Subsequent Change In Law Will Not Ipso Facto Reverse Position Of Parties Viz Their Rights Which Were Declared In The Earlier Order: Gauhati High Court

A Single Bench of Justice Soumitra Saikia has made it clear that a subsequent change in law arrived at by a Court by way of any separate judicial proceeding, wherein the earlier law laid down has been held to be not a good law, will not ipso facto reverse the position of the party viz-a-viz their rights which were declared and concluded by way of an earlier judicial proceedings.

In this regard, the bench relied on AR Antulay v. RS Nayak & Anr., (1988) 2 SCC 602, whereby the Supreme Court had held that "Overruling when made by a larger Bench of an earlier decision of a smaller one is intended to take away the precedent value of the decision without effecting the binding effect of the decision in the particular case."

The Bench also referred to a Division Bench judgment of the Gauhati High Court in Victor Cane Industries v. Commissioner of Taxes & Ors, (2002) 2 GLR 69, where it was held that simply because the law has changed or earlier law laid down has been reversed, it would not entitle the revisional authority to reopen the earlier assessments.

Background

In the instant case, the question before the Court pertained to ramifications of Supreme Court's decision in Unicorn Industries v. Union of India which overruled an earlier judgment in SRD Nutrients Pvt. Ltd. v. Commissioner of Central Excise, Guwahati.

The matter before the Court was with respect to entitlement of industrial units in North-Easter states, towards refund of Education Cess and Secondary and Higher Education Cess paid by them.

It may be noted that the Petitioner-industries were exempted from payment of basic excise duty as part of a scheme to promote industrial development in the region. They had also thereof sought exemption from payment of Education cess payable on excise duty and refund of the amount already paid.

The matter came to be decided in SRD Nutrients (supra) where it was held that the specified industries were entitled to refund of Education Cess and Secondary and Higher Education Cess.

Pursuant thereof, the Excise department passed respective Refund Orders on various dates sanctioning the refunds claimed by the Petitioners.

However, in a recent judgment rendered in the case of Unicorn Industries (supra), the Top Court held that in the absence of notifications containing an exemption to additional duties in the nature of Education Cess and Secondary & Higher Education Cess, it cannot be said that same are exempted.

After this decision, the Department said that the refund made to the Petitioners was "erroneous" and it thus issued Demand-cum-show cause notices under Section 11A of the Central Excise Act, seeking recovery of the refund of Education Cess, Secondary & Higher Education Cess earlier sanctioned/granted to the petitioners

Findings

The Single Bench opined that the term "erroneous" means any error deviating from law. It held

"A change of law subsequently would not make an action taken earlier by Quasi-Judicial Authority in terms of law as it stood then, to be held to be erroneous so as to enable the Departmental Officer to invoke powers under Section 11A of the Central Excise Act."

Binding effect of a Judgment and Principle of Res Judicata

The Bench further said that a Judgment decides the rights between the parties to a lis. Once a Court renders a judgment on the issues viz-a-viz the rights of the parties, such a judgment can only be re-visited by the established judicial norms, namely, a review or an appeal or revision in some cases.

In the instant case the Bench noted that in respect of the some of the Petitioners since the refunds were not granted, writ petitions were filed before the High Court, whereby it was held that Petitioners are entitled to refunds claimed in terms of the judgment of the Apex Court in M/S SRD Nutrients (supra).

It further noted that no appeal or review was filed in respect of these orders, and hence the High Court's order attained finality.

In this backdrop the Bench observed,

"The refunds which were granted by the Department were pursuant to judicial proceedings before the Apex Court and/or the Gauhati High Court, the refunds sanctioned/released were on the basis of orders passed by the Apex Court and/or the Gauhati High Court. Consequently, once a judgment or judicial order is passed by a Court of law against the Department, the remedy available to the Department is by way of an appeal to a higher Court or review."

It added,

"Since, the review filed before the Supreme Court were dismissed and since no further appeal and/or review was passed against the different orders passed by the Gauhati High Court , the lis between the parties, namely, the petitioners and the Department of Central Excise has attained finality in respect of the issues which are now sought to be reopened by way of the demand-cum-show cause notice impugned in the present proceedings. Such a procedure sought to be invoked by the Department is completely alien in law as established by the constitution as well as the law laid down by the Apex Court in a catena of judgments."

Case Title: M/S Topcem India v. Union of India & Ors. (and other connected petitions)

Click Here To Download Order

Read Order