Court quashes show cause notices post Tribunal decision, emphasizes binding effect of higher appellate orders.

The High Court allowed the petition, quashing the show cause notices dated 21.8.2012 and 22.1.2013. It emphasized the binding effect of the Tribunal's decision in Sarla Performance Fibers Ltd., stating that adjudicating authorities must follow higher appellate orders. The court criticized the repeated issuance of show cause notices post the Tribunal's decision, highlighting the disregard for binding precedents. The High Court ruled in favor of the petitioner, emphasizing the importance of following established legal principles and exhausting alternative remedies before approaching the court.

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Issues Involved:

1. Legality of levying education cess and secondary and higher education cess on DTA clearances by a 100% EOU.
2. Binding effect of the Tribunal's decision on subordinate authorities.
3. Jurisdiction and appropriateness of issuing show cause notices after the Tribunal's decision.
4. Exhaustion of alternative remedies before approaching the High Court.

Issue-wise Detailed Analysis:

1. Legality of Levying Education Cess and Secondary and Higher Education Cess on DTA Clearances by a 100% EOU:

The petitioner, a Public Limited Company operating as a 100% Export Oriented Unit (EOU), challenged the imposition of education cess and secondary and higher education cess on Domestic Tariff Area (DTA) clearances. The petitioner argued that these cesses should not be levied on the sum total of customs duties. The Customs Excise & Service Tax Appellate Tribunal (CESTAT) in Sarla Performance Fibers Ltd. vs. Commissioner of C.Ex. Vapi held that once the measure of Customs Duty equivalent to Central Excise Duty is worked out, levying education cess separately for clearances by a 100% EOU to DTA is not warranted.

2. Binding Effect of the Tribunal's Decision on Subordinate Authorities:

The Tribunal's decision in Sarla Performance Fibers Ltd. was binding on the adjudicating authorities. Despite this, the adjudicating authority continued to issue show cause notices demanding cess, which was challenged by the petitioner. The High Court reiterated that the principles of judicial discipline require that orders of higher appellate authorities should be followed unreservedly by subordinate authorities. The court cited Union of India vs. Kamlakshi Finance Corporation Ltd. to emphasize that revenue officers must follow the decisions of appellate authorities unless suspended by a competent court.

3. Jurisdiction and Appropriateness of Issuing Show Cause Notices After the Tribunal's Decision:

The petitioner had previously succeeded in Special Civil Application No. 12686 of 2012, where the High Court struck down the adjudicating authority's order. Despite this, new show cause notices were issued, which the petitioner challenged as arbitrary and in disregard of the High Court's previous decision. The High Court noted with strong disapproval the repeated acts of the adjudicating authority ignoring binding precedents and stated that such actions led to multiplicity of proceedings and undue harassment to the assessee.

4. Exhaustion of Alternative Remedies Before Approaching the High Court:

The respondent contended that the petitioner should exhaust alternative remedies and respond to the show cause notices instead of approaching the High Court directly. The High Court, however, found that the adjudicating authority committed a serious error by disregarding binding precedents and that there were no disputed facts, thus justifying the petitioner's approach to the High Court without exhausting alternative remedies.

Conclusion:

The High Court allowed the petition, quashing and striking down the show cause notices dated 21.8.2012 and 22.1.2013. The court emphasized that the decision of the Tribunal in Sarla Performance Fibers Ltd. continues to hold the field and must be followed by the adjudicating authorities. The court reiterated that any challenge to the Tribunal's decision should be pursued through appropriate proceedings as permissible under the law. The rule was made absolute to the extent above.

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