The Assessing Officer says he will not follow the appellate order in my own case because the department has appealed against it. Can he do that?
No. The Supreme Court held that revenue officers deciding quasi-judicial issues are bound by the decisions of the appellate authorities above them, and that the principles of judicial discipline require those orders to be followed unreservedly. That an appellate order is not acceptable to the department - a phrase the Court called objectionable in itself - and is under appeal is no ground for not following it, unless its operation has been suspended by a competent court. If the officer thinks the appellate order is wrong, his remedy is to have the department take the matter up, not to disregard it.
Decided by the Supreme Court (Supreme Court of India - order by S. Ranganathan J) on 1991-09-24, reported as AIR 1992 SC 711; 1991 (55) ELT 433 (SC); (1992) 1 SCC 648; 1992 Supp (1) SCC 443; JT 1992 (1) SC 85; 1991 (2) SCALE 635; 1991 ECR 486 (SC); 1994 (46) ECC 129. It bears on section 35E of the Central Excise Act, 1944, section 35E Central Excises and Salt Act, 1944 of the Income Tax Act 1961, in Appeals and Assessment & Scrutiny matters.
This is the authority a practitioner reaches for when a subordinate officer refuses to apply a binding appellate order - the Tribunal's decision in the assessee's own case, or a Commissioner (Appeals) order for an earlier year - on the footing that the department has filed or intends to file an appeal. The Court supplies both the rule and the answer to the officer's anxiety: the statutory machinery for the department to challenge an order adverse to revenue is what protects the exchequer, so following the appellate order costs the Revenue nothing but time. It also upheld the High Court's strictures, refusing to soften them, on the ground that the tendency, if it spread, would cause considerable harassment to the assessee public without any benefit to the Revenue. Although the case arose under central excise, that reasoning is applied across tax administration.
Binding on every court and authority in India.
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Kamlakshi Finance Corporation manufactured electrical insulation tapes. It said the goods fell under tariff heading 85.47 of the schedule to the Central Excise Tariff Act 1985; the department said heading 39.19. The Assistant Collector issued a show cause notice proposing 39.19. In reply the company pointed out that for its Borivili factory the Collector (Appeals) had accepted its claim under heading 85.46 and held 39.19 inapplicable. The Assistant Collector distinguished that order on the footing that the Borivili claim had been under 85.46 and not 85.47, and by order of 4 January 1988 classified the goods under 39.19. The Collector (Appeals) set that order aside, saying the reason given for not following the earlier appellate order was totally untenable, and directed a reasoned and speaking order. On remand the Assistant Collector, by order of 12 May 1989, simply reiterated his predecessor's conclusion, again gave no reason for not following the appellate order on the Borivili plant, and distinguished a decision of the Tribunal in Chetna Polycoats (P) Ltd to similar effect on the ground that the department had not agreed with it and had appealed to the Supreme Court. The second order was practically a repetition of the first. The company moved the Bombay High Court, which quashed the order, directed the department to allocate the matter to a competent officer, and passed strictures on the two Assistant Collectors. The Union appealed.
The special leave petition was dismissed. On the merits the Additional Solicitor General conceded the department had no grievance, since the High Court had only set aside the order and remanded for proper consideration; the Court noted in passing that the department's appeal against the Tribunal's decision in Chetna Polycoats had itself been dismissed at admission on 13 February 1991. On the strictures, the Court declined to interfere. It accepted that the officers were probably not actuated by mala fides and genuinely thought the claim untenable, but held that was beside the point: they had by-passed two appellate orders on the same issue placed before them, one of the Collector (Appeals) and one of the Tribunal. Revenue officers deciding quasi-judicial issues are bound by the decisions of the appellate authorities. The order of the Appellate Collector binds Assistant Collectors within his jurisdiction, and the Tribunal's order binds both. Judicial discipline requires the orders of higher appellate authorities to be followed unreservedly. That an order is not acceptable to the department and is under appeal is no ground for not following it unless its operation has been suspended by a competent court. The High Court's observations, seemingly vehement and unpalatable to the Revenue, were intended to curb a tendency which, if it spread, would cause considerable harassment to assessees without benefit to the Revenue, and the department should take them in the proper spirit.
