crimped yarn. The nylon yarn initially spun by the company is of a single ply. Two such plys are thereafter crimped in opposite directions and twisted together so that when so combined a homogeneous 2-ply nylon yarn is obtained which cannot be then separated without damaging the yarn. This 2-ply yarn is thereafter used as a single yarn for the manufacture of fabrics is of a thickness slightly more than those that plys which have been crimped and twisted together as mentioned abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d made a representation to the Superintendent of Central Excise claiming that excise duty was payable only on the basis of the resultant denier. By his letter dated 6th/7th August, 1968 the Superintendent informed the petitioners that the matter was being referred to the higher authorities and that in the meantime the 2-ply nylon yarn should be cleared on the basis of the denierage of the components. On 7th September, 1968 the petitioners made a representation to the Assistant Collector of Central Excise requesting him to rectify the previous assessments and to grant refund of the excise duty on the basis of resultant denierage to the petitioners. By an order dated 25th October, 1969 the Assistant Collector of Central Excise, Ajmer held, after discussing the various contentions raised by the petitioner company, that excise duty charged on 2-ply nylon yarn on the basis of the denierage of its components was correct and rejected the petitioner company's case. The petitioners preferred an appeal to the Collector of Central Excise who rejected the appeal by his order dated 11th May, 1970. Thereupon the petitioners preferred a revision application to the Central Government under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that therefore this court should issue a writ of mandamus directing the respondents to refund the said amount to the petitioners with interest at 12% per annum for the period between the date when the duty was deposited till the date on which it is actually refunded to the petitioners. 7. But this is not all. On 3rd March, 1973 the Assistant Collector of Central Excise, Kota wrote a letter to the mill manager of the petitioner company stating as follows : "It has been decided that the assessment of crimped yarn would not be on the basis of the resultant denier of crimped yarn but on the basis of the denier of the single basic yarn used for crimping. You are, therefore, directed that assessment be made accordingly with immediate effect." In other words the petitioners have been directed to clear their future production after paying excise duty on the basis indicated in the letter mentioned above. The petitioner's grievance is that despite the revisional order by which the Government after careful examination accepted the case of the petitioners the respondents have chosen to raise demands practically on the same basis as the orders dated 25th October, 1969 and 11th May, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranspired that there had been a circular issued by the Central Board of Central Excise and Customs dated 22nd February, 1973 the contents of which more or less have been repeated in the trade notice and which need not, therefore, be repeated here. There is, therefore, no doubt that the action taken by the Assistant Collector of Central Excise on 3rd March, 1973 has been based on the circular issued by the Central Board of Central Excise and Customs. 8. At this stage we may mention that the petitioners are also contesting and challenging the correctness of the basis of the above circular of the Central Board, and the further proceedings initiated against them. They point out that the commodity or Item of goods manufactured by them is yarn and that they carry out only one integrated and single process of manufacture of this yarn. Sometimes the process of manufacture stops with the emergence of a single ply yarn in which event the goods are removed at that stage and excise duty is paid thereon. But in some cases the process of manufacture continues by taking the single ply yarn to the next stage of crimping and then manufacturing the crimped 2-ply yarn. In such cases the goods manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to the trade notice as already mentioned. Since the petitioners apprehended that the action of the Assistant Collector and the Collector had been taken not on their own initiative but on the basis of the directives from above, they approached this court under Article 226 of the Constitution of India seeking not only the refund of the amounts paid in excess from May 1964 onwards (upto 16th June, 1972) but also for further directions restraining the respondents from levying and claiming excise duty on the crimped yarn manufactured by them with reference not to the resultant denierage but with reference to the denierage of the components of the crimped yarn. 10. Before proceeding to deal with the one important preliminary point which we think is sufficient to dispose of the present case it is necessary to refer to certain interim orders passed in this writ petition. Along with the writ petition which had been filed on 20th March, 1973 the petitioners had also asked for interim stay of collection of further excise duty on the basis of the letter dated 3rd March, 1973. On this petition a Division Bench of this court passed the following order on 20-4-1973 : "Heard. