Changing Face of Precedent

Changing face of Precedent

Prepared By: CA Pradeep Jain,

CA Preeti Parihar and

Sukhvinder Kaur LLB (FYIC)

Introduction:-

In a civilized world, delivery of justice is a very important facet. Administration of Justice is not easy. In order to maintain proper system of administering justice, certain principles have evolved like unwritten principles of natural justice are required to be followed in every case. There is a hierarchy of courts and quasi-judicial authorities established which are engaged in delivering just decisions. But the rise in contradictory decisions given in various cases with similar facts and circumstances have put a question mark on the legal term “Precedent” as generally used in the legal scenario for ascertaining the predictability of any issue.

Precedent: Meaning:-

The thesaurus gives meaning of the word ‘precedent’ as going before, anterior or forerunner. We can say it as something done or said that may serve as an example to authorize a subsequent act of the same kind, i.e. an authoritative example. When coming to legal point of view, precedent means any judicial decision which serves as a rule for future decisions in like cases. It is more or less a law established by following earlier judicial decisions.

Doctrine of “Stare Decisis”:-

The principle of Stare Decisis has emerged from Anglo-American legal traditions. The word stare decisis means “let the decision stand”. This doctrine implies that the judges should look to past decisions for guidance and answer questions of law consistent with precedent. Therefore, while deciding any issue, the court sets out a ruling precedent for cases coming in future with similar facts and circumstances.

Necessity:-

Following precedent gives consistency and predictability to the law. If a no. of contradictory decisions pertaining to similar issues are available in the boundaries of Court, one cannot predict his own stand and future course of action to be taken. Of course not following the precedent creates a chaos amongst the justice-seekers. It makes bit difficult for them to decide whether to accept the situation as it is or to prefer the appeal. Of course, following the precedent resolves half of the problems of law and brings stability therein and creates faith in the eyes of people.

Compliance or otherwise of precedent: In the eyes of Law:-

The Hon’ble Supreme Court had considered the application of principle of stare decisis to judgments of Tribunals in Government of Andhra Pradesh & Othrs v/s A. P. Jaiswal & Ors [2001 AIR SCW 101] and it was observed as under: -

Consistency is the cornerstone of the administration of justice. It is consistency which creates confidence in the system and this consistency can never be achieved without respect to the rule of finality. It is with a view to achieve consistency in judicial pronouncements, the Courts have evolved the rule of precedents, principle of stare decisis etc. These rules and principles are based on public policy and if these are not followed by Courts then there will be chaos in the administration of justice……

The Courts have laid down time and again that precedent law must be followed by all. If the precedent judgments are not followed by the lower courts or authorities, it would lead to lowering of the judicial authority and will lead to chaos. Judicial discipline requires that the lower authorities follow the decisions of the Tribunal if the same has not been changed. This has been reiterated in many judgments.

Thus, it was set that precedents laid down by the Higher Courts are required to be followed by the lower courts. A decision of a larger bench is binding on the double bench and single bench and the decision given by the double bench are binding on the single benches.

It was held by the Larger Bench in the case of Commissioner of C. Ex., Vadodara v/s Adarsh Re-rolling Mills [2002 (143) ELT 533 (Tri. - LB)] that “Certainty about law and uniformity in its implementation are central in ensuring rule of law. Therein lies the necessity to follow precedent and subordination of adjudicating authorities to their appellant authorities. Uniformity in tax administration is even more important than legal correctness.”

But it has also been provided that if the decision of the higher forum is perceived as erroneous decision or based on erroneous interpretation, then such a decision is required to be referred to higher forum than the forum laying the precedent for consideration. Thus, if there is conflict between two benches, then the issue is required to be referred to larger bench for resolution. In the case of Union of India v. Paras Laminates (P) Ltd. [1990 (049) ELT 0322 (SC)] it was observed as under: -

It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the Judicial decision in the earlier cases on identical matters. Classification of particular goods adopted in earlier decisions must not be lightly disregarded in subsequent decisions, lest such judicial inconsistency should shake public confidence in the administration of justice. It is, however, equally true that it is vital to the administration of justice that those exercising judicial power must have the necessary freedom to doubt the correctness of an earlier decision if and when subsequent proceedings bring to light what is perceived by them as an erroneous decision in the earlier case. In such circumstances, it is but natural and reasonable and indeed efficacious that the case is referred to a Larger Bench. This is what was done by the Bench of two members who in their reasoned order pointed out what they perceived to be an error of law in the earlier decision and stated the points for the President to make a reference to a Larger Bench.”