The Court separated three things the department had run together: whether the officers' classification was right, whether they acted mala fide, and whether they were entitled to disregard binding appellate orders. Only the third mattered. If the healthy rule of following higher appellate authority is not observed, the result is undue harassment to assessees and chaos in the administration of tax laws. The Court then answered the officers' real anxiety - that accepting the assessee's contention would lose revenue with no way to put it right - by pointing to section 35E of the Central Excise Act. Under sub-section (1) the Board, if not satisfied with the legality or propriety of an order of the Collector, may direct him to apply to the Appellate Tribunal for determination of specified points; under sub-section (2) the Collector, on an order of an authority subordinate to him, may direct that authority to apply to the Collector (Appeals), with a further right of appeal. So whenever an order goes against the Revenue, the immediately higher administrative authority can have the issue taken up and resolved. Given that machinery there is no justification for an Assistant Collector or Collector refusing to follow the appellate order even where he has reservations about its correctness; he must follow it and bring the matter to the notice of the Board or the Collector so that proceedings under section 35E can be taken. If his view is right it will be upheld in the end and the Revenue will get its duty, after the delay such a procedure entails. The remedy, in short, is in the officer's own hands, and it is not disobedience.
The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities.
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court held that revenue officers deciding quasi-judicial issues are bound by the decisions of the appellate authorities above them, and that the principles of judicial discipline require those orders to be followed unreservedly. That an appellate order is not acceptable to the department - a phrase the Court called objectionable in itself - and is under appeal is no ground for not following it, unless its operation has been suspended by a competent court. If the officer thinks the appellate order is wrong, his remedy is to have the department take the matter up, not to disregard it. This was decided by the Supreme Court (Supreme Court of India - order by S. Ranganathan J) and bears on section 35E of the Central Excise Act, 1944, section 35E Central Excises and Salt Act, 1944 of the Income Tax Act 1961. It is reported as AIR 1992 SC 711; 1991 (55) ELT 433 (SC); (1992) 1 SCC 648; 1992 Supp (1) SCC 443; JT 1992 (1) SC 85; 1991 (2) SCALE 635; 1991 ECR 486 (SC); 1994 (46) ECC 129. This is the authority a practitioner reaches for when a subordinate officer refuses to apply a binding appellate order - the Tribunal's decision in the assessee's own case, or a Commissioner (Appeals) order for an earlier year - on the footing that the department has filed or intends to file an appeal. The Court supplies both the rule and the answer to the officer's anxiety: the statutory machinery for the department to challenge an order adverse to revenue is what protects the exchequer, so following the appellate order costs the Revenue nothing but time. It also upheld the High Court's strictures, refusing to soften them, on the ground that the tendency, if it spread, would cause considerable harassment to the assessee public without any benefit to the Revenue. Although the case arose under central excise, that reasoning is applied across tax administration. If it applies to you, the first step is this: Put the binding appellate order on record in the assessment proceedings, in writing, and ask the officer to record why he is not following it; that record is what makes the point reviewable later.
