2005 (7) TMI 112 - HC - Central Excise

Judicial discipline - Validity Of show cause notice - Whether the respondents, more particularly respondent No. 3, is entitled to go behind an order of the Tribunal and refuse to implement it by issuing the impugned show cause notice - HELD THAT - It is not disputed on behalf of the respondent authorities that the order of Tribunal dated 23rd July, 2003 has become final, there being no challenge to the said order. In the circumstances, the respondent authority could not have undertaken to ignore the said order by raising an issue which, to say the least, is a non-issue. The Tribunal, in its order dated 23-7-2003, has categorically held in paragraph No. 2(b) that, Engines are cleared for home consumption on payment of excise duty . Nothing has been brought on record to show that the aforesaid finding of fact recorded by the final fact finding authority is incorrect in any manner whatsoever or is not supported by evidence. In fact, as noted hereinbefore, the order of the Tribunal, has attained finality and in the circumstances, it is not possible for any subordinate authority to go behind the said order, more particularly, qua findings of fact recorded by the Tribunal. Therefore, the specious plea made by respondent No. 3, to the effect that the petitioner had not established that the engines had borne duty, is not only hollow but bereft of any substance and against the settled legal position. The fact that the impugned show cause notice has been issued at a subsequent stage and after issuance of communication dated 7-1-2004 (Annexure F ) would go to show that the said notice has not been issued with an honest intent. As this Court is not called upon to undertake an inquiry in this regard, suffice it to state that the notice does not appear to be bona fide. Vide Circular No. 695/11/2003-C.X., the Central Board of Excise Customs has laid down as to in what circumstances the goods must be released or refund must be granted and in this connection, it is stated that The order of High Court or Tribunal should be implemented unless a stay has been obtained from the higher judicial forum on the implementation of the order. Further, consultation with Board in such cases may cause into delay in finalization of the refund claims . Accordingly, the Board has directed the jurisdictional commissioners to take decisions in such cases at their level to grant refund. Therefore, applying the aforesaid circular also, if the action of the respondents is tested, it becomes clear that the respondent was not justified in issuing the impugned show cause notice. However, what is more material to note is that in case of M/s Kapoor Machinery Stores, vide order dated 24-9-2004, a Single Member Bench has allowed application for rectification of mistake by recording that the earlier order dated 29-4-2004 was passed on a wrong appreciation of facts and accordingly, the appeal has been restored to original number. Therefore, the reliance by the respondent on the order of the Tribunal which does not exist any more is misplaced. Even otherwise, it goes without saying that when there are two conflicting orders, one of a Single Member and one by a Division Bench, the order issued by the Division Bench would prevail. In the show cause notice, the respondent No. 3 has placed reliance on Circular No.224/58 of 96-CX., dated 26-6-1996. It is an admitted position that the said circular was cited before the Tribunal in the petitioner's case and has already been considered. Therefore, apart from the position in law as to judicial discipline being required to be maintained, none of the other grounds on which the impugned show cause notice is based survive in law. In the result, the impugned show cause notice bearing F. No. V84(18)-1236/2004-Ref., dated 3rd February, 2005 (Annexure H ) is hereby quashed and set aside. The petitioner is entitled to take credit for the sum as stated in its communication dated 10-11-2004 without being prevented from doing so. The petition is accordingly allowed. Rule made absolute. The respondents shall pay costs quantified at a sum of Rs. 5,000/- (Rupees five thousand only). In the first instance, the same shall be paid by the respondent authorities and thereafter, recovered from respondent No. 3 personally.

Issues:
1. Entitlement to go behind an order of the Tribunal and refuse to implement it by issuing a show cause notice.
2. Classification and duty payment of Diesel Engines cleared for captive consumption.
3. Reversal of selling price of Centrifugal Pump sets.
4. Rectification of amount reversed under Rule 57CC.
5. Legal effect of an order of a higher forum.
6. Implementation of orders by subordinate authorities.
7. Reliance on Circular No.224/58 of 96-CX in the show cause notice.

Analysis:

Issue 1:
The primary issue in this case is whether the respondents, particularly respondent No. 3, can challenge an order of the Tribunal and refuse to implement it by issuing a show cause notice. The High Court emphasized the importance of following orders of higher forums without reservation, especially when no challenge has been made to the order. The Court held that the impugned notice was not issued with an honest intent and lacked bona fides.

Issue 2:
Regarding the classification and duty payment of Diesel Engines cleared for captive consumption, the Excise Department initially held that the engines were not chargeable to duty. However, the Commissioner (Appeals) and the Tribunal ruled in favor of the petitioner, stating that the engines were separate excisable entities and not parts of Centrifugal Pumps. The Tribunal's order, which became final, required the reversal of debits made under protest.

Issue 3:
The matter of reversing the selling price of Centrifugal Pump sets was raised during the proceedings. The Commissioner (Appeals) rejected appeals on this issue, but the Tribunal found in favor of the petitioner, stating that the engines could not be classified as parts of the pumps. The High Court upheld the Tribunal's decision and quashed the impugned show cause notice.

Issue 4:
The petitioner sought rectification of the amount reversed under Rule 57CC. Respondent No. 3 initially directed the petitioner not to take credit until the amount was transferred, leading to objections from the petitioner. The High Court clarified that only a book entry was required, and the petitioner was entitled to take credit without further delay.

Issue 5:
The legal effect of an order of a higher forum was extensively discussed, emphasizing the need for subordinate authorities to follow such orders unreservedly. The Court cited relevant judgments to support this principle and highlighted the importance of judicial discipline in implementing orders without delay.

Issue 6:
The implementation of orders by subordinate authorities was a key aspect of the judgment. The Court reiterated that final orders of the Tribunal must be followed without reservation unless stayed by a competent higher forum. The respondent's failure to implement the Tribunal's order promptly was deemed unjustified.

Issue 7:
The reliance on Circular No.224/58 of 96-CX in the show cause notice was found to be misplaced, as the circular had already been considered by the Tribunal in the petitioner's case. The High Court quashed the show cause notice and allowed the petitioner to take credit without hindrance.

In conclusion, the High Court ruled in favor of the petitioner, emphasizing the importance of implementing orders of higher forums promptly and without reservation. The judgment clarified various issues related to duty payment, classification of goods, rectification of amounts, and the legal effect of tribunal orders.

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