It is clear from the above observations of the Supreme Court that the proper thing for the Single Bench to do would have been to refer the matter to a Larger Bench than to render a differing decision.

As such, the rules set out by the precedent are not inviolable. Judicial decisions are mostly based on historical conditions that may change with changing circumstances and occasionally it becomes clear that a legal interpretation of the past was made in error. Consequently, the system recognizes that new precedents may need to replace old. However, there have been some changes evolving in the principles of precedent which are discussed hereunder: -

Changing Scenario:-

Following the judgment of the Larger Bench of the Tribunal:-

On the issue of availability of Cenvat credit on inputs used by Jobworker, the Larger Bench in the case of M/s Sterlite Industries Ltd v/s CCE, Pune [2005 (183) ELT 353 (Tri-LB)] had held that credit was admissible on the inputs used by the jobworker in processing goods on the basis of principal manufacturer as duty was ultimately being paid on the clearance of finished goods. This decision has been given by the larger bench by applying the principles laid down by the Hon’ble Supreme Court in the case of Escorts Ltd. [2004 (171) ELT 145 (SC)].

Recently, Mumbai Tribunal in the case of M/s Tata Motors Ltd v/s Commissioner of Central Excise, Pune-II [2009-TIOL-1427-CESTAT-MUM] while examining the same issue held that principles laid down by the Apex Court in Escorts case have not been applied correctly in M/s Sterlite Industries Ltd case. It was observed that the case of M/s Sterlite Industries Ltd had not taken into account the laws laid down with regard to the basic scheme of the Cenvat Credit Rules laid down by the Hon’ble Apex Court and the High Court.

On this reasoning the precedent laid down in the case of M/s Sterlite Industries Ltd was not followed eventhough the judgment was passed by the Larger Bench of the Tribunal. As such, double bench refused to follow the larger bench decision.

Effect of dismissal of SLP by Supreme Court:-

When a Special Leave Petition (SLP) is dismissed by the hon’ble Supreme Court, it means that the issue was not decided by the Highest Court and the precedent laid down by the Highest subordinate Court i.e. the High Court is required to be followed.

In the case of Jindal Stainless Limited v/s Union of India [2006 (206) ELT 0155 (Del.)] it was held that “Dismissal of an SLP in limine does not constitute a precedent as envisaged in Article 141 of the Constitution.” In this case it is held that dismissal of SLP in limine without expressing any opinion on the merits of the impugned judgment does not constitute law laid down by the higher authority for the purpose of Article 141 of' the Constitution. In other words, in the cases which are dismissed on the facts apparent on the record and where the merits are not touched does not form the precedent under article 141 of the constitution. Article 141 in the Constitution of India says that the law declared by the Supreme Court shall be binding on all courts within the territory of India

On the issue of availability of cenvat credit on welding electrodes used in repair and manufacturing of plant & machinery in the factory, there was lot of litigation. There was no consensus between the various Tribunals about allowing credit on welding electrodes.

Matter reached High Court. The hon’ble High Court of Rajasthan in the case of Hindustan Zinc Ltd v/s Union of India & Ors [2008 (228) ELT 0517 (Raj)] finally held that welding electrodes used for repairs and maintenance of plant & machinery are eligible for Cenvat credit both as capital goods as well as inputs. This judgment was delivered by overruling the decision of the Larger Bench in the case of Jaypee Rewa Plant v/s Commissioner of Central Excise, Raipur [2003 (159) ELT 553 (Tri.-LB)].

Parallel proceedings were also going on the issue. The Kolkata Tribunal had held in the case of SAIL v/s CCE, Ranchi [2008 (222) ELT 233 (Tri Kol.)] that the credit in respect of welding electrodes used for repairing machines shall not be admissible. This judgment was delivered by following the decision of the Larger Bench of the Tribunal in Jaypee Rewa Plant.

A Special Leave Petition of M/s SAIL was pending before the Apex Court. The said SLP was dismissed by the Apex Court on the facts of the case.

