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Dear Professional Colleague,

Ignoring judicial discipline and recording conclusions diametrically contrary to judgment of the Tribunal is either illustrative of gross incompetence or clear irresponsible conduct - Revenue to pay litigation costs

We are sharing with you an important judgment of the Hon’ble CESTAT, Delhi in the case of RGL Converters Vs. Commissioner of Central Excise, DELHI-I [2014-TIOL-2305-CESTAT-DEL] on following issue:

Issue:

Whether the Revenue is justified in ignoring judicial discipline and recording conclusions diametrically contrary to judgment of the Tribunal?

Facts & background:

RGL Converters (“the Appellant”) is a manufacturer of Printed Cork Tipping Paper (“PCT”). The relevant process involves procurement of Cork Tipping Base Paper (CKT) including Other Uncoated Paper and Paper Board in rolls or sheets, including jumbo rolls of specified width and length. The jumbo rolls are first trimmed on their edges to remove torn portions and then printed in rotary printing machines with specific designs with the aid of non-toxic, non-poisonous and specially formulated food grade liquid printing ink (purchased from manufacturers of those products). Thereafter, the rolls are slit to the specified, required width.

The Department contended that a new product emerges from the said process, which bears a different name, characteristic and classification i.e. PCT, classifiable under Tariff Heading No. 48239014.

Accordingly, Show Cause Notice was issued to the Appellant confirming the duty liability of Rs. 24,70,163 /- apart from interest and penalty.

The Appellant submitted to the Adjudicating Authority that in their own case the Hon’ble CESTAT held that the said process does not amount to manufacture so as to be charged to Central Excise duty. However, the Adjudicating Authority rejected the arguments of the Appellant on the basis that the judgment of the Hon’ble CESTAT were challenged before the Hon’ble Delhi High Court and the Hon’ble Delhi High Court had dismissed the Department’s appeal only on the ground of limitation and not on merits. Hence the order of the Hon’ble CESTAT had not attained finality and thus unworthy of efficacy as a binding precedent. The Commissioner (Appeals) also took a similar view and rejected the appeal filed by the Appellant.

Being aggrieved, the Appellant preferred an appeal to the Hon’ble CESTAT, Delhi.

Held:

The Hon’ble CESTAT, Delhi held that:

- It is a trite principle that a final order of this Tribunal is an operative judgment per-se, not contingent on ratification by any higher forum, for its vitality or precedential authority. The fact that Department’s appeal against the judgment of this Tribunal was rejected only on the ground of bar of limitation and not in affirmation of the conclusions recorded on merits, does not derogate from the principle that a judgment of the Tribunal is per se of binding precedential vitality qua Adjudicating Authorities lower in the hierarchy, such as a primary Adjudicating Authority or Commissioner (Appeals);

- It is axiomatic that judgments of this Tribunal have precedential authority and are binding on all quasi-judicial authorities. If an Adjudicating Authority is unaware of this basic principle, the Authority must be inferred to be inadequately equipped to deliver the quasi-judicial functions entrusted to his case. If the Authority is aware of the hierarchical judicial discipline (of precedents) but chooses to transgress the discipline, the conduct amounts to judicial misconduct, liable in appropriate cases for disciplinary action;

The Authorities in this case, have chosen to ignore judicial discipline and have recorded conclusions diametrically contrary to the judgment of this tribunal. This is either illustrative of gross incompetence or clear irresponsible conduct and a serious transgression of quasi-judicial norms by the Authorities.

Accordingly, the Hon’ble Tribunal quashed the order of the Adjudicating Authority and the Commissioner (Appeals) and directed the Department to pay the Appellant an amount of Rs. 10,000 within a month.

Further, the Registrar was also directed to communicate a Copy of the Order to the Central Board of Excise and Customs and to the Secretary (Revenue), Ministry of Finance, Government of India, for information.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards.

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

Flat No. 34B, Ground Floor, Pocket - 1,

Mayur Vihar, Phase - I,

Delhi – 110091, India

Email: bimaljain@hotmail.com

Web: www.a2ztaxcorp.com

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

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