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty on production, the rules provide that the date of determination of duty is the date of removal of goods from the factory. This is evident not only from Section 4 of the Act which requires the assessable values to be determined as at the time of removal of goods, but also from Rules 9 9A which deal with the clearance of goods from the place of production and the determination of the rate of duty and valuation. Rule 9A(1)(ii) makes it all clear that the date for determination of duty and tariff valuation, in the case of goods cleared from a factory, is the date of removal of such goods from such factory. Crimped yarn being yarn falls under Item 18 itself, and is therefore, assessable in the same manner as the single straight yarn, at the time of clearances from the factory on the basis of the denier of the yarn in the form it is presented for clearance. And the danierage of such yarn has to be determined according to the standard methods available. There is no stipulation in these methods that in the case of crimped yarn, either single or plied yarn, this denierage would be the danierage of the single yarn." 12. At the hearing of the writ petition, apart from raising the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as otherwise the plaintiff company sought for a refund of the amount of Rs. 7,31,153.08 which it claimed had been paid under coercion and/or mistake. On behalf of the Union of India it was contended that if the plaintiff company was aggrieved by the order levying excise duty it should have proceeded to have challenged the same in appropriate forums under Central Excise Act. It was contended that the revisional order of the Government of India determined a refund of only Rs. 14,387.08 and that the amount of Rs. 7,31,153.08 was not covered by the order in revision. Naturally the contest between the parties revolved round the scope of the order dated 14th April, 1972 passed by the Government of India in revision. There was no doubt that the order in revision was confined only to a narrower period and concerned only with the amount of Rs. 14,38l.06. But the question that arose was as to the effect of this order regarding the claim put forward on behalf of the plaintiff. While it was contended on behalf of the plaintiff company that the order passed under Section 36 of the Act was final and binding more so when no change in the product or law had taken place, it was argued on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicability or otherwise of the rules of estoppel and res judicata to such proceedings turns not on whether the Tribunal which has given the earlier decision was one which exercised judicial functions or not but rather on the principle that "in matters of a recurring annual tax a decision on appeal with regard to one year's assessment is said not to deal with `sadem quaistio' as that which arises in respect of an assessment for another year and consequently, not to set up an estoppel". The learned Lord explained, after referring to the scope of the jurisdiction of a Board of Review set up under the Income-tax Ordinance there in issue : "The critical thing is that the dispute which alone can be determined by any decision given in the course of these proceedings is limited to one subject only, the amount of the assessable income for the year in which the assessment is challenged. It is only the amount of that assessable income that is concluded by an assessment or by a decision on an appeal against it (see section 75). Although, of course, the process of arriving at the necessary decision is likely to involve the consideration of questions of law, turning upon the constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier transaction was put through and came up for consideration - see New Jahangir Vakil Mills Co. Ltd. v. CIT, (1963 - 49 ITR SC 137), and CIT v. Brij Lal Lohri Another (1972-84 ITR-SC 273). Such being the position in tax law and rating law there can be reason why the same principle will not also be applicable to excise matters. So, it can be urged, the decision of the excise authorities or even the High Court in relation to a particular period does not have a conclusive effect except in regard to that particular period and cannot be treated as a decision for all time to come. If Broken Hill and Cafoor (supra) are to be applied straightaway, the preliminary objection raised by counseld for the petitioners has to fail. 14. However, while it has been repeatedly held that the principle of res judicata or estoppel as such will not apply in tax matters and that the view taken by the assessing or appellate or revisional authority or even the High Court in respect of any one assessment year period will not be final and conclusive for subsequent periods, it was observed even in Sneath's case, (1932-17 Tax Cases 149), that such earlier decision will be a cogent factor in the determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the reasons why the Tribunal's finding contrary to that in earlier years was set aside following this line of decisions. Chandrachud J. (as His Lordship then was) held in Karsendas Ranchoddas, (1972 - 83 ITR 256, Bom. ), that the Tribunal 'in failing to consider the orders of assessment relating to subsequent years (had ignored good and cogent evidence, and so its finding could not be accepted. In other words, these decisions import into the rule of non-applicability of the principles of res judicata and estoppel a limitation that while the earlier decision is not conclusive or immutable, it can be ignored or brushed aside or departed from only for good and cogent reasons. 15. The question which we are now called upon to consider is as to the precise scope of this limitation. What will be its effect in a case where there are no changes in the circumstances, either factual or legal? Will it be open to the department, without any cogent reasons and merely at its own caprice, to refuse to follow the conclusion reached on the earlier occasion and to take up a totally different stand in a subsequent year ? In answering this question, it has to be appreciated that, while what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicata or estoppel by record. But the Full Bench made it clear that the power of the Income tax Officer to reopen a matter was not unlimited and the limitation it laid down was this : "It seems to us that where Income tax officials have, after inquiry, proceeded to assess the assessee on a certain basis, though they may be entitled to reopen the enquiry, they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with the preceding officer's finding. The position is just like the position of any two parties who have proceeded on a certain basis in their relations. It may be open to one party to reopen the matter. But if he wants to do so, there should be facts which would entitle him to do it. If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor we think he is entitled to reopen the question. But if there are no fresh facts it is difficult to see