2024 (2) TMI 561 - AT - Central Excise

CESTAT cannot reject refund appeal for non-deposit when Supreme Court judgment already established entitlement

M/s Jindal Photo Limited Versus Commissioner of C.E. & S.T. Jammu

CESTAT Chandigarh rejected appellant's appeal for non-deposit of mandatory pre-deposit regarding Education Cess and S H Education Cess refund. However, ... Refund of Education Cess and S&H Education Cess paid through PLA - appeal rejected on account of non deposit of mandatory pre-deposit - HELD THAT:- The Parallel proceedings for recovery of the self-credit/refund erroneously taken by the appellant in respect of Education Cess and S&H Education Cess during the overlapping period, were adjudicated by the original authority as well as by the appellate authorities of the department and appellant was asked to deposit an amount of Rs. 22,69,936/-. Thereafter, the CESTAT vide its Final Order [2018 (10) TMI 2020 - CESTAT CHANDIGARH] held that the appellant is entitled to take the refund of Education Cess and S&H Education Cess in view of the judgment of the Hon’ble Supreme Court in the case of SRD Nutrients Pvt. Ltd. [2017 (11) TMI 655 - SUPREME COURT] - It is also found that pursuant to CESTAT’s Order dated 25.10.2010, the appellant duly applied for refund of the amount so deposited and was granted by the original authority vide its order dated 11.03.2019 wherein the Original authority has also observed that the appellant is entitled for refund of Education Cess and S&H Education Cess and by following the decisions of the CESTAT, the Original authority has rightly granted the refund. The High Court has stated that the decision in SRD Nutrients (P) Limited [2017 (11) TMI 655 - SUPREME COURT] had attained finality and was binding on the parties thereto. Therefore, the subsequent decision of this Court overruling SRD Nutrients (P) Limited in the case of M/s Unicorn Industries [2019 (12) TMI 286 - SUPREME COURT] cannot have a bearing on past decisions which had attained finality although they had followed SRD Nutrients (P) Limited, which was subsequently overruled in M/s Unicorn Industries. Otherwise a pandora's box would be opened and there would be no end to litigation, which is against public policy. In view of the above, the appellant is entitled to the refund of Education Cess and S&H Education Cess and the said order has been complied with by the Revenue. ISSUES PRESENTED AND CONSIDERED 1. Whether refunds of Education Cess and Secondary & Higher Education Cess taken through self-credit/PLA under the exemption notification are admissible to the claimant for the period in question. 2. Whether a subsequent higher-court decision overruling an earlier Supreme Court ruling (which formed the basis for grant of refunds) permits the revenue to recover refunds that had been granted and attained finality under the earlier ruling. 3. Whether collateral actions by a quasi-judicial authority or revenue to reopen or recover refunds that have been adjudicated and refunded following a final tribunal/order are permissible, in view of principles of finality, public policy and availability of judicial remedies. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of Refunds of Education Cess and S&H Education Cess under the Exemption Notification Legal framework: The entitlement to refund was claimed under a statutory exemption notification permitting credit/refund of cesses; the departmental view was that levies imposed by subsequent Finance Acts fell outside the notification's scope. Precedent Treatment: The Tribunal previously adjudicated that the claimant was entitled to refund of the cesses for the overlapping period, and the original authority thereafter granted refund in compliance with that tribunal order. Interpretation and reasoning: The Tribunal observed that the parallel recovery proceedings and the subsequent grant of refund were decided on the basis of the earlier binding precedent that was 'in vogue' at the relevant time. The original authority, following the tribunal's direction, correctly applied the prevailing legal position to allow the refund. Ratio vs. Obiter: Ratio - where a refund claim is adjudicated and allowed by a tribunal/authority in accordance with the law prevailing at the time, the grant is lawful. Obiter - incidental observations about the underlying statutory scope of the notification beyond what was necessary to uphold the refund. Conclusion: The claimant was entitled to the refund under the law as it stood when the tribunal/order was rendered, and the original authority lawfully granted the refund in compliance with that order. Issue 2 - Effect of a Subsequent Overruling Supreme Court Decision on Past Final Refunds Legal framework: Principles of finality of adjudication, public policy against reopening settled litigation, and the availability of appropriate judicial remedies by the revenue (as opposed to unilateral administrative action) govern whether a later adverse precedent may be applied retroactively to unsettle past final orders. Precedent Treatment: A High Court held that where refunds were sanctioned on the basis of an earlier Supreme Court judgment then in force, the revenue cannot reopen or recover those refunds merely because a later Supreme Court decision has overruled the earlier one; the Supreme Court subsequently upheld that High Court view on special leave. Interpretation and reasoning: The Tribunal relied on the High Court and the Supreme Court outcome which recognized that allowing recovery in such circumstances would 'open a Pandora's box,' undermining finality and public policy. The Court emphasized that past decisions which attained finality and were followed to grant refunds cannot be retrospectively disturbed by executive action on the sole basis of a changed judicial view, absent proper judicial process invoked by the revenue. Ratio vs. Obiter: Ratio - a subsequent overruling decision ordinarily does not permit the revenue to recover refunds that were granted and had attained finality under the earlier binding authority; such retrospective disturbance is barred by considerations of finality and public policy. Obiter - comments on exceptional circumstances under which reopening might be permissible (not necessary to the decision rendered). Conclusion: The subsequent overruling of the then-prevailing Supreme Court position does not entitle the revenue unilaterally to recover refunds already granted and finalized under the earlier law; the decision of the High Court upholding this principle was affirmed by the Supreme Court and is binding on the present dispute. Issue 3 - Permissibility of Collateral Reopening or Recovery by Quasi-Judicial/Revenue Authorities after Final Orders Legal framework: Administrative or quasi-judicial action to reopen concluded matters is constrained by principles of finality, the need to provide litigants repose, and procedural limitations (limitations, maintainability, and availability of judicial remedies). The revenue's appropriate remedy to challenge final orders is by instituting proper judicial proceedings, not by collateral administrative recovery. Precedent Treatment: Courts have observed that refunds sanctioned pursuant to a binding judicial decision cannot be revoked collaterally by a quasi-judicial authority; a later adverse judicial pronouncement does not by itself permit unilateral retraction of refunds that had become final. Interpretation and reasoning: The Tribunal noted that parallel recovery proceedings coexisted but that the particular amounts were deposited and later refunded pursuant to final tribunal orders. Given the High Court and Supreme Court rulings holding that reopening such settled matters is impermissible, the Tribunal found reliance solely on the later overruling authority by the Commissioner (Appeals) insufficient to sustain recovery. Ratio vs. Obiter: Ratio - unilateral collateral reopening/recovery of refunds that have attained finality is impermissible; the revenue must resort to appropriate judicial remedies rather than executive retraction. Obiter - ancillary procedural discussion regarding limitation and maintainability where not necessary to dispose of the appeal. Conclusion: The impugned order relying only on the subsequent overruling authority to deny/refund or recover amounts was unsustainable; collateral reopening by the appellate/departmental authority was impermissible where the issue had been finally adjudicated and complied with. Overall Conclusion and Disposition The Tribunal concluded that (a) refunds granted in compliance with a tribunal/order based on the law prevailing at the relevant time were valid; (b) a subsequent overruling Supreme Court decision could not be invoked by the revenue to recover amounts that had attained finality without resort to appropriate judicial remedies; and (c) the impugned order that denied the refund/reopened settled refunds by relying solely on the later overruling decision was not sustainable in law, and was set aside with consequential relief as per law.