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TMI Blog2024 (11) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - SHRI DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri B.L. Narasimhan and Ms. Daliya Singh, Advocates for the Appellant Shri Unmesh Kumar, Authorised Representative for the Department ORDER IPL Biologicals Limited [the appellant] (formerly known as International Panaacea Limited), has filed this appeal to assail the order dated 13.09.2022 passed by the Commissioner of Central Tax, GST Delhi East [the Commissioner] , by which the demand of central excise duty of Rs. 1,00,28,180/- has been confirmed and has been ordered to be recovered with interest under section 11A of the Central Excise Act 1944 [the Central Excise Act] . 2. The appellant is engaged in the manufacture of bio-fungicides and bio-insecticides, namely Sanjeevni (Trichoderma Viride), Phasal Rakshak (Pseudomonas Fluorescens), Kalichakra (Metarhizium Anisopliae) and Daman (Beauverio Bassiana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod from April 2009 to January 2010 without payment of excise duty was proposed as the appellant had erroneously classified the products under ETI 3002 90 30 at Nil rate of duty. The demand was proposed with interest under section 11AB and imposition of penalty under section 11AC of the Central Excise Act. 9. The appellant filed a reply to the show cause notice and denied the allegations. 10. The Commissioner, by the order dated 29.04.2011, held that the products were classifiable under ETI 3808 99 10 instead of ETI 3002 90 30 and confirmed the demand of differential excise duty with interest and penalty. 11. The aforesaid order dated 29.04.2011 passed by the Commissioner was assailed by the appellant before the Tribunal. The Tribunal, by an order dated 12.03.2012, remanded the matter to the Commissioner for a fresh adjudication. The relevant portion of the order passed by the Tribunal is reproduced below: 7. We have gone through the impugned order of the Commissioner and have appreciated the submissions made by both the sides. It seems that there is no dispute about the fact that the appellant s products are formulation of micro organisms as is itself mentioned in the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the appeals are still pending in the Apex Court, the de-novo adjudication proceedings in the instant case has been kept in abeyance till finalization of the issue in the Apex Court. This case will be taken up for adjudication only after the Hon ble Supreme Court gives its final verdict in both the appeals. (emphasis supplied) 13. The appellant sent another letter dated 02.08.2022 to the Commissioner pointing out that the department had not challenged the order of the Tribunal in NMS Babu on the issue of classification of goods before the Supreme Court and so the order of the Tribunal in NMS Babu on the issue of classification issue had attained finality. The appellant also pointed out that the department had withdrawn the appeal in T. Stanes before Supreme Court on account of monetary limit and hence the order of the Tribunal in T. Stanes had also attained finality. Thus, as the decisions of the Tribunal in NMS Babu and T. Stanes had attained finality so far as the classification of the products is concerned, the matter should be decided by the Commissioner. 14. The Commissioner, after considering the submissions of the appellant, by order dated 13.09.2022 confirmed the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment has not contested the issue of classification and accordingly the issue stands settled in their favour . The assertion flows from Para 2 of the remand decision of the Apex Court which read as:- 2. A large number of issues were decided by the impugned judgment dated 25-102005 [2006 (198) E.L.T. 528 (Tribunal)], but Shri A.K. Panda, learned Senior Counsel appearing on behalf of the Revenue, has confined himself to two of these issues. According to him, the CESTAT has not dealt with whether a subsidiary company, viz., Respondent No. 3 in the present appeal, is only a dummy, consequent to which the excisable goods manufactured by it needs to be clubbed with its holding company, viz., Respondent No. 1. If this is done, it is an admitted position that the terms of Notification No. 7/97, dated 1-3-1997, which exempts Small Scale Units if the aggregate value of clearances of all excisable goods do not exceed three crores in the preceding financial year, will not apply as the aggregate value of excisable goods produced from both companies together would exceed three crores. 33.2 I find that the Hon ble CESTAT in their remand order had directed to decide the case in light of two prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the case of M/s. T. Stanes Co. the Original Authority in his order dated 25-10-2004 has examined the evidences and recorded his finding in which he states: From the above, it is seen that the manufacturing process of the impugned goods consist of crushing, blending and mixing it with chemicals, curing and dispatching. Chemicals like Dihydrogen Artho Phosphate, Potasium, Potassium Dihydrogen Phosphate and muriate of Potash etc. are used at the time of broth preparation . Further, the meaning of the word preparation is discussed in Re Bayer Australia Ltd. Vs. Collector of Customs (NSW) (1985) 7 ALN N84 as follows: That a product cannot be a preparation of an intermediate nature not presented in the form ready to be marketed . The learned Primary Judge accepted this definition and held that a preparation is a presentation of a substance which is ready to be used for a particular application or purpose. In our respectful opinion this is the correct interpretation of the word preparation in heading 3808 . The findings of the Original Authority and the above case law clearly establish that the impugned products sold by M/s. T.Stanes Co are disinfecting insecticidal etc. preparatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TI 3808 99 10 as contended by the department. 21. 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 and T. Stanes, 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. 22. 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. 23. It needs to be noted that the Supreme Court decided the appeal filed by the department against the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the excisable goods by both the holding company and the subsidiary company cannot be clubbed only on the basis of a circular dated 29-5-1992. A cursory reading of the circular would show that it refers to a completely different Notification and not to Notification No. 7/97, dated 1-3-1997. 