2021 (4) TMI 138 - HC - Central Excise

Revising the order of Rejection of refund claims - the appeals filed by Revenue (against grant of refund) were earlier dismissed on the grounds of monetary limit - benefits in terms of Notification No. 20/2007 CE dated 25.04.2007 - area based exemption - substantial expansion - HELD THAT - In the recital of the impugned order the respondent No. 3 refused to accept that the petitioner complied with the requirement of the Notification No. 20/2007 dated 25.04.2007 regarding investments of fixed assets more than 25% towards expansion of the manufacturing unit. Although, the order of the Commissioner (Appeals) is referred to, however, the respondent No. 3 did not elaborate as to why it disagreed with the findings of the Commissioner (Appeals) although, the petitioners submitted their objections in response to the said show cause notice and had also referred to the findings of the Commissioner (Appeals) therein. The respondent No. 3 in its order held that although the appeals before the CESTAT have been withdrawn on the basis of monetary limits for pursuing litigation as prescribed by the Central Board of Excise and Customs, the respondent No. 3 was of the opinion that the CESTAT orders have not binding effect on the adjudication authority to take an particular stand in the matter. There is no discussion in the impugned order as to the effect of the findings of the fact which is reflected in the Commissioner (Appeals) order. Although, the Principle of Res Judicata is strictly not applicable to revenue matters, however, a finding of fact by a higher authority like the Commissioner (Appeals) cannot be ignored. The importance of the requirement of maintaining the judicial discipline by Quasi Judicial Authority like the respondent No. 3, as time and again been stressed upon by the Apex Court in catena of Judgments - In the case of Union of India and Ors Vs- Kamlakshi Finance Corporation Limited reported in 1991 (9) TMI 72 - SUPREME COURT held that the order of the Appellate Collector is pending on the Assistance Collector and the working within his jurisdiction order of the Tribunal is binding upon the Assistant Collector and the Appellate Collector who function under the jurisdiction of the Tribunal. The Principles of judicial discipline require that the orders of the higher appellate authority should be followed unreservedly by the Subordinate Authority. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal - The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. The finding of fact recorded by the Commissioner of Appeals in respect of the fulfillment of the requirement under Notification No. 20/2007 dated 25.04.2007 by the petitioner, in view of the dismissal of the Revenue appeals by the CESTAT has attained finality. Such findings of fact cannot be unilaterally disregarded by the Departmental Officer merely because it was not agreeable to them. It was incumbent upon the respondent No. 3 to reflect in its order, impugned in the present proceedings, the grounds and reasons for disregarding the said finding of fact by the Commissioner (Appeals) - In the absence of any clear finding by the respondent No. 3 to support its disagreement with the finding of fact by the Commissioner of Appeals, mere disagreement with the order of the Higher Authority, namely, Commissioner (Appeals) will be opposed to the Principle of judicial discipline required to be maintained by Quasi Judicial Officers exercising Quasi Judicial functioning. Such, actions of the respondent No. 3 cannot be countenanced in view of the law laid down by the Apex Court. Considering the fact that the disagreement by the respondent No. 3 with the findings of the Higher Appellate Authority, namely, the Commissioner (Appeals) is on factual aspect, records of which are available in the Department, the matter is remanded back to the authorities and the respondent authority is directed to pass appropriate orders afresh in the matter after giving adequate opportunities to the petitioner within a period of 3(three) months from today - Petition allowed by way of remand.

Summary

Issues Involved:
1. Rejection of Central Excise Duty refund claims.
2. Demand for recovery of Central Excise Duty refunds along with interest and penalty.
3. Legality of orders passed by subordinate authorities disregarding higher appellate authority's decisions.
4. Applicability of the principle of Res Judicata in revenue matters.
5. Adequacy of statutory alternative remedies available to the petitioner.

Issue-wise Detailed Analysis:

1. Rejection of Central Excise Duty refund claims:
The petitioner challenged the rejection of refund claims for various periods amounting to significant sums. The petitioner argued that they were eligible for refunds under Notification No. 20/2007 CE dated 25.04.2007 due to their substantial expansion in fixed capital investments. The Assistant Commissioner initially granted refunds, which were later upheld by the Commissioner (Appeals). However, these refunds were subsequently rejected by the respondent No. 3 in the impugned orders.

2. Demand for recovery of Central Excise Duty refunds along with interest and penalty:
The petitioner also contested the demands for recovery of previously granted refunds along with interest and penalties. The respondent No. 3 issued several show cause notices and passed orders confirming these demands. The petitioner argued that these orders were passed without proper consideration of the findings of the Commissioner (Appeals), which had attained finality.

3. Legality of orders passed by subordinate authorities disregarding higher appellate authority's decisions:
The core issue was whether the respondent No. 3 could disregard the findings of the Commissioner (Appeals), a higher appellate authority. The court emphasized the importance of judicial discipline, stating that orders of higher appellate authorities should be followed unreservedly by subordinate authorities. The court cited the case of Union of India and Ors vs. Kamlakshi Finance Corporation Limited, stressing that subordinate authorities cannot disregard higher appellate authority's orders unless suspended by a competent court.

4. Applicability of the principle of Res Judicata in revenue matters:
While the principle of Res Judicata is not strictly applicable to revenue matters, the court highlighted that findings of fact by higher authorities cannot be ignored by subordinate authorities. The court noted that the respondent No. 3 failed to provide clear reasons for disregarding the findings of the Commissioner (Appeals), which is contrary to the principles of judicial discipline.

5. Adequacy of statutory alternative remedies available to the petitioner:
The court acknowledged that the petitioner had adequate statutory alternative remedies available, which were not availed. However, the court found that the impugned orders were passed without proper consideration of the higher authority's findings, necessitating judicial intervention.

Conclusion:
The court set aside and quashed the impugned orders dated 27.01.2020 and 18.12.2019 passed by the respondent No. 3. The matter was remanded back to the authorities for fresh consideration, directing the respondent to pass appropriate orders within three months, ensuring adherence to the findings of the Commissioner (Appeals) unless questioned by way of an appeal/review/revision. The court allowed the writ petitions in part, with no order as to costs.