When we talk about tax administration in India, one principle stands taller than most others: judicial discipline. It sounds technical, but in practice, it simply means that when a higher judicial or appellate authority has spoken, those lower in the hierarchy must listen and comply.
Without this rule, there would be nothing but chaos, harassment of taxpayers, and inconsistent enforcement of law. This principle, though timeless, finds one of its strongest articulations in a Supreme Court judgment that continues to echo even in the GST era: Union of India and Others v. Kamlakshi Finance Corporation Ltd. [AIR 1992 SC 711]. This article will delve deep into this judgement and explore the importance of Judicial Discipline in GST.
The Story of the Case
The case itself wasn’t about GST as it was decided in 1991 under the Central Excise regime. But the situation will sound eerily familiar to anyone who has navigated today’s GST disputes.
Kamlakshi Finance Corporation was manufacturing electrical insulation tapes. The big question was: under which tariff heading should their product be classified?
• The assessee said their product belonged under tariff heading 85.47.
• The department insisted it fell under 39.19.
The Assistant Collector issued notices and insisted on the department’s classification, even though in another factory of the same company, the Collector (Appeals) had already ruled in favour of the assessee. To exacerbate the situation, the Tribunal had also previously adopted a similar stance in a different case.
Instead of following these appellate orders, the Assistant Collector repeated his earlier decision, simply noting that the department had filed an appeal. This led to endless back-and-forth and unnecessary litigation.
The assessee became frustrated and went to the Bombay High Court, which revoked the order and harshly criticised the Assistant Collectors’ actions. The Supreme Court then received an appeal from the Union of India.
What the Supreme Court Said regarding Judicial Discipline in GST
The Supreme Court, through Justice S. Ranganathan, delivered a judgment that remains one of the cornerstones of judicial discipline in taxation law.
The Court’s words need to be quoted in full to appreciate their force:
“The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not ‘acceptable’ to the department in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court.”
This one paragraph encapsulates the entire doctrine. No matter how strongly a tax officer feels about protecting revenue, they cannot ignore binding appellate decisions just because the department intends to appeal further.
The Court went further:
“If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.”
That sentence still speaks directly to many GST taxpayers today who face repeated demands despite favourable appellate orders.
Judicial Discipline in GST Framework
Though GST is a different tax code, the hierarchical structure remains the same. We now have flow of power and hierarchy as:
• Adjudicating Authorities (like Assistant/Deputy Commissioners etc.)
• Appellate Authorities
• GST Appellate Tribunal
•High Courts and the Supreme Court as the highest authorities
The principle of judicial discipline applies seamlessly across this structure. Once an appellate authority gives a ruling and unless it is stayed, every officer below is bound to follow it.
Yet, practical experience shows us otherwise. Many GST assessees complain that even after getting favourable appellate orders, fresh notices are issued on the same grounds. Departments often argue that they have filed an appeal or that “the order is not acceptable.” But as the Supreme Court made clear in Kamlakshi Finance:
“The mere fact that the order of the appellate authority is not acceptable to the department … can furnish no ground for not following it.”
Why Judicial Discipline in GST Matters
1. Certainty and Stability
Businesses plan their operations, investments, and pricing based on the understanding of tax liability. If lower officers disregard appellate rulings, taxpayers lose the certainty they need to function.
2. Fairness to Assessees
Taxpayers shouldn’t be forced into endless litigation. Once an appellate forum decides, that decision must bring some closure unless overturned at a higher level.
3. Administrative Efficiency
A disjointed and disorganised tax system would result from each officer acting independently in the absence of judicial discipline. The efficciency and consistency of the law across nation is guaranteed by judicial discipline.
4. Respect for Hierarchy
The tax administration is not just about revenue collection; it’s also about respecting the rule of law. Officers are bound by the judgments of higher forums, just as citizens are bound by the law.
Department’s Remedies Are Clear
One of the anxieties officers often express is: “If we follow the appellate order and it’s wrong, the revenue will suffer.”
The Supreme Court in Kamlakshi Finance addressed this directly. It pointed to Section 35-E of the Central Excise Act (similar provisions exist under GST) which empowers higher officers to file appeals if they believe an order is wrong. The Court observed:
“There can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal… even where he may have some reservations on its correctness.”
In other words, officers do not have to act as lone defenders of revenue, the law itself provides structured remedies to safeguard revenue’s interests.
A Human Angle: The Harassment Factor
Let’s humanise this issue for a moment. Imagine you’re a business owner. You’ve already fought a long legal battle, hired lawyers, submitted documents, and finally, an appellate authority has ruled in your favour. You breathe a sigh of relief, only to receive another notice from a lower officer saying the same thing all over again.
That isn’t just a technical inconvenience. It’s emotional stress, financial drain, and an erosion of faith in the system. The Supreme Court recognised this too:
“The harassment to the assessee [is caused] by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy.”
This acknowledgment makes the judgment not only legally significant but also deeply empathetic to the taxpayer’s plight.
Judicial Discipline in GST Litigation
In recent GST litigation, High Courts have repeatedly leaned on Kamlakshi Finance. For example, when departments ignore earlier binding judgments on issues like ITC, limitation periods, or classification, courts regularly remind them of this very principle.
The upcoming GST Appellate Tribunal will make judicial discipline even more important, as its rulings will set binding precedents across states. Officers at the ground level will need to respect those rulings to maintain consistency nationwide.
Conclusion: A Rule for Both Revenue and Taxpayers
Judicial discipline in GST is not about favouring taxpayers over revenue or vice versa. It’s about upholding the rule of law. When appellate rulings are followed, taxpayers feel secure, and the department maintains credibility. When they are ignored, both sides lose, taxpayers lose faith, and the department’s orders are struck down in courts.
The Supreme Court’s message in Kamlakshi Finance remains as relevant in GST today as it was in excise law three decades ago:
“The utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them.”
That is not just a legal mandate; it’s the foundation of a fair, predictable, and trustworthy tax system.
Author Details-Apoorva Lamba (3rd Year Student Madhav Mahavidyalya, Jiwaji University, Gwalior)
Link to similar articles: https://jpassociates.co.in/section-73-vs-section-74-of-cgst-act/
