AUGUST 23, 2023

By Vijay Kumar

A taxpayer filed a refund application on 31 December 2021. On 1 February 2022, a show cause notice was issued. The taxpayer replied to the said show cause notice on 14 February 2022. By an order dated 22 February 2022 passed in Form GST RFD-06, the refund claim was rejected, against which an appeal was filed by the taxpayer. By an order dated 11 October 2022, the appeal was allowed.

In pursuance of the order in appeal, the taxpayer again filed a refund claim on 29 November 2022. The Assistant Commissioner of CGST issued a show cause notice dated 28 December 2022, as to why the refund claim should not be rejected. The taxpayer replied to the SCN on 11 January 2023, pointing out that the issues were considered by the Appellate Authority in the appeal and a finding of fact was recorded. The Assistant Commissioner by his order dated 27 January 2023 rejected the petitioner's refund claim and confirmed the show cause notice.

Against this order, the taxpayer is before the High Court. (2023-TIOL-987-HC -MUM-GST) with the contentions that:

1. The Assistant Commissioner has patently erred in passing the impugned order, inasmuch as, he in fact has sat in appeal over the orders passed by the Additional Commissioner (Appeals) dated 11 October 2022, by which the appeal filed by the petitioner was allowed on merits.

2. The Assistant Commissioner who is an authority lower in hierarchy and certainly bound by the orders which were passed by the Additional Commissioner (Appeals), cannot take such a position in law and reject the claim of the petitioner on the same grounds which in fact were subject matter of consideration in the appeal proceedings.

3. This would not only amount to gross administrative indiscipline but also result in subordinate authorities, not honouring the orders passed by the higher authorities.

The Revenue Counsel submitted that:

a decision has been taken to review the orders passed by the Appellate Authority dated 11 October 2022 and as the Appellate Tribunal has not been constituted, an appeal would be filed as and when the Tribunal is constituted. (till then, what happens to the taxpayer? Is he doomed?)

However, he was not in a position to justify as to how the Assistant Commissioner can take a position that he is not bound by the orders passed by the Appellate Authority and would have authority to revisit the findings and to come to a conclusion different from what has been arrived at by the Appellate Authority.

The High Court observed,

1. At the outset, we may observe that the petitioner has been pursuing the refund application in question from December 2021, when the petitioner made the application on 31 December 2021 followed by issuance of a show cause notice dated 1 February 2022, its adjudication denying refund and an appeal against the same before the Appellate Authority culminated into a final order dated 11 October 2022 of the Additional Commissioner, CGST & Central Excise (Appeals) having taken place, is not in dispute.

2. A perusal of the order passed by the Additional Commissioner(Appeals), would indicate that all contentions of the department were taken into consideration which are findings of fact as recorded on correlation of the entire material.

3. The only remedy for the department if at all was to seek review. If the department was of the opinion that the order passed by the Additional Commissioner needs to be challenged, the same was required to be assailed in the appropriate proceedings. Thus, certainly it was not open to the Assistant Commissioner to pass the impugned order which amounted to sitting in appeal over the order passed by the Additional Commissioner (Appeals).

4. On this ground, the impugned order is required to be held to be passed in patent lack of jurisdiction, as also on the face of it illegal. The Assistant Commissioner could not have passed the impugned order, as he was certainly bound by the orders passed by the Additional Commissioner (Appeals), and the absence of any stay to the appellate orders grants benefit of the appellate orders to the petitioner.

5. The principles of law as laid down by the Supreme Court are well settled. In Union of India Vs. Kamlakshi Finance Corporation Ltd. 2002-TIOL-484-SC-CX-LB , the Supreme had directed the department to adhere to the judicial discipline and give effect to the orders of higher appellate authorities which are binding on them.

6. In view of the above discussion, we have no doubt that the petition needs to succeed. We accordingly allow this petition. We direct the respondents to sanction to the petitioner the refund amount of Rs. 11,69,07,326/- with appropriate interest in terms of Section 56 of the CGST Act, 2017.

7. The amount be refunded within a period of two weeks from today.

An Assistant Commissioner, illegally, irresponsibly, in violation of all norms and in total disregard to judicial discipline held over 11 crores of rupees rightfully belonging to a businessman. How frustrating and defeating it is for a businessman to have his money held up by a tax officer, out of ignorance and arrogance! Is it a disease of doing business?

Be you ever so high, the law is above you - except for a few revenue officers who honestly believe they are above Law. It is really unfortunate that an otherwise well-disciplined department like the Indirect Taxes&Customs has scant respect for judicial discipline. An Assistant Commissioner or Joint Commissioner would never disobey the executive orders of a Commissioner written or unwritten, legal or illegal and a Commissioner will never dream of disobeying similar orders of a Chief Commissioner or Board. Perfectly right. But when it comes to judicial decisions, departmental officers flout with total impunity (and immunity) orders of the Tribunal and even those of the High Courts and Supreme Court. The unfortunate fact is that these Revenue officers believe that they are better than the judiciary and nothing will happen to them if they pass orders in total violation of binding principles laid by the Tribunal or higher Courts.

Thirty two years ago the Apex Court in UNION OF INDIA v KAMLAKSHI FINANCE CORPORATION LTD [ 2002-TIOL-484-SC-CX-LB ] - very clearly held that,

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.

This was actually on an appeal from an order of the Bombay High Court in Kamlakshi Finance Corporation vs Union Of India on 19 October, 1989 in which the High Court observed,

This Writ Petition bears out the useless and unsatisfactory manner in which officers of the Excise Department carry out their duties. The purpose of their orders appears to be to classify the product under the heading which will attract the maximum duty irrespective of whether that is the proper classification or not and also without taking into account the decisions of the Tribunal or of the Appellate Collector. Discipline would require that they would be bound by it but the paramount discipline in the Excise Department appears to be to try to secure as much money as possible from the assessees and not to do what is right or correct or legal .

This is totally unacceptable and amounts to indiscipline of the worst sort. This indicates how quasi-judicial powers are being misused by people who are not qualified to exercise the same. Their only purpose seems to be to collect as much money as possible or to harass the assessees to the maximum extent possible. The difficulty is what is to happen in future, because we are quite sure that if we pass an order of remand such incompetent and indisciplined officers will go on passing orders in this unsatisfactory manner. There seems to be no control of the department over such officers .

It may be for the Department, if there is any competent officer, to allocate the matter to that officer to pass a proper order .

The Department took the matter to Supreme Court as they did not like the High Court's strictures on the officers. The Supreme Court observed,

we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently 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.

But many in the field do not consider the Supreme Court supreme and have consistently flouted this sacred principle.

The whole system of judicial decisions will end up in a mockery if lower authorities are allowed to disregard the judicial decisions of higher authorities. It has become a practice among quasi-judicial authorities to somehow pass orders in favour of revenue even by blatant disobedience of the orders of higher authorities.

Be you ever so high, the law is above you.

Until Next week