Kamlakshi Finance Corporation manufactured electrical insulation tapes. It said the goods fell under tariff heading 85.47 of the schedule to the Central Excise Tariff Act 1985; the department said heading 39.19. The Assistant Collector issued a show cause notice proposing 39.19. In reply the company pointed out that for its Borivili factory the Collector (Appeals) had accepted its claim under heading 85.46 and held 39.19 inapplicable. The Assistant Collector distinguished that order on the footing that the Borivili claim had been under 85.46 and not 85.47, and by order of 4 January 1988 classified the goods under 39.19. The Collector (Appeals) set that order aside, saying the reason given for not following the earlier appellate order was totally untenable, and directed a reasoned and speaking order. On remand the Assistant Collector, by order of 12 May 1989, simply reiterated his predecessor's conclusion, again gave no reason for not following the appellate order on the Borivili plant, and distinguished a decision of the Tribunal in Chetna Polycoats (P) Ltd to similar effect on the ground that the department had not agreed with it and had appealed to the Supreme Court. The second order was practically a repetition of the first. The company moved the Bombay High Court, which quashed the order, directed the department to allocate the matter to a competent officer, and passed strictures on the two Assistant Collectors. The Union appealed. The matter was decided on 1991-09-24 by the Supreme Court (Supreme Court of India - order by S. Ranganathan J). On those facts the Supreme Court held as follows. The special leave petition was dismissed. On the merits the Additional Solicitor General conceded the department had no grievance, since the High Court had only set aside the order and remanded for proper consideration; the Court noted in passing that the department's appeal against the Tribunal's decision in Chetna Polycoats had itself been dismissed at admission on 13 February 1991. On the strictures, the Court declined to interfere. It accepted that the officers were probably not actuated by mala fides and genuinely thought the claim untenable, but held that was beside the point: they had by-passed two appellate orders on the same issue placed before them, one of the Collector (Appeals) and one of the Tribunal. Revenue officers deciding quasi-judicial issues are bound by the decisions of the appellate authorities. The order of the Appellate Collector binds Assistant Collectors within his jurisdiction, and the Tribunal's order binds both. Judicial discipline requires the orders of higher appellate authorities to be followed unreservedly. That an order is not acceptable to the department and is under appeal is no ground for not following it unless its operation has been suspended by a competent court. The High Court's observations, seemingly vehement and unpalatable to the Revenue, were intended to curb a tendency which, if it spread, would cause considerable harassment to assessees without benefit to the Revenue, and the department should take them in the proper spirit.
The Court separated three things the department had run together: whether the officers' classification was right, whether they acted mala fide, and whether they were entitled to disregard binding appellate orders. Only the third mattered. If the healthy rule of following higher appellate authority is not observed, the result is undue harassment to assessees and chaos in the administration of tax laws. The Court then answered the officers' real anxiety - that accepting the assessee's contention would lose revenue with no way to put it right - by pointing to section 35E of the Central Excise Act. Under sub-section (1) the Board, if not satisfied with the legality or propriety of an order of the Collector, may direct him to apply to the Appellate Tribunal for determination of specified points; under sub-section (2) the Collector, on an order of an authority subordinate to him, may direct that authority to apply to the Collector (Appeals), with a further right of appeal. So whenever an order goes against the Revenue, the immediately higher administrative authority can have the issue taken up and resolved. Given that machinery there is no justification for an Assistant Collector or Collector refusing to follow the appellate order even where he has reservations about its correctness; he must follow it and bring the matter to the notice of the Board or the Collector so that proceedings under section 35E can be taken. If his view is right it will be upheld in the end and the Revenue will get its duty, after the delay such a procedure entails. The remedy, in short, is in the officer's own hands, and it is not disobedience. In the words reproduced by the source cited on this page: "The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities."
