S. Ranganathan, J.
1. This is a writ petition filed by M/s. J.K. Synthetics Limited and its director Shri Sohan Lal Singhania praying for the issue of a writ of certiorari quashing the order of the Assistant Collector, Central Excise, Kota dated 3rd March, 1973, two letters addressed by the Assistant Collector and the Collector of Central Excise to the petitioner company dated 6th March, 1973 and 9th March, 1973 and a trade notice dated 6th March, 1973 issued by the Collector of Central Excise. It is also consequently prayed that the respondents should be directed to immediately refund to the petitioners a sum of Rs. 68,84,365.86 being the excess excise duty recovered from the petitioner company with interest. The writ petition has been filed in the following circumstances.
2. M/s. J.K. Synthetics Limited is a public limited company which manufactures Nylon Yarn at its factory at Kota. The company's plant at Kota has been installed under an industrial license granted for the manufacture of nylon yarn which is said to have an integrated and continuous process production. The raw material used for the manufacture of nylon yarn is a Chemical known as Caprolactam which is described as a monomer. The basic process of manufacture consists in polymerising the above raw material and then melting and spinning, the polymer in a continuous process. After spinning the same is stretched and treated to obtain the desired qualities and grades of nylon yarn. The dispute in the present writ petition relates to the assessment of excise duty in respect of what is described as 2-ply crimped yarn. The nylon yarn initially spun by the company is of a single ply. Two such ply are thereafter crimped in opposite directions and twisted together so that when so combined a homogeneous 2-ply nylon yarn is obtained which cannot be then separated without damaging the yarn. This 2-ply yarn is thereafter used as a single yarn for the manufacture of fabrics is of a thickness slightly more than those that plays which have been crimped and twisted together as mentioned above.
3. Nylon yarn is subject to central excise duty under Entry 18 of the Central Excise Tariff which, in so far is relevant for our purpose, reads as under :
'18. Rayon and Synthetic Fibres and Yarn, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.
Explanationn. - 'Rayon and synthetic fibres and Yarn' shall be deemed to include -
(iii) man-made filament (continuous) yarn; and
All such yarn, single or crimped, falls only under this item. However, the rates of duty vary according to the thickness of the nylon yarn which is described as 'Denier'. The denierage of the yarn and the corresponding excise duty at the relevant time was as follow :
Denier Group Rate of duty/kg.(i) 1-35 38.50(ii) 36-80 33.50(iii) 81-110 28.50(iv) 111-150 23.50(v) 151-750 11.50(vi) 751 and above. 5.85 In other words the position was that the greater the denierage the lower was the rate of duty.
4. The 2-ply nylon yarn obtained by the petitioners was of the denierages 152, 180, 200 and so on. According to the petitioner company the excise duty was payable by it in respect of the above commodity only @ 11.50 per kg. on the basis of its resultant denier. On the other hand the attempt of the department which is resisted in this writ petition is to levy higher rates of excise duty applicable to the denier groups 36.80 and 81-110 based not on the resultant denier of 2-ply nylon yarn but on that of the single plys which were utilised for obtaining the 2-ply nylon yarn. The principal argument on behalf of the petitioner company is that it is liable to pay excise duty only on the resultant denierage and not according to the denierage of the component elements.
5. It may, however, not be necessary to decide this question in the present writ petition on account of certain circumstances of the present case which acquired greater emphasis in the course of the arguments on the writ petition. It appears that originally some time in 1968, controversy arose between the petitioner company and the excise duty authorities as to the basis on which excise duty should be levied on the 2-ply nylon yarn manufactured by the petitioners. On 5th August, 1968 the petitioners had made a representation to the Superintendent of Central Excise claiming that excise duty was payable only on the basis of the resultant denier. By his letter dated 6th/7th August, 1968 the Superintendent informed the petitioners that the matter was being referred to the higher authorities and that in the meantime the 2-ply nylon yarn should be cleared on the basis of the denierage of the components. On 7th September, 1968 the petitioners made a representation to the Assistant Collector of Central Excise requesting him to rectify the previous assessments and to grant refund of the excise duty on the basis of resultant denierage to the petitioners. By an order dated 25th October, 1969 the Assistant Collector of Central Excise, Ajmer held, after discussing the various contention raised by the petitioner company, that excise duty charged on 2-ply nylon yarn on the basis of the denierage of the denierage of its components was correct and rejected the petitioner company's case. The petitioners preferred an appeal the Collector of Central Excise who rejected the appeal by his order dated 11th May, 1970. Thereupon the petitioners preferred a revision application to the Central Government under Section 36 of the Central Excises & Salt Act, 1944. During the Course of the revision proceedings, various affidavits and reports from laboratories were filed regarding the determination of the denier of 2-ply nylon yarn. Ultimately on 26th May, 1972 the Central Government passed an order accepting the case put forward by the assessed. After a discussion of the several contentions put forward on behalf of the petitioners the Central Government held that the petitioners' claim that only the resultant denierage of the cirmped yarn should be taken into account for the purpose of excise duty should be accepted. It was observed :
'Therefore, having regard to the fact (i) that the export and drawback incentives are based on the denierage of the resultant yarn, (ii) that there is no Explanationn below item 18 of the Central Excise Tariff, similar to that under item, 18A and 188 for cotton and woollen yarn, that in the case of synthetic yarn the denier of a plied yarn will be the denier of the single yarn, and (iii) in the absence of any such stipulation in any standard methods of determining the denierage (including I.S. specification) the assessment of crimped yarn on the basis of the resultant denierage cannot be denied.'
The Central Government thereforee allowed the revision petition and also directed that all consequential reliefs should be granted.