By taking notice of the dismissal of SLP by the Apex Court, the Tribunals have denied Cenvat credit on welding electrodes. In the case of Lloyds Metals & Engineers Ltd v/s CCE, Nagpur [2009 (91) RLT 822 (CESTAT-Mum.)], it was observed by the Mumbai Tribunal that “the Tribunal’s decision in the case of SAIL has been upheld by the Supreme Court wherein the words used by the Supreme Court were that in the facts of the case appeal dismissed, which means that the facts were taken into account while dismissing the appeal and therefore the decision has to be treated on merits.” It was further held that “since the SAIL decision has been affirmed by the Supreme Court, the same will have precedence over the Rajasthan High Court’s decision.”

Thus, the dismissal of SLP on the facts was held to mean that credit was being denied on welding electrodes. Anyhow, the judgment of the High Court in the case of Hindustan Zinc was not followed; rather dismissal of SLP on facts by the Supreme Court was preferred.

Thereafter, a single member Bench in the case of M/s U P State Sugar Corporation Ltd v/s CCE, Meerut-I [2009-TIOL-452-CESTAT-DEL] held that dismissal of SLP of M/s SAIL by the Supreme Court was only a summary dismissal and did not amount to affirmation of the judgment/order of the Court/ Tribunal appealed against, on merit. It merely meant that the Supreme Court declined to interfere in the matter. Had the given appeal been dismissed on the basis of the merits of the case, its dismissal would have amounted to affirmation of judgment that credit is not allowed on welding electrodes.

Thus, the single member Bench of the Tribunal upheld the decision of the High Court or the dismissal of appeal by Supreme Court was not considered.

Non-following the precedent: Mistake apparent on record:-

It has been held by the larger bench of Mumbai Tribunal in the case of Hindustan Lever Ltd 2006-TIOL-1111-CESTAT-MUM-LB] that when Supreme Court pronounces on true position of law, any decision rendered by any other authority contrary to that is to be regarded as an error apparent on record. In such cases, rectification of that error within period permissible under law and in accordance with provisions of statute is required to be effected and the decision should be given accordingly.

Reference to Larger Bench:-

Reference to Larger bench was made when there was difference of opinion over an issue between two benches of the Court or Tribunal. The reference was made by a Tribunal which had to decide the matter and had before it conflicting decisions before it to follow. The matter was sent to the President of the Tribunal for placing the matter before the Larger Bench.

Recently, a decision was given in the case of Guljag Industries Ltd & Ors v/s CCE, Jaipur & Anr [2009 (92) RLT 810 (CESTAT-Del.)] on the question that “Who has the authority to make reference to larger bench in case of difference of opinion or contradictory orders on same issue?”.

It was held that in case of difference of opinion amongst the members of a bench on an issue, the Bench has to formulate such issue and ask registry to place the matter before the President of the Tribunal to do the needful in terms of Section 129C (5) of the Customs Act, 1962 and Section 86 of the Finance Act, 1994. It is the prerogative of the President either to refer the matter to third Member or constitute a larger Bench in case of such difference of opinion or hear the matter himself and thereafter the majority of the opinion to form the decision. Reference of a matter to larger Bench or a third Member is entirely in the discretion of the President which has to be exercised judiciously.

It was further held that Division Bench or single member bench does not have power to refer the matter directly to a larger Bench. There is no statutory provision or any judicial pronouncement vesting such power in them. Even in cases where the Division Bench is faced with a situation of having two different views given by different benches on the same issue, the Bench facing such an issue has to formulate the issue which is required to be referred to larger Bench and thereupon ask the Registry to place the matter before the president to do the needful.

On the issue raised in the appeal, it was held that the case is required to be placed before the larger bench and the order in this regard is to be passed by the administrative side by the President.

Thus, from the said judgment it follows that the power is with the President of the Tribunal to decide whether reference is to be made to the Larger Bench or not. The Tribunal facing conflicting decisions of higher Tribunals can only make reference to the President but cannot make reference itself.

While parting:-

The term precedent is known for bringing the stability and conviction in the judicial procedures at the Appellate bodies. Further Article 141 inserted in the Constitution of India also affirms the upholding of this term by saying the law set by the decision of the Supreme Court will be final and binding on all the lower formations. But under what circumstances, that law will be applicable or otherwise, is yet unexplained. As such, various appellate authorities mould the various decisions as per their convenience. In other words, the ‘standard sized’ ‘precedent’ have been converted into tailor-mades. In order to bring clarity in the related provisions, the nature, scope and the circumstances of applying the precedent are yet to be clarified in depth. Till then, obey and disobey of the precedent will continue and litigation will move on…

********

Comments

Changing Face of Precedent

Comments

Post a Comment

Query