2013 (10) TMI 567 - HC - Central Excise

100% EOU - duty on DTA clearance - Education Cess - Whether the petitioner is liable to pay education cess on the amount worked out by calculating the custom duty payable on the goods in respect of clearance made by 100% EOU to DTA Held that - The repeated acts of the adjudicating authority of ignoring the decision of this Court is impermissible although till date the Revenue has deemed it fit not to challenge the order passed by the higher authority or Tribunal of superior jurisdiction - Instruction dated 17.8.2011 of the CBEC in a move to reduce Government litigation provides for monitory limits for filing appeals by the Department before the CESTAT/High Court and Supreme Court which is 25 lakhs before the Supreme Court - This instruction provides that the adverse judgments relating to the constitutional validity of the provision of the Act or Rule is to be decided irrespective of the amount involved or where the Notification/Instruction/Order or Circular is held illegal or ultra vires. The adjudicating officer was reminded that he acts a quasi-judicial authority and is bound by the law of precedence and regarding the binding effect of the order of the higher authority which is the Tribunal - It was held that if such order is found to be erroneous by the Department it needs to prefer an appeal as per the statutory provisions contained in the Central Excise Act - The decision of the Apex Court rendered in Union of India vs. Kamlakshi Finance Corporation Ltd. 1991 (9) TMI 72 - SUPREME COURT OF INDIA holds in unambiguous terms that the Revenue officers are bound by the decision of the appellate authorities. Despite such clear and specific directions and authoritative pronouncements act of issuance of show cause notice by the Deputy Commissioner is wholly impermissible and unpalatable and deserves to be quashed and struck down with a specific note of strong disapproval - The respondents simply could not have exercised the powers contained under the statute in such arbitrary exercise and in complete disregard to the pronouncement of this Court particularly reminding the Revenue authorities of the binding effect of decision of Tribunal on the identical question of law - This not only led to multiplicity of proceedings but also speaks of disregard to the direction of this Court rendered in the earlier petition of this very petitioner - Both the show cause notices are quashed and struck down Decided in favour of Petitioner.

Summary

Issues Involved:

1. Legality of levying education cess and secondary and higher education cess on DTA clearances by a 100% EOU.
2. Binding effect of the Tribunal's decision on subordinate authorities.
3. Jurisdiction and appropriateness of issuing show cause notices after the Tribunal's decision.
4. Exhaustion of alternative remedies before approaching the High Court.

Issue-wise Detailed Analysis:

1. Legality of Levying Education Cess and Secondary and Higher Education Cess on DTA Clearances by a 100% EOU:

The petitioner, a Public Limited Company operating as a 100% Export Oriented Unit (EOU), challenged the imposition of education cess and secondary and higher education cess on Domestic Tariff Area (DTA) clearances. The petitioner argued that these cesses should not be levied on the sum total of customs duties. The Customs Excise & Service Tax Appellate Tribunal (CESTAT) in Sarla Performance Fibers Ltd. vs. Commissioner of C.Ex. Vapi held that once the measure of Customs Duty equivalent to Central Excise Duty is worked out, levying education cess separately for clearances by a 100% EOU to DTA is not warranted.

2. Binding Effect of the Tribunal's Decision on Subordinate Authorities:

The Tribunal's decision in Sarla Performance Fibers Ltd. was binding on the adjudicating authorities. Despite this, the adjudicating authority continued to issue show cause notices demanding cess, which was challenged by the petitioner. The High Court reiterated that the principles of judicial discipline require that orders of higher appellate authorities should be followed unreservedly by subordinate authorities. The court cited Union of India vs. Kamlakshi Finance Corporation Ltd. to emphasize that revenue officers must follow the decisions of appellate authorities unless suspended by a competent court.

3. Jurisdiction and Appropriateness of Issuing Show Cause Notices After the Tribunal's Decision:

The petitioner had previously succeeded in Special Civil Application No. 12686 of 2012, where the High Court struck down the adjudicating authority's order. Despite this, new show cause notices were issued, which the petitioner challenged as arbitrary and in disregard of the High Court's previous decision. The High Court noted with strong disapproval the repeated acts of the adjudicating authority ignoring binding precedents and stated that such actions led to multiplicity of proceedings and undue harassment to the assessee.

4. Exhaustion of Alternative Remedies Before Approaching the High Court:

The respondent contended that the petitioner should exhaust alternative remedies and respond to the show cause notices instead of approaching the High Court directly. The High Court, however, found that the adjudicating authority committed a serious error by disregarding binding precedents and that there were no disputed facts, thus justifying the petitioner's approach to the High Court without exhausting alternative remedies.

Conclusion:

The High Court allowed the petition, quashing and striking down the show cause notices dated 21.8.2012 and 22.1.2013. The court emphasized that the decision of the Tribunal in Sarla Performance Fibers Ltd. continues to hold the field and must be followed by the adjudicating authorities. The court reiterated that any challenge to the Tribunal's decision should be pursued through appropriate proceedings as permissible under the law. The rule was made absolute to the extent above.