6. According to the petitioners a sum of Rs 2,05,62,824.96 became liable to be refunded to the petitioner pursuant to the order of the Central Government dated 26th May, 1972 in respect of the excess excise duty collected from it for different periods from May 64 to 16th June, 1972. It is stated in paragraph 13 of the petition that the excise department has subsequently refunded to the petitioners only the refunds due in respect of the calendar years 1970 and 1971 and the period from January 1972 to 16th June, 1972. A sum of Rs. 81,84,365.86 being the refunds due in respect of the periods from May 1964 to December, 1969 has still not been granted to the petitioners in spite of repeated requests made by them. The first grievance of the petitioners is that this huge sum of Rs. 69.84 lacs the refund of which became due to the petitioners as a result of the revisional order of the Central Government which is final and binding on both the authorities and the assessed under Section 36 of the Act has been wrongfully withheld and that thereforee this court should issue a writ of mandamus directing the respondents to refund the said amount to the petitioners with interest with interest at 12% per annum for the period between the date when the duty was deposited till the date on which it is actually refunded to the petitioners.
7. But this is not all. On 3rd March, 1973 the Assistant Collector of Central Excise, Kota wrote a letter to the mill manager of the petitioner company stating as follows :
'It has been decided that the assessment of crimped yarn would not be on the basis of the resultant denier of crimped yarn but on the basis of the denier of the single basic yarn used for crimping. You are, thereforee, directed that assessment be made accordingly with immediate effect.'
In other words the petitioners have been directed to clear their future production after paying excise duty on the basis indicated in the letter mentioned above. The petitioner's grievance is that despite the revisional order by which the Government after careful examination accepted the case of the petitioners the respondents have chosen to raise demands practically on the same basis as the orders dated 25th October, 1969 and 11th May, 1970 earlier referred to which had actually been set aside by the revisional authority. In the writ petition the petitioners allege that this must have been due to directives received from the higher authorities and this suspicion of the petitioners is actually borne out by the contents of the trade notice dated 6th March, 1973 and the letter of the Central Government dated 9th March, 1973. Though the letter was issued subsequent to the letter of the Assistant Collector dated 3rd March, 1973 earlier referred to and though the trade notice also bears a subsequent date it is quite clear that the action taken by the Assistant Collector is in consequence of the decisions taken at the highest level. The letter dated 9th March, 1973 merely refers to the reasons given in the trade notice. The trade notice proceeds of the purported application of Rule 9(1) of Central Excise Rules. It states :
'2. It has been reported that single filament yarn which is the raw material for manufacture of plied crimped yarn, is in a fully manufactured condition immediately after undergoing the process of stretching on the drawing machine. A major part of this yarn on cops is cleared, as such, on payment of duty; a small percentage of it, however, is taken to another section where it is subjected to the process of crimping. After crimping such yarn is either cleared from the factory on payment of duty as single crimped yarn on it is taken to another machine called doubling machine, where two single crimped yarns are combined for subsequent clearance on payment of duty as double plied crimped yarn.
3. The matter has been examined Under Rule 9(1) of Central Excise Rules, 1944, no excisable goods shall be removed from any place where they are manufactured whether for consumption or manufacture of any other commodity in or outside such place until the excise duty livable thereon has been paid at such place. Removal of excisable goods for further manufacture is 'removal' for purposes of excise levy and duty has to be collected before the goods are so removed. In view of the above provision in the Rules, duty is livable as soon as the single filament yarn is manufactured.
4. It is, thereforee, hereby ordered that excise duty on nylon single filament yarn shall be levied and collected before such yarn is taken is taken for further manufacture of crimped yarn.'
Indeed it has now transpired that there had been a circular issued by the Central Board of Central Excise and Customs dated 22nd February, 1973 the contents of which more or less have been repeated in the trade notice and which need not, thereforee, be repeated here. There is, thereforee, no doubt that the action taken by the Assistant Collector of Central Excise on 3rd March, 1973 has been based on the circular issued by the Central Board of Central Excise and Customs.
8. At this stage we may mention that the petitioners are also contesting and challenging the correctness of the basis of the above circular of the Central Board, and further proceedings initiated against them. They point out that the commodity or item of goods manufactured by them is yarn and that they carry out only one integrated and single process of manufacture of this yarn. Sometimes the process of manufacture stops with the emergence of a single ply yarn in which event the goods are removed at that stage and excise duty is paid thereon. But in some cases the process of manufacture continues by taking the single ply yarn to the next stage of crimping and them manufacturing the crimped 2-ply yarn. In such cases the goods manufactured by the assesses is the crimped yarn : in the process of this manufacture there is no removal of the yarn at any intermediate stage away from the process of manufacture either for purposes of sale or for purposes of domestic consumption. In these cases the yarn produced is only the crimped yarn in respect of which it had been rightly held by the Central Government as early as 1972 that the excise duty was payable on the basis of the resultant denierage. The Central Excise Tariff specks of only one item under Item 18 and this is 'Yarn'. Whether the yarn is single filament yarn or crimped yarn it falls under the same tariff item, namely, Item 18. In fact the Central Board itself had recognised in its subsequent circular dated 21st March, 1974 that there is only one excisable commodity and on this basis proceeded to direct that after levying duty on the single filament yarn the department should not again levy excise duty at the stage of crimped yarn. According to the petitioners this stand of the department is clearly consistent with the petitioners' own case that there is only one excisable commodity produced by the assessed. In cases where single ply yarn is removed from the stage of manufacture and sold it will be liable to duty at that stage. But if the single integrated process of manufacture continues without interruption and the yarn that emerges from the factory is the crimped yarn, it will fall to be charged with the excise duty only at the stage of final manufacture as crimped yarn but not at the intermediate stage when the single filament yarn is produced because that item is not removed within the meaning of Rule 9(1) either for the purposes of sale or for purposes of consumption. This stand of the petitioners is opposed by the respondents who try to substantiate and support the stand taken in the circular of the Central Board of Direct Taxes dated 22nd February, 1973 and the trade notice referred to earlier.
