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February 20, 2021

Judicial discipline demands that subordinate authorities shall accept the decisions of Tribunal as binding precedent – SC

by CA Shivam Jaiswal in Income Tax

Judicial discipline demands that subordinate authorities shall accept the decisions of Tribunal as binding precedent – SC

Income Tax Appellate Tribunal (ITAT) is a quasi-judicial institution which specializes in dealing with appeals under the Direct Taxes Acts. According to Section 254, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. On a question of fact, the Appellate Tribunal order is a final order and no appeal can lie to High Court against this order. However, if the fact finding had not been done properly by the Appellate Tribunal, the assessee can file a writ petition to the High Court challenging the fact-finding process. If the High Court is satisfied that the claim of the assessee is correct then it will direct the Appellate Tribunal to conduct the fact finding as per the proper procedure.

Let us refer to the case of Khalid Automobiles v. UOI (1995), where the issue under consideration was whether in a case where the goods which were considered in the order of the Central Board and the goods which were subject matter of the appeal are identical, the Collector was justified in taking the position contrary to the order of the Central Board or not.

Facts of the Case:

  • The petitioner, a manufacturer of footwear, imported a consignment of 28500 dozen of pair of soles.
  • When the first consignment arrived at Cochin, the Customs Authorities raised an objection that the goods imported were not soles but they were complete footwear.
  • On this count, the consignment was confiscated by the authorities.
  • Appeal filed before the Central Board of Customs and Excise by the petitioner was disposed.
  • Allowing the appeal, the Board held that the goods imported could not be described as footwear though they were in finished condition.
  • The Government of India issued a notice to the petitioner seeking to revise the order of the Central Board in exercise of its power of revision Suo motu.
  • Meanwhile, a second consignment arrived and the Custom Authorities raised the same objection again and issued a show cause notice to the petitioner for confiscation of the goods.

Petition before the High Court (HC)

  • The petitioner preferred a writ petition before the Delhi HC challenging the show-cause notice issued by the Collector of Customs.
  • In the same writ petition, the petitioner also challenged the notice issued by the Government of India proposing to revise the order of the Central Board.
  • The HC quashed the notice given by the Government of India proposing to revise the earlier order of the Central Board of Customs and Excise on the ground that it was barred by limitation.
  • However, as regards the Show-cause notice issued by the Collector of Customs for the second consignment, the CH held that it was open to Collector to come to his own conclusion on merits of the case and hence there was no occasion for quashing the show cause notice.

Conclusion by the Collector

  • The petitioner appeared before the Collector and brought to its notice the earlier order of the Central Board dated 05-04-1980, wherein the similar goods were held to be covered by the Exemption Notification No. 29 of 1979.
  • The Collector, however, did not agree with the appellant and held that the goods in question were fully finished goods identifiable as chappals.
  • He observed that no expertise was required to insert the straps into them to make them suitable for wearing by human beings.
  • He also held that the earlier order of the Central Board was confined to the consignment which was the subject matter of consideration by the Board and the same did not apply to other consignments.
  • He also observed that in any case, the Board’s order was under review in pursuance of the show cause notice issued by the Central Government.
  • Against the order of the Collector, the appellant approached the Supreme Court under Article 136 of the Constitution.

Observations of the Supreme Court (SC)

  • The Collector was bound by the judicial order made by the Central Board of Customs and Excise when the goods which were considered in the said order dated 05-04-1980 and the goods which were subject matter of the appeal are identical.
  • The Supreme Court held that the Collector was bound to follow the orders of the Board unless there was an order of a higher authority or the jurisdictional High Court or Supreme Court to the contrary.
  • So far as the Collector was concerned, the order of the Board was binding upon him provided the goods were identical specially when the order of the Board was in the case of the appellant himself.
  • The Supreme Court, however, did not express any opinion as to whether the goods considered in the order and the goods imported under the present consignment were identical.
  • This being a matter of fact had to be examined, the Supreme Court remitted the matter back to the Appellate Collector for disposing of the same in accordance with law and in light of the observations made by the Supreme Court.

In conclusion, judicial discipline demands that subordinate authorities shall accept the decisions of Tribunal as binding precedent.

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