how he can arbitrarily go behind the finding of his predecessor. The same principles of natural justice or judicial dealing, which Courts impose upon Income-tax Officers, would prevent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an appeal for 1941-42. This argument was repelled by the court. The learned Chief Justice pointed out that the principle of res judicata applied in courts in order to give finality to litigation and to confer the characteristic of conclusiveness to the decision of a court but observed, referring to the observation in Commissioner of Inland Revenue v. Sneath, (193-17 Tax case 149), that the above principle would not apply to income-tax assessments where each year the authorities were considering an entirely new case. After referring to the Madras Full Bench and other decisions of the Madras, Patna, Nagpur and Allahabad High Courts as outlining the circumstances in which the income-tax authorities could reopen and depart from their earlier decisions, the learned Chief Justice remarked that it was not strictly necessary for the case before them to consider what the position of a High Court decision was in regard to res judicata, for that principle would not be applicable to the decisions of the Income-tax Appellate Tribunal and other income-tax authorities. So far these authorities were concerned, the learned Chief Justice earlier in the judgment, had posed the questions : "Can it b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act. It is not a very satisfactory thing that an assessee should feel a grievance that one Tribunal came to one conclusion and another Tribunal came to a different conclusion and that the two conclusions are entirely inconsistent with one another. Therefore the second Tribunal must be satisfied that the circumstances are such as to justify it in departing from the ordinary principles which apply to all Tribunals to try and give as far as possible a finality and a conclusiveness to the decision arrived at. We should also like to lay down a further limitation upon the power of the Tribunal to revise the decision given earlier by that very Tribunal. The effect of revising this decision should not lead to injustice and the court must always be anxious to avoid injustice being done to the assessee." 19. Applying the above principles to the facts of the case the court came to the conclusion that there was justification for the Tribunal while dealing with the appeals for the later assessment years to review the findings in the earlier appeal and come to a different conclusion. It will be seen from the above discussion that Chagla C.J. had laid down no new principle but only reitera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng either on the assessee or the department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigation arising out of the Income-tax Act and an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision, and if the Tribunal giving the earlier decision has taken to the Income-tax Appellate Tribunal, but then, as pointed out, it was never questioned by the Commissioner of Income-tax in exercise of his powers of revision which was the mode open to the revenue for reconsideration of the decisions of the Income-tax Officer year after year. It has not been shown in this case that the earlier decisions were either arbitrary or perverse or that by the time of the assessment year 1955-56 fresh facts had come into existence and came before the income-tax authorities. On this consideration this was not a proper case in which the revenue should have gone back on its approach adopted in this case for well over a decade." The court which approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t first, a little hesitant to come to this conclusion lest it should unduly fetter the rights of the department to frame a proper and correct assessment in accordance with law, merely because of an erroneous view taken earlier, due to oversight, lack of proper consideration or other reasons. But, on careful consideration, it appears to us that the principle followed by us carries with it its own limitations and inherent restrictions and ensures freedom to the Department in cases where a fresh consideration is due for genuine reasons. Also, not being a conclusive objection like res judicata but only a rule of natural justice it only precludes the same authority or one subordinate to him from revising his views arbitrarily and that too, only in the case of the particular assessee where the earlier decision has been taken. Thus, where the original decision is taken by an assessing authority, it is open to the higher authorities, who may consider it a wrong decision, to exercise their powers of revision or review under the Act and to set out the correct position. But if this has not been done or, if in a revisional proceeding for an earlier year, the ultimate revisional authority has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his amount on its being allowed to withhold the payment of taxes in respect of further periods extent of this amount of Rs. 66 lakhs. The court gave liberty to the respondents to mention to the court when the amount of Rs.68 lacs got exhausted but the respondents have not availed of this and have not sought for any directions from this company subsequently. In view of this interim order the petitioner can have no grievance for the non-payment to them of the said sum of Rs.68 lakhs and odd during the pendency of the writ petition. However, now that the writ petition is being disposed of, we direct that the respondents do take immediate action to carry out whatever verifications may be necessary and refund to the first petitioner all the amounts due to it in respect of the period upto 16th June, 1972 as per the orders of the Central Government dated 26th May, 1972. The said refunds should be granted to the petitioner within a period of three months from the date of receipt of this order failing which the petitioner would be entitled to interest at 12% p.a. thereon from the expiry of the above period of three months till the date of actual payment. So far as the period subsequent to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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