9. Immediately on receipt of the order of the Assistant Collector dated 3rd March, 1973 the petitioners lodged a protest with the Assistant Collector of Central Excise. On 6th March, 1973 Assistant Collector replied to the petitioners stating that excise duty on crimped yarn was livable on the basis of denier of single yarn. On 9th March, 1973 the Collector of Central Excise also confirmed the action of the Assistant Collector by reference to the trade notice as already mentioned. Since the petitioners apprehended that the action of the Assistant Collector and the Collector had been taken not on their own initiative but on the basis of the directives from above, they approached this court under Article 226 of the Constitution of India seeking not only the refund of the amounts paid in excess from May 1964 onwards (up to 16th June, 1972) but also for further directions restraining the respondent from levying and claiming excise duty on the crimped yarn manufactured by them with reference not to the resultant denierage but with reference to the denierage of the components of the crimped yarn.
10. Before proceeding to deal with the one important preliminary point which we think is sufficient to dispose of the present case it is necessary to refer to certain interim orders passed in this writ petition. Along with the writ petition which had been filed on 20th March, 1973 the petitioners had also asked for interim stay of collection of further excise duty on the basis of the letter dated 3rd March, 1973. On this petition a Division Bench of this court passed the following order on 20-4-1973 :
'Heard. The counsel for the petitioner gives an undertaking that in the of petition ultimately not succeeding in the petition he will pay the difference between the amount demanded and the amount which according to the petitioner is payable under toe order of the Central Government (Annexure D). The petitioner further undertakes not to demand refund of Rs. 68,84,365 which according to the petitioners is refundable to them under the Central Government Order. The petitioner further undertakes to pay the Excise Duty on the yarn cleared by them from time to time in accordance with the Central Government Order (Annexure D). The question of adjustment of the above amount of Rs. 68 lakhs and odd against the arrears of duty which the petitioners are held liable may be considered at the time of disposal of the writ petition. The respondents are at liberty to make a levy of the excise duty which according to them is livable on the petitioner but shall not collect the amount which is in excess of the amount livable under the Central Government Order (Annexure D).
In view of the undertaking given by the counsel for the petitioner the interim stay is modified in accordance with the undertaking. The undertaking of the petitioners shall be in force only pending the disposal of the writ petition. The respondents are at liberty to mention to the Court that the amount of Rs. 68 lakhs and odd is exhausted.'
11. It may also be mentioned at this stage that even this question as to whether in the case of crimped yarn the duty is payable at the stage when the single ply yarn was produced or whether it is payable at the stage when the crimped yarn is removed from the factory was also considered by the Central Government when it passed its revisional order on 26th May, 1972. The Central Government notices in paragraph 4 of its revisional order the contention of the petitioners that they had stored the crimped yarn in the store room approved by the department under Rule 47 and it is only at the time of removal that the duty was charged. Again in paragraph 7 of the order in revision the point is specifically dealt with in the following words :
'Regarding the main issue that the duty is livable at the single yarn stage and it is only deferred to the time of clearance the Government of India observe that is a well established principle that while legally the goods become liable to duty on production, the rules provide that the date of determination of duty is the date of removal of goods from the factory. This is evident not only from Section 4 of the Act which requires the assessable values to be determined as at the time of removal of goods, but also from Rules 9 & 9A which deal with the clearance of goods from the place of production and the determination of the rate of duty and valuation. Rule 9A(1)(ii) makes it all clear that the date for determination of duty and tariff valuation, in the case of goods cleared from a factory, is the date of removal of such goods from such factory. Crimped yarn being yarn falls under item 18 itself, and is thereforee, assessable in the same manner as the single straight yarn, at the time of clearances from the factory on the basis of the denier of the yarn in the form it is presented for clearance. And the danierage of such yarn has to be determined according to the standard methods available. There is no stipulation in there methods that in the case of crimped yarn, either single or plied yarn, this denierage would be the denierage of the single yarn.'
12. At the hearing of the writ petition, apart from raising the contentions that the excise duty payable on the crimped yarn can be only on the basis of the resultant denierage and that the denierage of the single ply could not be made the basis of levy of excise duty even on the basis of the purported removal because there was no removal within the meaning of Rule 9 until the crimped yarn was manufactured. Sri Ravinder Narain, learned counsel for the petitioners, also raised a preliminary point that in the present case the revenue was not entitled to take up estoppel from taking its present stand. He pointed out that the nature of the assessed's business had remained the same, that the facts and circumstances and the relevant provisions of the Excise Act were the same, that the Tariff entries were also the same and urges that in these circumstances the department was not entitled without any clear or cogent reasons, to depart from the conclusion which had been already arrived at in relation to the earlier period. The determination by the Central Government of the same issue in respect of the period from May 1964 to June 1972 was final and binding and without any charge in circumstances or law and without any clear or cogent reasons for such departure, he submitted, it was not open to the Central Excise authorities to take proceedings against the petitioners on a basis which had been taken in the earlier years but which had been upset by the revisional authority.
