Commissioner (Appeals) Became Functus Officio After Passing Earlier Order: HC

Vedanta Limited, operating units in both the Special Economic Zone (SEZ) and Domestic Tariff Area (DTA), used electricity generated in its DTA unit as an input for manufacturing aluminium products in the SEZ unit. Treating such electricity as an input used for exports, the company applied for fixation of a brand rate of duty drawback under Rule 6 of the Customs and Central Excise Duty Drawback Rules, 1995 for the period April 2017 to March 2018.

The Joint Commissioner of Customs (Preventive), fixed the brand rate at 15.61% of FOB value on 18.04.2019. Vedanta thereafter claimed drawback of Rs. 165.07 crore relating to exports under nine Bills of Export, but the claim was rejected by the Assistant Commissioner.

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On appeal, the Principal Commissioner (Appeals) partly allowed the claim, holding that drawback of Rs. 162 crore was admissible for four Bills of Export subject to reversal of corresponding Input Tax Credit (ITC) without interest. The Department accepted this order and did not file any further appeal. Vedanta reversed ITC of Rs. 40.25 crore and sought disbursal of the drawback. However, the Commissioner (Appeals), set aside the drawback on the ground that the availment of ITC made Vedanta ineligible. Aggrieved, Vedanta approached the High Court.

Issue Before Court: Whether the Commissioner (Appeals) could revisit and overturn entitlement to duty drawback already determined in an earlier appellate order that had attained finality.

HC Held: The Hon’ble High Court allowed the writ petition and quashed the impugned order. The Court held that the earlier appellate order, which allowed drawback subject to reversal of ITC, had attained finality since the Department had not challenged it before any higher forum. The later order passed by the Assistant Commissioner merely implemented that binding decision.

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The Court observed that the Commissioner (Appeals), while deciding appeals against the consequential order, effectively attempted to review and nullify the earlier appellate decision. Such an exercise was impermissible as the authority had become functus officio after rendering the earlier order and lacked statutory power to reopen the issue. The Court held that subordinate authorities are bound by final appellate decisions and cannot indirectly re-adjudicate the same issue.

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