7. In fact, this Court, in Commissioner of Central Excise, New Delhi v. Modi Alkalies Chemicals Ltd. Ors. [2004 (7) SCC 569 = 2004 (171) E.L.T. 155 (S.C.)] has held that this very circular would have no relevance to notifications other than the Notification mentioned therein. This judgment was followed in Parle Bisleri Private Limited v. Commissioner of Customs and Central Excise, Ahmedabad [2010 (14) SCC 378 = 2011 (263) E.L.T. 15 (S.C.)]. 8. It is clear, therefore, that the sole basis on which the CESTAT has decided the issue of clubbing is bad in law. Equally, on the issue of suppression of material facts leading to the extended period of limitation being applicable to the first of the six Show Cause Notices, the CESTAT is equally cursory, relying upon one letter dated 20-7-1998 sent by the subsidiary company in which nothing is stated from which it can be said that there is suppression or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order but has not been specifically dealt with by the Commissioner. 28. 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 Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer to determine the issue afresh. 32. Thereafter, the Commissioner proceeded to examine the classification issue of the products on merits and held that the products in question were correctly classifiable under ETH 3808. To arrive at this conclusion, the Commissioner even went to the extent of placing reliance upon the order passed by the adjudicating authority in T. Stanes, which order had been challenged by the appellant and had been set aside by the Tribunal. The Commissioner then held that the findings of the Original Authority and the above case law clearly establish that the impugned products sold by M/s. T. Stanes Co are disinfecting insecticidal etc. preparations based on cultures of microorganisms and as such merit classification under CETH 3808 . Not only this, the Commissioner proceeded to also comment on the decision of the Tribunal in NMS Babu and observed that the said decision of the Tribunal does not expound the correct position of law and hence reliance placed on it by the appellant is not justified or proper. The relevant portion of the order passed by the Commissioner is again reproduced below: 39. For the above reasons, the decision in the case of NMS Babu Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refusing to carry out the directions of the superior tribunal, yet held that no manifest injustice resulted from such refusal. It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner. That order had become final and binding on the parties, and the respondent could not question it in any way. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to say that the order of the Tribunal was wrong and, therefore, there was no injustice in disregarding that order. As we have said earlier, such view is destructive of one of the basic principles of the administration of justice. In fairness to him it must be stated that learned counsel for the respondent did not attempt to support the judgment of the Judicial Commissioner on the ground that no manifest injustice resulted from the refusal of the respondent to carry out the directions of a superior tribunal. He conceded that even if the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Appeal failed to understand Lord Delvin's speech but whether they did or not, I would have accepted them to know that they had no power to give any such direction and to realise the impossible position in which they were seeking to put those judges in advising or directing them to disregard a decision of this House. Lord Diplock observed at p. 874 of the Reports: It is inevitable in a hierarchical system of courts that there are decisions of the Supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary. When I sat in the Court of Appeal, I sometimes thought the House of Lords was wrong in over ruling me. Even since that time there have been occasions, of which the instant appeal is one, when alone or in company. I have dissented from a decision of the majority of this House. But the judicial system only works if someone is allowed to have the last word and if that last word, once spoken, is loyally accepted. (emphasis supplied) 38. In this connection it will also be appropriate to refer to the decision of the Supreme Court in Union of India vs. Kamlakshi Finance Corporation Ltd [1991 (55) E.L.T. 433 (S.C.)] . The order passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities . The mere fact that the order of the appellate authority is not acceptable to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. ***** 8. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that the decision reached by the coordinate benches has to be scrupulously followed by the other Tribunal. However, in this case, the Tribunal has taken a contrary decision and refused to place reliance on the decisions of the Coordinate Benches . Thus, according to the learned Senior Counsel, without taking note of the ratio laid down by the Coordinate Benches, on the very same issue, the Member (Technical) has passed the prejudicial portion of the order, which cannot be allowed to be sustained. 15. We find much force in the submissions so made by the learned Senior counsel for the petitioner. The prejudicial portion of the order has been passed by the Tribunal in derogation of the various orders passed by the coordinate benches of the Tribunal on the very same issue. xxxxxxxxxx. Therefore, we hold that the very reference made by the Tribunal to determine as to whether the conclusion reached by the Member (Judicial) is right or the one made by the Member (Judicial) itself is unnecessary. The issue before the Tribunal has already been examined and adjudicated by the coordinate benches and it binds the Tribunal in all respects. While so, the Tribunal cannot go beyond the settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frequency of conflicting judgments of the superior judiciary will do incalculable harm to the system inasmuch as the courts at the grass root will not be able to decide as to which of the judgment lay down the correct law and which one should be followed. (emphasis supplied) 42. In the instant case, as noticed above, 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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