In support of his contention, Sri Ravinder Narain relied on the decision of a learned judge of this court dated 2nd February 1978 in Bharat Carpets Ltd. v. Union of India (Suit No. 142/73) - 1978 ELT (J 111). In that case the plaintiff company Bharat Carpets Ltd. had a suit against the Union of India for the recovery of a sum of Rs. 7,31,153.08. For the period from 22nd June, 1968 to 20th April, 1972 the Union of India had demanded and collected an excise duty of the amount indicated above in respect of the carpets manufactured by the plaintiff company. It appears that in respect of a part of the period covered by the action the company had filed an appeal which had been unsuccessful, but had preferred a further revision to the Government which had been accepted on 14th April, 1972. In the revisional order it was held that the woollen tufted carpets manufactured by the plaintiff company were not excisable goods. On the basis of the said order as well as otherwise the plaintiff company sought for a refund of the amount of Rs. 7,31,153.08 which it claimed had been paid under coercion and/or mistake. On behalf of the Union of India it was contended that if the plaintiff company was aggrieved by the order levying excise duty it should have proceeded to have challenged the same in appropriate forums under Central Excise Act. It was contended that the revisional order of the Government of India determined a refund of only Rs. 14,387.08 and that the amount of Rs. 7,31,153.08 was not covered by the order in revision. Naturally the contest between the parties revolved round the scope of the order dated 14th April, 1972 passed by the Government of India in revision. There was no doubt that the order in revision was confined only to a narrower period and concerned only with the amount of Rs. 14,381.06. But the question that arose was as to the effect of this order regarding the claim put forward on behalf of the plaintiff. While it was contended on behalf of the plaintiff company that the order passed under Section 36 of the Act was final and binding more so when no change in the product or law had taken place, it was argued on behalf of the Union of India that the order passed in the earlier application was restricted only to the period to which the refund related and that it had no application for subsequent periods. Learned counsel for the Union of India relying on Dwarkadas Keshardeo Morarka v. CIT, : 44ITR529(SC) , B. D. Barucha v. CIT, : 49ITR135(Bom) , and Installment Supply (P) Ltd. & another v. Union of India and Others, : 2SCR644 , contended that in matters of taxation there was no question of rest judicata because when fresh material came to the notice of the taxing authority, it has the power to re-orient and re-consider the amount of tax payable. The learned judge held that the ratio of the decisions relied upon had no application to the case where no evidence had been collected and the only question involved was the interpretation of the expression 'woollen fabrics'. According to him, thereforee, the order passed by the Government had wider scope and covered even subsequent periods and the failure to refund the amount of excise duty and making, instead, further demands in utter violation of the said order which was fully binding on the Department was wholly illegal. On the basis of this decision it is contended on behalf of the petitioners that the position is identical in the present case and that the petitioners are, thereforee, entitled not only to the refund of the excise duty collected and directed to be refunded but also to an order restraining the respondents from enforcing a different basis of levy for the subsequent periods.
13. This contention is not only far-reaching in its consequences but appears, at first, contrary to the well settled proposition of law that the doctrine of rest judicata or estoppel will not apply in matters of this kind. In an early English case, an attempt was made to apply this doctrine to tax matters as well (see Hoystead's case, 1926 App Cas 155) but subsequent decisions in England have consistently refused to do so. It is sufficient to refer to the decision of the Privy Council in the case of Abdul Cafoor, (1961 App Cas 584), which has pointed out that Hoystead is inconsistent with a long line of authority starting from the Broken Hill decision, 1926 App Cas 94 P.C. and ending with Society of Medical Officers of Health v. Hope, (1960 App Cas 551, H.L.) - Lord Radcliffe has explained in this decision that the applicability or otherwise of the rules of estoppel and rest judicata to such proceedings turns not on whether the Tribunal which has given the earlier decision was one which exercised judicial functions or not but rather on the principle that 'in matters of a recurring annual tax a decision on appeal with regard to one year's assessment is said not to deal with 'sadem quaistio' as that which arises in respect of an assessment for another year and consequently, not to set up an estoppel'. The learned Lord explained, after referring to the scope of the jurisdiction of a Board of Review set up under the Income-tax Ordinance there in issue :
'The critical thing is that the dispute which alone can be determined by any decision given in the course of these proceedings is limited to one subject only, the amount of the assessable income for the year in which the assessment is challenged. It is only the amount of that assessable income that is concluded by an assessment or by a decision on an appeal against it (see section 75). Although, of course, the process of arriving at the necessary decision is likely to involve the consideration of questions of law, turning upon the construction of the Ordinance or of other statutes or upon the general law, and the tribunal will have to form its view on these questions, all these questions have to be treated as collateral or incidental to what is the only issue that is truly submitted to determination.'
The question in Broken Hill (supra) was whether, an earlier decision of the High Court of Australia under a rating Act notwithstanding, it was open to the Revenue to take a contrary stand in a subsequent year and the Privy Council answered the question in the affirmative. The Committee said :
'The decision of the High Court related to a valuation and a liability to a tax in a previous year, and no doubt as regards that year the decision could not be disputed. The present case relates to a new question, namely, the valuation for a different year and the liability for that year. It is not eadem quasetic, and thereforee the principle of rest judicata cannot apply.'