It was decided by the Supreme Court on 1991-09-24 and is reported as AIR 1992 SC 711; 1991 (55) ELT 433 (SC); (1992) 1 SCC 648; 1992 Supp (1) SCC 443; JT 1992 (1) SC 85; 1991 (2) SCALE 635; 1991 ECR 486 (SC); 1994 (46) ECC 129. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 35E of the Central Excise Act, 1944, section 35E Central Excises and Salt Act, 1944, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The special leave petition was dismissed. On the merits the Additional Solicitor General conceded the department had no grievance, since the High Court had only set aside the order and remanded for proper consideration; the Court noted in passing that the department's appeal against the Tribunal's decision in Chetna Polycoats had itself been dismissed at admission on 13 February 1991. On the strictures, the Court declined to interfere. It accepted that the officers were probably not actuated by mala fides and genuinely thought the claim untenable, but held that was beside the point: they had by-passed two appellate orders on the same issue placed before them, one of the Collector (Appeals) and one of the Tribunal. Revenue officers deciding quasi-judicial issues are bound by the decisions of the appellate authorities. The order of the Appellate Collector binds Assistant Collectors within his jurisdiction, and the Tribunal's order binds both. Judicial discipline requires the orders of higher appellate authorities to be followed unreservedly. That an order is not acceptable to the department and is under appeal is no ground for not following it unless its operation has been suspended by a competent court. The High Court's observations, seemingly vehement and unpalatable to the Revenue, were intended to curb a tendency which, if it spread, would cause considerable harassment to assessees without benefit to the Revenue, and the department should take them in the proper spirit. It arises in Appeals and Assessment & Scrutiny matters, on section 35E of the Central Excise Act, 1944, section 35E Central Excises and Salt Act, 1944 of the Income Tax Act 1961, and was decided by Supreme Court of India - order by S. Ranganathan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. When told the order is under appeal, respond that a pending appeal is no ground for departing from it unless its operation has been stayed by a competent court, and ask whether any stay exists. Where the officer persists in ignoring a binding order of an authority above him, consider a writ; the High Court here quashed the order and directed that the matter go to a competent officer, and the Supreme Court left that intact. Do not put the argument as mala fides. The Court accepted the officers here were acting bona fide and decided the case on judicial discipline instead.
Still good law. I read the whole order, which runs to its operative dismissal of the special leave petition. I checked no later authority in this session. The proposition is one of judicial discipline rather than of any particular statute, and is routinely applied to income tax authorities although this case arose under central excise; a reader relying on it in an income tax matter should cite it for that principle and pair it with the appeal machinery in the Income-tax Act rather than section 35E. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Until build 87 this library carried a second entry on the same judgment, at /caselaw/case/union-of-india-v-kamlakshi-finance-judicial-discipline/, which asked: The Assessing Officer has ignored an appellate order in my own case because the department has filed an appeal against it. Can he do that? It was the shorter of the two write-ups and has been merged into this one. That address now redirects here, and every citation, section and subject it carried that this entry did not has been folded in. This is a central excise classification matter, not an Income-tax Act case, so the statutory scheme the Court points to as the department's remedy is section 35E of the Central Excise Act 1944 and not anything in the 1961 Act; the batch line's references to sections 254 and 251 and to Article 141 do not appear in the order. The Court did not decide the classification question at all - the department conceded the remand - so there is no ruling here on headings 85.47 and 39.19. The order is reported as an ORDER of Ranganathan J and the harvested page names no other judge, so I cannot say who else sat. I did not check later authority applying this order in income tax matters. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The special leave petition was dismissed. On the merits the Additional Solicitor General conceded the department had no grievance, since the High Court had only set aside the order and remanded for proper consideration; the Court noted in passing that the department's appeal against the Tribunal's decision in Chetna Polycoats had itself been dismissed at admission on 13 February 1991. On the strictures, the Court declined to interfere. It accepted that the officers were probably not actuated by mala fides and genuinely thought the claim untenable, but held that was beside the point: they had by-passed two appellate orders on the same issue placed before them, one of the Collector (Appeals) and one of the Tribunal. Revenue officers deciding quasi-judicial issues are bound by the decisions of the appellate authorities. The order of the Appellate Collector binds Assistant Collectors within his jurisdiction, and the Tribunal's order binds both. Judicial discipline requires the orders of higher appellate authorities to be followed unreservedly. That an order is not acceptable to the department and is under appeal is no ground for not following it unless its operation has been suspended by a competent court. The High Court's observations, seemingly vehement and unpalatable to the Revenue, were intended to curb a tendency which, if it spread, would cause considerable harassment to assessees without benefit to the Revenue, and the department should take them in the proper spirit.
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