In Union of India vs Kamlakshi Finance Corporation Ltd (1991 (55) ELT 633(SC)), the Supreme Court reminded the departmental authorities to show respect to the views expressed and orders passed by higher authorities. "It cannot be toovehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities". The need for this is as simple as fundamental. " If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws."

Yet, there are cases when the tribunal is compelled to assail the attitude and perception of the departmental officers is assailed by the tribunal for violating the directions passed by the Supreme Court and being contrary to the manner in which the department is to proceed when it does not intend to agree with the "law laid down" by the tribunal. A recently reported case provides an illustration.

The facts involved in this case fall under a narrow compass. The appellants filed a Modvat declaration in July 1992 under a general description of the tariff entry "other articles of iron and steel" and not by describing individual inputs likeflanges, liner, adopter, etc in respect of which Modvat credit was intended to be taken. Likewise, they filed Modvat declaration of certain copper and nickel products by describing them as "copper and articles thereof" and "nickel and articles thereof".

A question arose whether correct declaration was made and if not whether the Modvat credit was admissible. The commissioner (appeals) rejected the contention of the appellant and agreed with the additional collector who had disallowed the Modvat credit. The commissioner (appeals) justified his order on the perception that in the absence of details about each and every input the scheme of Modvat credit is likely to be misused or abused. The commissioner (appeals) did make an attempt to explain the logic of his perception. "The scheme of Modvat, by its very nature, is vulnerable to intentional misuse or abuse as well as unintentional but incorrect availment of Modvat benefit. In a scheme of this nature, certain prescribed procedures are basic requirements.Unless such basic procedures are followed there can not be any accountability nor there can be by proper monitoring.... In the absence of a proper, complete and accurate description of the goods, the requirement of declaration having been fulfilled for such goods can no be said to have been met."

The tribunal, however, set aside the order passed by the commissioner (appeals). A more striking feature of the order passed by the tribunal in this case is the observations made on the attitude of the commissioner (appeals) in dealing with several judgments that were relied upon by the appellants in their favour. The commissioner (appeals) felt that the ratio of these judgments didn't apply to the facts of this particular case. He disposed of the force of these judgments by observing as follows: "I observe that these cover a situation where the goods supplied by the party are the same as declared in the declaration of a manufacturer but are either described differently or are classified differently in theaccompanying gate pass. This is obviously not the case of the party in the present proceedings."

The tribunal criticised this attitude of commissioner (appeals) observing that "when before a quasi-judicial authority, the law of the land comprising the tribunal, the high courts and the Supreme Court is quoted, it is incumbent on the adjudicating authority at the first instance to look into the precedence". The tribunal warned that such precedents cannot be disposed of casually. "The precedence lay down the manner in which the substantive provisions of law is required to be interpreted. The judgments of the higher forum are precedents which require to be followed and applied by all lower authorities. The non-following or non-analysing the judgments is an act of indiscipline."

Relying upon certain decisions of its own and on examining the facts and circumstances of the case the tribunal allowed the appeal. The tribunal also noted that "when the appellants had clarified the details for the inputs in termsof the sub-heading already furnished, the same ought to have been taken into consideration."

In the above case the two departmental authorities, namely, the additional collector and commissioner (appeals) had both taken a wrong view as per the decision of the tribunal. In fact the tribunal expressed serious concern that the attitude of the officers observed in this case is responsible for increase in disputes and litigation. "It is not for him to merely accept the fact that they are utilised in or in relation to the manufacture of the final product. If the declaration is merely accepted or declaration is rejected without scrutiny, it leads to multiplicity of litigation and the idea is to avoid the same." The concern is well justified. But is only the attitude of the departmental officers responsible for disputes and prolonged finality?

It is seen that at times the industry also claims certain benefits that are not intended and which are patently impermissible. Disputes are raised merely for the sake ofgaining time and deriving fiscal advantage during the interregnum, till a higher authority puts an end to the so-called dispute.

Take an illustration from yet another recently reported case decided by the tribunal. And, again from interpretation of Modvat rules.

Modvat credit scheme was extended to capital goods in 1994. It has been the intention that the benefit would apply to capital goods, their components and parts, including spare parts. The legislature uses certain words or expressions which have to be interpreted and understood in their normal sense and an attempt to give undesirable extended meaning to them causes great violence to the legislative intention. Unfortunately, each and every word or expression used cannot be defined or clarified. But that itself should not be exploited to "manufacture" doubts or disputes.

While, parts of machinery and equipment are eligible to Modvat, is it fair to give totally unwarranted meaning to "part"? More specifically, how many would agree that metal platesrequired for making storage tank is a "part of tank". But you don't lose anything in staking a claim! This is precisely what the assessee did. By filing a declaration in August 1995 they claimed Modvat of excise duty paid on steel plates used for making tanks under rule 57-Q of the Central Excise Rules, 1944. These tanks were used for storing molasses. The assistant commissioner rejected the claim for steel by an order passed in January 1996. He observed that "the items mentioned in the declaration are not covered under the purview of (the Modvat) notification". The assistant commissioner justified his action on the premise that "capital goods should be such, which are used for producing or processing or bringing about any change in any substance for the manufacture of final product in the factory of manufacture". On interpretation of the legal provisions also he rejected the contention of the assessee. "The (aforementioned) items are neither used for the purposes defined under rule 57Q nor specificallyincluded in the list of capital goods as laid down under sub-rule (1)(c) and (d) to rule 57Q of the Central Excise Rules, 1944, the credit of duty paid on such items are now allowable under the said rule 57Q". The assistant collector, therefore, directed the assessee not to take any credit on these items and to reverse the credit immediately, if already taken.

The assessee, however, chose to exercise their right of appeal to commissioner (appeals). The commission (appeals) decided their case in June 1997. He observed that "steel for molasses tank cannot be called capital goods under rule 57Q and so Modvat credit shall not be available on them".

But so what! The assessee could not be deterred from going to the tribunal. They sought to rely upon certain decisions of the tribunal in support of their claim. The tribunal was duty bound to examine these decisions. But at the end nothing emerged except disappointment "We find that none of the cases cited by the appellant pertains to inputs used in themanufacture of goods. In the instant case, steel sheets are inputs for the manufacture of molasses tanks. They are not parts, nor spares nor equipment for manufacture of the steam tanks.

All the case laws cited by the learned counsel for the appellants have been examined and it was found that it does not help the case of the appellant." The tribunal decided the appeal in July 1998. As such, the so-called dispute was dragged for three years. Many wonder whether it is not a gross abuse of the right to merely advance a different opinion when there is no scope for it.

Dispute, disputes and more disputes. Who is responsible? The fault lies on both the sides. Each side blaming the other would not enable us to reach any conclusion. They have to both think constructively and act positively. They should both realise that adding to compliance cost is a national loss.

The author is a joint secretary in the Union ministry of finance. The views expressed in this article are his own