In Cafoor's case, the Commissioner of Income-tax sought to deny the petitioner, for the years 1950-51 to 1954-55, an exemption which it had been held entitled to for the year 1949-50 under the order of an appellate Board of Review. It was held that the respondent was not estopped by the earlier decision of the Board of Review from challenging the assessed's claim for exemption for subsequent years on the principle that 'a question for liability to tax for one year is always to be treated as as inherently a different issue from that of liability for another year, even though there may appear to be similarity or identity in the questions of law on which they respectively depend' and hence 'a Supreme Court decision would be no more capable of setting up an estoppel than would one made by the Board of Review, whatever its precise status as a judicial tribunal' (vide page 597). These principles have been applied in India also. There are indeed a large number of decisions of several High Courts and the Supreme Court on various questions arising under the Income-tax Act, holding that neither the assessed not the departmental is to be held bound by a stand or attitude adopted by it in an earlier year or on an earlier decision. Indeed, the Supreme Court has held that, in a subsequent year, it is open to the Department to take up, in relation to an earlier transaction, even a stand contrary to the that taken by it in relation to the year in which the earlier transaction was put through and came up for consideration - see New Jahangir Vakil Mills Co. Ltd. v. CIT, ( : 49ITR137(SC) and CIT v. Brij Lal Lohri & Another : 84ITR273(SC) . Such being the position in tax law and rating law there can be reason why the same principle will not also be applicable to excise matters. So, it can be urged, the decision of the excise authorities or even the High Court in relation to a particular period does not have a conclusive effect except in regard to that particular period and cannot be treated as a decision for all time to come. If Broken Hill and Cafoor (supra) are to be applied straightaway, the preliminary objection raised by counsel for the petitioners has to fail.
14. However, while it has been repeatedly held that the principle of rest judicata or estoppel as such will not apply in tax matters and that the view taken by the assessing or appellate or revisional authority or even the High Court in respect of any one assessment year period will not be final and conclusive for subsequent periods, it was observed even in Snoath's case, (1932 - 17 Tax Cases 149), that such earlier decision will be a cogent factor in the determination of the same point in the following year. This rule has also been approved in a number of decisions of the Supreme Court, mainly while dealing with an argument that decisions on questions of fact concluded by a decision for an earlier assessment year could not be reopened in a subsequent year. Thus, in Subbayya Chettiar v. CIT, : 19ITR168(SC) , the Supreme Court, considering the question of the residential status of the assessed, observed that as the question had been decided mainly with reference to the question of proof, 'the decision must be confined to the year of assessment ton which this case relates and it would be open to the appellant to show in future years by proper evidence that the seat and control and management of the affairs of the family is wholly outside British India'. Raja Bahadur Visheshwara Singh (deceased) & Others v. CIT, 1961 42 ITR 685, and Dwarkadas Kesardas Morarka v. CIT, : 44ITR529(SC) involved the question whether certain shares held by the assessed were capital investments or merely part of the stock-in-trade of his business. The Supreme Court held that 'in the matter of assessment of income tax each year's assessment is complete and the decision arrived at in a previous year on the material then before the taxing officer cannot be regarded as binding in the assessment for subsequent year' and that the mere fact that certain shares had been held to be stock-in-trade in previous year, does not mean that they must be similarly treated for the assessment year 1949-50, and would not preclude the Officer from finding, if there were sufficient materials before him, that they formed part of the capital investments of the assessed or vice versa. In M. M. Ipoh and Others v. CIT, : 67ITR106(SC) , the Supreme Court, while reiterating that the rule of rest judicata would not apply emphasised that findings of fact in one year would be 'good and cogent evidence' in subsequent years. To a similar effect was the decision in Dalhousie Investment Trust Co. v. CIT, 1968 68 ITR 487. In Investment Ltd. v. CIT, 1970 77 ITR 5333, it was observed that 'though... an order made in assessing the income of one year regarding the nature of a transaction or the income there from was not conclusive in another year, the finding... was good and cogent evidence of the nature of the transaction... for (a subsequent assessment year)' and this was one of the reasons why the Tribunal's finding contrary to that in earlier years was set aside following this line of decisions. Chandrachud J. (as His Lordship then was) held in Karsendas Ranchoddas, : 83ITR256(Bom) , that the Tribunal 'in failing to consider the orders of assessment relating to subsequent years (had ignored good and cogent evidence' and so its finding could not be accepted. In other words, these decisions import into the rule of non-applicability of the principles of rest judicata and estoppel a limitation that while the earlier decision is not conclusive or immutable, it can be ignored or brushed aside or departed from only for good and cogent reasons.
15. The question which we are now called upon to consider is as to the precise scope of this limitation. What will be its effect in a case where there are no changes in the circumstances, either factual or legal Will it be open to the department, without any cogent reasons and merely at its own caprice, to refuse to follow the conclusion reached on the earlier occasion and to take up a totally different stand in a subsequent year In answering this question, it has to be appreciated that, while what is sought to be done in this case is to ignore or brush aside the decision taken by one of the departmental authorities on the same issue for an earlier period, it should make no difference in principle even in a case where the decision for the earlier year had been confirmed by the High Court or Supreme Court in appropriate proceedings for, as pointed out by Lord Radcliffe, the rule operates not because of the nature of the proceedings in which the decision was taken earlier but because of the truly limited scope of the issue decided earlier. If that be so, the question for consideration would be whether, for a subsequent period, the department can contend that the decision on an issue on an earlier occasion would have no importance or relevance whatever when the issue arises subsequently, even if it had been contested up to, and decided by, the High Court or Supreme Court for the earlier period. If the matter is looked at from this larger perspective, we think it will be clear that there can be only one answer to this question viz. that the department should not be permitted to take different stands unless there is any good or cogent reason for the change in view. For example if the facts are different or if further and fresh facts are brought on record or if the process of manufacture has changed or if the relevant entries in the tariff have undergone a modification or if, subsequent to the earlier decision there has been the pronouncement of a High Court or the Supreme Court which necessitates reconsideration of the issue, it can hardly be doubted that the department can take a different view and have the matter agitated right up to the Supreme Court, if necessary. But when there is no change at all and when the position is exactly the same, legally and factually, as it was on the earlier occasion then we think that the department should be restrained from capriciously changing its stand and inflicting unnecessary proceedings and hardship upon assesseds.
