2024 (11) TMI 547 - AT - Central Excise

Classification of goods - bio-fungicides and bio-insecticides - to be classified under ETI 3002 90 30 as contended by the appellant or under ETI 3808 99 10 as contended by the department? - applicability of judicial precedents - HELD THAT - When the matter had earlier come up for decision before the Tribunal against the earlier order dated 29.04.2011 passed by the Commissioner, the Tribunal noticed that though the appellant had placed reliance upon the decisions of the Tribunal in NMS Babu 2005 (10) TMI 18 - CESTAT, BANGALORE and T. Stanes 2008 (10) TMI 109 - CESTAT, CHENNAI , but the impugned order had ignored these two decisions and had decided the matter independently. The impugned order was, therefore, set aside and the matter was remanded to the Commissioner for a de-novo decision in the light of the two decisions of the Tribunal. The Tribunal, however, made it clear that it was not expressing any opinion on the merits of the case. The Commissioner, instead of deciding the matter, placed the matter in the call book by letter dated 15.09.2014 for the reason that the appeals filed by the department before the Supreme Court against the orders of the Tribunal in NMS Babu and T. Stanes were pending. The Commissioner also stated that the matter will be taken up for adjudication only after the Supreme Court decided the matter. A perusal of the judgment of the Supreme Court in NMS Babu clearly indicates that the issue of classification of the products had not been raised by the department in the appeal filed by the department before the Supreme Court. What was contended by the department before the Supreme Court was in connection with only two issues. This is evident from a perusal of paragraph 2 of the judgment of the Supreme Court wherein it has been noticed that though large number of issues were decided by the Tribunal, but only two issues were raised by the learned counsel appearing for the department - The first contention of the department before Supreme Court was that the Tribunal had not dealt with the issue as to whether the respondent subsidiary company was only a dummy company, consequent to which the excisable goods manufactured by it would have to be clubbed with the holding company - The second issue that was raised by the department before the Supreme Court was regarding suppression of material facts by both the holding company and the subsidiary company. The Supreme Court noticed that neither the Commissioner nor the Tribunal had satisfactorily answered the first issue raised by the department. It is for this reason that the Supreme Court remanded the matter to the Tribunal to decide afresh as to whether any case for clubbing of excisable goods manufactured by the holding company and the subsidiary company had been made out or not. The Supreme Court also remitted the matter regarding suppression of material facts by the holding company and the subsidiary company to the Tribunal for re-determination on facts. In the instant case, though there were two binding decisions of the Tribunal on the issue that had arisen for consideration before the Commissioner and inspite of a specific direction issued by the Tribunal to decide the matter in the light of the aforesaid two decisions, the Commissioner made an attempt not to follow the two binding decisions and take an independent decision. The belief of the Commissioner that he could decide the matter on merits as the Supreme Court while dismissing the Civil Appeal filed by the department against the decision of the Tribunal in T. Stanes had left the questions of law open is tainted with mala fides. When the Supreme Court left the question of law open, it was the Supreme Court alone that was to decide the matter and the Commissioner was bound by the two decisions of the Tribunal. The Commissioner also did not attempt to examine the contention raised by the appellant that the appeal filed by the department before the Supreme Court against the decision of the Tribunal in NMS Babu was not against that part of the order of the Tribunal that decided the issue of classification and it was only on other two issues. To maintain judicial discipline, the Commissioner was bound to follow the decisions of the Tribunal in NMS Babu and T. Stanes. However, the Commissioner not only declined to follow the two binding decisions, but even went to the extent of stating that the decision of the Tribunal in NMS Babu does not expound the correct position of law and hence reliance placed thereon is not justified or proper . The Commissioner even placed reliance upon the decision of the adjudicating authority in T. Stanes, which decision had been set aside by the Tribunal in the appeal filed by T. Stanes. The order dated 13.09.2022 passed by the Commissioner deserves to be set aside and is set aside - Appeal allowed.

Summary

Issues Involved:

1. Classification of bio-fungicides and bio-insecticides under the correct Excise Tariff Item (ETI).
2. Adherence to judicial precedents and principles of judicial discipline.
3. Validity of the demand for central excise duty and interest.
4. Authority of the Commissioner to disregard binding Tribunal decisions.

Issue-wise Detailed Analysis:

1. Classification of Products:

The primary issue in this case was whether the appellant's products, namely bio-fungicides and bio-insecticides, should be classified under ETI 3002 90 30 as "cultures of micro-organisms" or under ETI 3808 99 10 as "pesticides." Initially, the appellant classified the products under ETI 3808 99 10 and paid the excise duty. However, following a Tribunal decision in a similar case (NMS Babu), the appellant reclassified the products under ETI 3002 90 30 and ceased paying excise duty. The Commissioner, however, disagreed with this classification, asserting that the products were not merely cultures of micro-organisms but preparations based on such cultures, thereby justifying classification under ETI 3808 99 10.

2. Adherence to Judicial Precedents:

The Tribunal had previously remanded the case to the Commissioner, directing the reconsideration of the classification issue in light of two precedent decisions (NMS Babu and T. Stanes). Despite this, the Commissioner independently adjudicated the classification without adequately considering these binding precedents. The Tribunal emphasized that judicial discipline mandates adherence to higher appellate authorities' decisions. The Commissioner's failure to comply with these precedents and his assertion that the Tribunal's decision in NMS Babu did not expound the correct position of law was criticized as contemptuous and against judicial discipline principles.

3. Validity of the Demand for Central Excise Duty and Interest:

The Commissioner confirmed the demand for central excise duty of Rs. 1,00,28,180/- with interest under section 11A of the Central Excise Act but dropped the penalty under section 11AC. The appellant contested this demand, arguing that the products were correctly classified under ETI 3002 90 30, and hence, no duty was payable. The Tribunal found that the Commissioner's decision to uphold the demand was flawed due to the failure to follow binding precedents and the erroneous classification of the products.

4. Authority of the Commissioner to Disregard Binding Tribunal Decisions:

The Tribunal strongly criticized the Commissioner for overstepping his authority by disregarding the Tribunal's binding decisions. The Commissioner's action of independently deciding the classification issue and commenting on the Tribunal's decisions was deemed improper. The Tribunal reiterated the importance of judicial discipline, emphasizing that lower authorities must follow higher appellate authorities' decisions without deviation unless overturned by a competent court.

Conclusion:

The Tribunal set aside the Commissioner's order dated 13.09.2022, allowing the appeal with consequential reliefs. The Tribunal underscored the necessity of adhering to judicial precedents and maintaining judicial discipline, thereby reinforcing the hierarchical structure of judicial decision-making.