1971 (1) TMI 54 - HC - Central Excise

Summary

Issues Involved:

1. Preclusion of Central Excise Department from reopening prior adjudication.
2. Failure to consider prior adjudication in subsequent decisions.
3. Relevance of grounds for the decision under the Act.
4. Subjective satisfaction in the appellate order.
5. Lack of reasoning in the revision order.
6. Influence of Central Board of Revenue circular on decisions.

Issue-wise Detailed Analysis:

1. Preclusion of Central Excise Department from Reopening Prior Adjudication:

The petitioner argued that the prior adjudication by the third respondent on 30-5-1962 precludes the Central Excise Department from reopening the same question. The court rejected this ground, stating, "The principle of res judicata cannot apply for adjudications made by Revenue authorities though they have to exercise their powers in a quasi-judicial manner." The court emphasized that decisions in one assessment year do not prevent different conclusions in subsequent years, referencing Udayan Chinubhai v. Commr. of Income-tax, A.I.R. 1967 S.C. 762.

2. Failure to Consider Prior Adjudication in Subsequent Decisions:

The court found that the orders made by Respondents 2 to 4 did not reference the earlier decision of the third respondent, which upheld the petitioner's contention. The court held that "the failure to take into consideration the earlier decision has clearly vitiated the orders made by Respondents 2 to 4." The court noted that the burden was on the Department to show the prior decision was erroneous when reopening the question.

3. Relevance of Grounds for the Decision Under the Act:

The court criticized the second respondent's reliance on the Trade Notice issued by the third respondent, which did not provide reasons for classifying offset printing paper of 85 grams and above as cartridge paper. The court stated, "It is not open to the Central Board of Revenue or any of the Central Excise authorities to classify under Item 17(1) the varieties of paper which do not fall under the said classification." The court emphasized that classification should be based on the process of manufacture and materials used, not merely on the use of the paper.

4. Subjective Satisfaction in the Appellate Order:

The court found that the third respondent's order was based on subjective satisfaction without clear reasoning. The relevant portion of the order stated, "I have seen samples of paper placed on record. It is clear that when the paper is of 85 grams per square metre and above it is undistinguishable from cartridge paper - in other words, it is cartridge paper." The court held that the order must state the reasons for the conclusion, not just the result of the examination.

5. Lack of Reasoning in the Revision Order:

The court declared the fourth respondent's order void for lack of reasoning. The order simply stated, "The Government of India have carefully considered all the points made by the applicants, but see no justification for interfering with the order in appeal. The revision application is accordingly rejected." The court referenced the Supreme Court's decision in Travancore Rayons Ltd. v. Union of India, 1969 (2) SCWR 814, which mandates that reasons must be given even when affirming lower authorities' orders.

6. Influence of Central Board of Revenue Circular on Decisions:

The court dismissed this ground, noting that the second respondent did not reference the circular issued by the Central Board of Revenue. The court concluded, "The decision of the third respondent rests as stated earlier entirely on his personal examination of the paper in question and not on any other material." Therefore, the court found no evidence that the circular influenced the decisions of Respondents 2 to 4.

Conclusion:

The court concluded that the second respondent's order dated 17-8-1966 was vitiated due to the failure to consider the prior order of the third respondent dated 30-5-1962 and the relevant basis for classification. The orders of Respondents 3 and 4 were declared void for lack of reasoning. The court quashed the impugned orders and directed the second respondent to make a fresh adjudication in light of this decision. The recovery of the amounts as per demands Exhibits A-3 and A-4 was kept in abeyance until proper adjudication. No order as to costs was made.