16. We find that there is a distinct line of authority in India enunciating this limitation on departmental action. As early as 1930, a full Bench of the Madras High Court reviewed the cases bearing upon the question in Sankaralinga Nader v. CIT, (2nd 53 Madras 420). The Full Bench was concerned with the power of the Income-tax Officer and what it held was that the officer was not bound by the rule of rest judicata or estoppel by record. But the Full Bench made it clear that the power of the Income-tax Officer to reopen a matter was not unlimited and the limitation it laid down was this :
'It seems to us that where income-tax officials have, after inquiry, proceeded to assess the assessed on a certain basis, though they may be entitled to reopen the enquiry, they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with the preceding officer's finding. The position is just like the position of any two parties who have proceeded on a certain basis in their relations. It may be open to one party to reopen the matter. But if he wants to do so, there should be facts which would entitled him to do it. If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor we think he is entitled to reopen the question. But if there are no fresh facts it is difficult to see how he can arbitrarily go behind the finding of his predecessor. The same principles of natural justice or judicial dealing, which Courts impose upon Income-tax Officers, would prevent them capriciously setting aside the orders of their predecessors based on enquiry.'
17. The Full Bench also considered the question whether the decision of the High Court on a reference relating to one assessment year would operate as rest judicata for a subsequent assessment year. The seemingly conflicting decisions of the Judicial Committee in Broken Hill Proprietary Co. Ltd. v. Broken Hill Municipal Council, (1926 App Cas94 P.C.), and in Heystead v. Commissioner of Taxation, (1926 App Cas155), were considered and thus reconciled. The court observed :
'The principle to be deduced from these two cases is that where the question relating to assessment does not vary with the income every year but depends on the nature of the property or any other question on which the rights of the parties to be taxed are based, e.g., whether a certain property is trust property or not, it has nothing to do with the fluctuations in the income; such questions if decided by a Court on a reference made to it would be rest judicata in that the same question cannot be subsequently agitated. But if the question is decided by a Court on a reference which depends upon considerations which may vary from year to year, e.g. the case in which the average valuation had to be taken, there could be no question of rest judicata.'
18. The issue has received critical discussion at the hands of Chagla, C.J., in what may be described as the leading case on the subject in regard to this aspect, N. A. Shah and Co. v. CIT, : 30ITR618(Bom) . In that case it had been held by the Income-tax Appellate Tribunal in relation to the assessment year 1941-42 that one Hire Lal was a partner of the firm of Shah & Co. under a Deed of Partnership dated 13-12-1939 not in his own right but only as a trustee on behalf of one Vasant Lal, a minor. However, the same question was agitated for the assessment years 1942-43 to 1944-45 and when the appeals went to the Tribunal it took the view that Hira Lal was a partner in his own right. The argument on behalf of the assessed was that the issue that arose in both sets of assessment years was the same, that the Appellate Tribunal was a judicial body analogous to a court and that, thereforee, the principle enunciated in Sankaralinga Nadar (supra) in regard to the decision of the High Court on a reference would apply with equal force to the Tribunal's decision on an appeal for 1941-42. This argument was repelled by the court. The learned Chief Justice pointed out that the principle of rest judicata applied in courts in order to give finality to litigation and to confer the characteristic of conclusiveness to the decision of a court but observed, referring to the observation in Commissioner of Inland Revenue v. Sneath, 193-17 Tax case 149, that the above principle would not apply to income-tax assessments where each year the authorities were considering an entirely new case. After referring to the Madras Full Bench and other decisions of the Madras, Patna, Nagpur and Allahabad High Courts as outlining the circumstances in which the income-tax authorities could reopen and depart from their earlier decisions, the learned Chief Justice remarked that it was not strictly necessary for the case before them to consider what the position of a High Court decision was in regard to rest judicata, for that principal would not be applicable to the decisions of the Income-tax Appellant Tribunal and other income-tax authorities. So far these authorities were concerned, the learned Chief Justice earlier in the judgment, had posed the questions : 'Can it be said that because the principle of rest judicata does not apply, an Income-tax Authority is entitled to go back upon a finding given in an earlier decision without any limitation whatsoever ?' and 'Can it be said that in the subsequent year when that very question arises it is open to the Income-tax Authorities at their sweet will to come to a conclusion which is contrary to the one arrived at in the earlier assessment ?' and answered them thus :
'While taking the view that the principle of estoppel or rest judicata does not strictly apply to the Income-tax Authorities, we wish to make it clear that we don not suggest that it is open to a Tribunal to come to a different conclusion to the one arrived at by that very Tribunal earlier without any limitation whatsoever... If the first decision was not an arbitrary decision or a perverse decision, if the first was decision was arrived at after due inquiry and if no fresh facts were placed before the Tribunal giving the second decision, would it still be open to the second Tribunal to come to a contrary conclusion ?... In our opinion it would not be open to a second Tribunal to disturb the decision given by the first Tribunal... the mere fact that the second Tribunal may look upon the decision of the first Tribunal as erroneous in law would not justify it in coming to a contrary conclusion or reversing the finding of the first Tribunal...in order to enable the second Tribunal to depart from the finding of the first Tribunal it is (not) essential that there must be some fresh facts which must be placed before the second Tribunal which were not placed before the first Tribunal. If the first Tribunal failed to take into consideration material facts, facts which had a considerable bearing upon the ultimate decision, and if the second Tribunal was satisfied that the decision was arrived at because of the failure to take into consideration these material facts and that if these material facts had been taken into consideration the decision would have been different, then the second Tribunal would be in the same position to revise the earlier decision as if fresh facts had been placed before it... Even though the principle of rest judicata may not apply, even though there may be no estoppel by record, it is very desirable that there should be finality and certainty in all litigations including litigations arising out of Income-tax Act. It is not a very satisfactory thing that an assessed should feel a grievance that one Tribunal came to one conclusion and another Tribunal came to a different conclusion and that the two conclusions are entirely inconsistent with one another. thereforee the second Tribunal must be satisfied that the circumstances are such as to justify it in departing from the ordinary principles which apply to al Tribunals to try and give as far as possible a finality and a conclusiveness to the decision arrived at. We should also like 'to lay down a further limitation upon the power of the Tribunal to revise the decision given earlier by that very Tribunal. The effect of revising this decision should not lead to injustice and the court must always be anxious to avoid injustice being done to the assessed.'
