CENVAT refund for supplies to 100% EOU and binding precedent must be followed by subordinate authorities.

CENVAT refund under Rule 5 could not be refused merely because the goods were supplied to a 100% EOU and not physically exported; the jurisdictional High Court had already treated such clearances as eligible for refund, making the contrary distinction unsustainable. The ruling also reaffirmed that subordinate quasi-judicial authorities must follow binding decisions of the jurisdictional High Court even where the earlier judgment arose in another assessee's case. Disregard of binding precedent was criticised as contrary to judicial discipline, with the court noting that such conduct may attract civil contempt, although the contempt proceedings were closed on the facts stated.

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Issues: (i) whether the adjudicating authority could refuse refund under Rule 5 of the Cenvat Credit Rules, 2004 on the ground that the claimant had supplied goods to a 100% EOU and had not made physical exports; (ii) whether the adjudicating authority was bound to follow the jurisdictional High Court decision in the assessee's favour notwithstanding that it arose in another assessee's case, and whether the contrary approach justified any contempt-related consequences.

Issue (i): whether the adjudicating authority could refuse refund under Rule 5 of the Cenvat Credit Rules, 2004 on the ground that the claimant had supplied goods to a 100% EOU and had not made physical exports.

Analysis: The refund claim was governed by the law already declared by the jurisdictional High Court that CENVAT credit on inputs used in manufacture of goods cleared to a 100% EOU is refundable and cannot be denied merely because the transaction is treated as deemed export rather than physical export. The impugned orders rejected the claims on an erroneous distinction, and that approach was held unsustainable.

Conclusion: The refusal of refund was held to be untenable, and the claimant was entitled to sanction of refund under Rule 5.

Issue (ii): whether the adjudicating authority was bound to follow the jurisdictional High Court decision in the assessee's favour notwithstanding that it arose in another assessee's case, and whether the contrary approach justified any contempt-related consequences.

Analysis: The judgment reaffirmed that subordinate quasi-judicial authorities are bound by the decisions of the jurisdictional High Court and cannot disregard binding precedent on the ground that the earlier ruling was rendered in another person's case. The reliance on Mafatlal Industries was held to be misconceived, and the court relied on the principles of judicial discipline and binding precedent. The court also noted that such disregard may amount to civil contempt, though it closed the contempt proceedings in view of the apology and absence of mala fides.

Conclusion: The authority was held bound by the earlier High Court ruling, the contrary reasoning was disapproved, and the contempt proceedings were closed without further action.

Final Conclusion: The impugned refund orders were quashed, the refund claims were directed to be sanctioned with consequential relief, and the court issued directions to prevent repetition of disregard of binding precedent by revenue authorities.

Ratio Decidendi: A subordinate authority must unreservedly follow a binding decision of the jurisdictional High Court or superior tribunal, and refund under Rule 5 cannot be denied merely because the binding ruling was rendered in another assessee's case.

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