OCTOBER 23, 2024

By Vijay Kumar

A fascinating case:

Facts:

1. A refund application was filed a taxpayer claiming refund of Rs.2,02,09,111/-

2. The refund application was rejected by the Assistant Commissioner of GST, on the ground of limitation that the application was filed after a period of two years.

3. The Taxpayer filed an appeal which was allowed by the Joint Commissioner vide order dated 29.08.2023.

4. The joint Commissioner held:-

"…. Thus, I hold that the refund claim should not have been rejected on the grounds of being time barred. Therefore, I remand back the instant matter to the proper officer to examine the refund application of the appellant afresh and on merits alone. The proper officer shall pass a detailed speaking, order after going through the submissions of the appellant and he shall adhere to the principles of Natural Justice..

5. This impugned order was set aside and the matter remanded to the Assistant Commissioner.

6. The Assistant Commissioner again heard the application and passed an order, wherein, he mentions a letter sent to the Joint Commissioner on 14.12.2023 seeking clarification on the order in appeal.

7. The Joint Commissioner answered the letter dated 14.12.2023 on 29.12.2023, and rejected the same treating it as beyond the scope of Section 161 of the CGST Act.

8. Thereafter, the Assistant Commissioner again rejected the refund application being time barred vide his order dated 24.01.2024.

In these circumstances, the taxpayer approached the High Court challenging the order passed by the Assistant Commissioner dated 24.01.2024.

The High Court took note of the fact that the Assistant Commissioner in his order dated 24.01.2024, noticed that the Joint Commissioner had rejected his application for seeking rectification/clarification of the order passed in appeal, still proceeded to again dismiss the application on the ground of limitation and directed the Commissioner to file an affidavit as to what steps have been taken against his subordinate, who has challenged his authority.

The Commissioner was not pleased to file the affidavit as directed by the High Court.

The High Court noted:

1. We find that the Assistant Commissioner seems to be asserting his authority over and above the order passed in appeal by the Joint Commissioner, who has already observed that the application has to be treated within time and has to be decided on merits.

2. However, Assistant Commissioner, a subordinate officer has refused to examine the case on merits and again dismissed the application as time barred. Such an approach adopted by the subordinate officer is the result of the virtual failure of system of hierarchy in the CGST.

3. If subordinate officers do not comply with the appellate orders, it would be something sort of administrative chaos.

4. Such officers are required to be dealt with by the Department in a strict manner, so that they may not create a precedent for others to start insubordination.

5. It also reflects in general public faith in filing appeals, which would be wavered if the appellate orders are not complied with.

6. Litigation is also forced unnecessarily before this Court.

7. Such insubordination requires to be dealt with more strictness.

Accordingly, the High Court directed the Commissioner to take appropriate departmental action against the Assistant Commissioner for his insubordination, by initiating proceedings for major penalty.

The High Court disposed of the writ petition by setting aside the order of Assistant Commissioner dated 24.01.2024 and at the same time, directed the Commissioner to appoint another officer to deal with the application relating to refund of the petitioner, who would decide it purely on merits within a stipulated period of two months. - PROXIMA STEEL FORGE PVT LTD Vs UNION OF INDIA - 2024-TIOL-1758-HC-P&H-GST

Now, will the Commissioner obey the directions of the High Court? Why did he not file the affidavit as required by the High Court? Perhaps, he had no grounds to defend his insubordinate Assistant Commissioner.

And why should an Assistant Commissioner go out of his way to disobey a superior appellate order and invite disciplinary action on himself?

An Assistant Commissioner, illegally, irresponsibly, in violation of all norms and in total disregard to judicial discipline held over two 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 dis-ease 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.

Thirty three 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 obviously did not like the High Court's strictures on the officers and the harsh comments apparently in anguish rather than anger. After all, the Department had no grievance on merits of the case since the High Court had only remanded the matter for a proper consideration and a proper order. But the real grievance was that the High Court erred in passing severe strictures against the Departmental 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.

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.

On the High Court's order being harsh, the Supreme Court observed,

It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assessee-public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them.

This was in 1991 and in 2024, we have an Assistant Commissioner who refuses to follow the appellate orders of his superior.

This raises another question. Can an adjudicating authority be punished for a wrong order, however, wrong it might be?

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

Until next week