19. Applying the above principles to the facts of the case the court came to the conclusion that there was justification for the Tribunal while dealing with the appeals for the later assessment years to review the findings in the earlier appeal and come to a different conclusion. It will be seen from the above discussion that Chagla C.J. had laid down no new principle but only reiterated the principles enunciated in earlier decisions except the additional limitation referred to in his judgment. The same principle had also been followed in subsequent cases. In Burmah Shell Refineries Ltd. v. Chand, : 61ITR493(Bom) , the Bombay High Court, referring to Shah & Co. (supra) observed :
'The view of this court thus had been that though the Income-tax Officer is not bound by the rule of rest judicata or estoppel on record, he can reopen a question previously decided only if fresh facts come to light which on investigation would entitled the officer to come to a conclusion different from the conclusion previously reached or if the earlier decision had been rendered without taking into consideration material evidence'.
and that the Income-tax Officer, while completing a provisional assessment, could ignore a claim of the assessed which had been accepted in an earlier year as totally irrelevant. In CIT/E.P.I. v. Kotrika Ramaswamy Chetty, : 64ITR388(AP) , the principle was extended to maintain consistency between the findings in assessment and penalty proceedings. A bench of the Punjab High Court in CIT v. Dalmia Dadri Cement Ltd., , also applied the same principle. In that case, the assessed company was making certain payments to one R. D. Aggarwal under an agreement dated 27-5-1938. For well over a decade, up to the assessment year 1955-56, the revenue had been allowing the payment of compensation as revenue expenditure and this conclusion was never questioned even in revision by the Commissioner of Income-tax. But for the first time in assessment year 1955-56, the amount was sought to be disallowed as capital expenditure. The court observed :
'With reference to H. A. Shah and Co. v. Commissioner of Income-tax (supra), the learned counsel has contended that it is not permissible to the revenue now, in regard to the assessment year 1955-56, to take a different view, there having been no change whatsoever in the facts and circumstances of the case. In that case, Chagla C.J., with whom Tendolkar, J. agreed, held that as a general rule the principle of rest judicata is not applicable to decisions of the income-tax authorities. An assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessed or the department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigation arising out of the Income-tax Act and an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision, and if the Tribunal giving the earlier decision has taken to the Income-tax Appellate Tribunal, but then, as pointed out, it was never questioned by the Commissioner of Income-tax in exercise of his powers of revision which was the mode open to the revenue for reconsideration of the decisions of the Income-tax Officer year after year. It has not been shown in this case that the earlier decisions were either arbitrary or perverse or that by the time of the assessment year 1955-56 fresh facts had come into existence and came before the income-tax authorities. On this consideration this was not a proper case in which the revenue should have gone back on its approach adopted it this case for well over a decade.'
The court which approved the view taken by the Income-tax Appellate Tribunal on the merits also held, for the above reason, that in the circumstances it was not a proper case in which the revenue should have gone back on its approach adopted in this case for well over a decade. Again, in Seth Ramnath Daga v. CIT, : 82ITR287(Bom) , the Bombay High Court after citing certain decisions of the High Court and Supreme Court for saying that the principle of rest judicata would not apply to findings of the Income-tax Tribunal also referred to Kaniram Ganpat Rai v. CIT, 1941 9 ITR 3 32 Pat.) and Tejmat Bhojing v. CIT ( ), and observed that the issue could be reopened or reconsidered if fresh facts come to light or the previous decision had not been arrived at after due enquiry.
20. The above decisions bring out clearly that whatever may be the position of a court of law or of an Appellate Tribunal it is not open to the Income-tax Authorities to change their view capriciously. An authority can depart from a finding arrived at in an earlier year only for cogent reasons. There should be either fresh facts or a change of law or at least a suggestion that while arriving at the conclusion of the earlier year certain material facts or provisions had not been considered and that if they had been considered a different view might have been taken. But for no reason at all there can be no departure from the view taken in an earlier year. This rule is based both in the principle that there should be a finality to litigation even in Income-tax matters as well on principles of natural justice.
21. It appears to us that the above principles squarely apply to the facts of this particular case. Our attention has not been drawn to any change in the factual or legal position nor has it been brought to our notice that the earlier decision was vitiated by any failure to notice material facts or material considerations. On the other hand the Central Government had after a careful consideration revised a view which had been taken by the Excise authorities and cancelled an assessment made on the petitioner. That being the position we are of opinion that it was not open to the excise authorities to take a different view without any valid reasons and to start levying excise duty on the basis of the individual deniers of the yarn which ultimately came out as crimped 2-ply yarn.
22. We were, at first, a little hesitant to come to this conclusion lest it should unduly fetter the rights of the department to frame a proper and correct assessment in accordance with law, merely because of an erroneous view taken earlier, due to oversight, lack of proper consideration or other reasons. But, on careful consideration, it appears to us that the principle followed by us carries with it its own limitations and inherent restrictions and ensures freedom to the Department in cases where a fresh consideration is due for genuine reasons. Also, not being a conclusive objection like rest judicata but only a rule of natural justice it only precludes the same authority or one subordinate to him from revising his views arbitrarily and that too, only in the case of the particular assessed where the earlier decision has been taken. Thus, where the original decision is taken by an assessing authority, it is open to the higher authorities, who may consider it a wrong decision, to exercise their powers of revision or review under the Act and to set out the correct position. But if this has not been done or, if in a revisional proceeding for an earlier year, the ultimate revisional authority has taken a view in favor of the assesses, fresh proceedings cannot be launched against the assessed merely because the department later thinks that the previous view is untenable or that the matter should be agitated and a fresh decision obtained. In such cases, the Department would still have the remedy of enunciating its views in another case where its hands are not so tied and matters can be pursued therein. If eventually the High Court or Supreme Court approves its views, that would enable the department to apply these views even in cases where a different view was taken earlier by it. The rule will thus not really prejudice the interests of the department in any way. It is indeed a harmonious reconciliation between two well-established positions : on the one hand, that the matter of levy of tax in respect of each occasion is a separate and independent subject matter and that, generally speaking, there can be no reason why the authorities as well as the assessed could not approach the matter from different stand points on different occasions and the practical necessity, on the other, that there should be a finality to all litigation even in tax matters and that it should not be open to the department to change the pattern of assessments at its whim and put an assessed to avoidable inconvenience and harassment.
23. For the above reasons, we have come to the conclusion that the preliminary objection to the assessment raised by Sri Ravinder Narain has to be upheld. In fact it may be pointed out that so far as the period up to 16th June, 1972 is concerned the position is fully concluded by the order of the Central Government dated 26th May, 1972 which has already become final. As stated earlier the department has implemented the decision on the Central Government in part and refunded various amounts to the petitioner. There is a complaint that still there is a sum of Rs. 68,84,365.86 outstanding to the petitioner. On behalf of the respondent it is stated that the rafundability of these amounts needs to be verified. We were a little surprised that substantial amounts of about Rs. 68 lacs should have been withheld by the Government from 26th May, 1972 till 1980 on this vague ground. But we find that as a result of interim order passed by this court in this writ petition which has been set out earlier the petitioner had undertaken not to demand the refund of this amount on its being allowed to withhold the payment of taxes in respect of further periods extent of this amount of Rs. 66 lakhs. The court gave liberty to the respondents to mention to the court when the amount of Rs. 68 lacs got exhausted but the respondents have not availed of this and have not sought for any directions from this company subsequently. In view of this interim order the petitioner can have no grievance for the non-payment to them of the said sum of Rs. 68 lakhs and odd during the pendency of the writ petition. However, now that the writ petition is being disposed of, we direct that the respondents do take immediate action to carry out whatever verifications may be necessary and refund to the first petitioner all the amounts due to it in respect of the period up to 16th June, 1972 as per the orders of the Central Government dated 26th May, 1972. The said refunds should be granted to the petitioner within a period of three months from the date of receipt of this order failing which the petitioner would be entitled to interest at 12% p.a. thereon from the expiry of the above period of three months till the date of actual payment. So far as the period subsequent to 16th June, 1972 is concerned we direct, for the reasons discussed earlier, the issue of (a) a writ of certiorari quashing the trade notice dated 6th March, 1973 (Annexure H), the letters dated 3rd and 6th March, 1973 (Annexures A & F) and the letter dated 9th March, 1973 (Annexure C) issued by the respondents and (b) a writ of mandamus restraining the respondents from taking any steps or action pursuant to the aforesaid letters, orders or notice or seeking to recover excise duty from the petitioner on the basis of the above.
24. The writ petition is allowed. The petitioners will be entitled to their costs : Counsel's Fee, Rs. 500.
25. After the judgment in the above writ petition was announced learned counsel for the petitioner draws our attention to a reference in the judgment to an interim order of the court dated 20-4-1973 and to the following observations in the penultimate paragraph of the judgment :
'The court gave liberty to the respondents to mention to the court when the amount of Rs. 68 lacs got exhausted but the respondents have not availed of this and have not sought for any direction from this court subsequently.'
He points out that, subsequent to the order of the Court dated 20-4-1973, the petitioner had been called upon to furnish security of immovable property in respect of further demands raised by the respondent by the orders dated 29-9-1974 and 4-8-1975. He submits that, in the circumstances, the respondents should be directed to pay interest to the assessed petitioner on sums amounting to Rs. 68 lacs recovered from the petitioner from the dates of payment of the amounts instead of from the expiry of a period of 3 months from the date of the receipt of the judgment of this court as directed.
26. Learned counsel appears to be correct in stating that in addition to the sum of Rs. 68 lacs the refund of which was withheld by the respondents further security has been given by the petitioner to the respondents in respect of the demands raised against the petitioner. However, we do not see any reason to change our direction in the matter of interest in respect of the sum of Rs. 68 lacs which we have already given in the judgment. The fact remains that the sum of Rs. 68 lacs was withheld from the petitioner by the respondents not willfully but by way of security against the demands made against it and in pursuance of the interim orders of this court passed on the petitioner's consent. We, thereforee, see no alter any portion of our judgment except to record the fact mentioned by the counsel that there were interim orders dated 19.9.1974 and 4.8.1975 subsequent to that dated 20.4.1973.