The Hindu Business Line : You've to run faster just to stay in the same place

AS IF to answer a popular Zen koan, `What is the sound of one hand clapping?' there is the Möbius strip, named after the German mathematician and astronomer August Ferdinand Möbius. It has only one surface and only one edge and is so easy to create — by merging the two ends of a paper ribbon after giving it a half-twist — that one may suggest that the thing would have existed as ancient palm-leaf festoons. Similar is the endless stair where you can keep climbing up ad infinitum, as if it were a cosmic treadmill. Almost akin, though at a more mundane level, was the apex court decision in the Escorts case on October 25, 2004.

Factual background in a nutshell is as follows: In 1993, Excise officials demanded of the company Rs 38 lakh as short levy of duty on machine parts captively consumed. Escorts disputed the levy before the CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal, predecessor to the present CESTAT). In 1998, the Tribunal's order went in favour of the Department. So, Escorts knocked the doors of the apex court and argued that the Tribunal had disposed of the appeal without granting it an opportunity of being heard. Thus, in 2001, the apex court set aside the CEGAT order and "remanded the matter for fresh consideration on merits without expressing any view on the merits of the case." CEGAT heard the matter afresh.

But what was the matter? It was about "determination of the value of goods captively consumed". Escorts sold 2 per cent of its production to the spares market and used 98 per cent captively. Applying a 2002 decision of the Supreme Court in Ashok Leyland Ltd vs Collector of Central Excise, Madras, the Tribunal ruled that the value of captively consumed goods is to be ascertained based on market price of the goods directly sold. Thus, its decision went in favour of the Department, once again.

Aggrieved by the order, Escorts came to the Supreme Court a second time. Mr V. Lakshmi Kumaran, arguing for the company, submitted that it was wrong for the Tribunal to apply the Ashok Leyland decision here because "the factual position was different". "The judgment in that case can be applicable only in a situation where the goods sold in the spare parts market are identical and complete in all respects to the goods captively consumed," he added. But that was not the situation in the case of his client, he said, because goods captively consumed were different and not identical to the goods sold in the spare parts market.

On the side of the Department was R. Mohan, Additional Solicitor General, who contended that Escorts did not bring out any factual difference vis-à-vis the Ashok Leyland decision, and so the CEGAT decision did not warrant any interference.

Justices Arijit Pasayat and C. K. Thakker observed that the decision in the Ashok Leyland case had held the Valuation Rules to be inapplicable where price was ascertainable; "the mere fact that sale is also made to the Defence or to the Civil Department of the Government at different prices would not mean that the price becomes an unascertainable price," the court had said then. However, the question before the judges in the present case was whether that precedent would help the Department.

Before placing reliance on decisions, look at the factual situation, said the judges. "Observations of courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context," they noted. Also, judgments are not to be construed as statutes, they cautioned.

To help understand, the judges explained the difference between judgments and statutes: "To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes."

If that needs interpretation, there are a few foreign utterances to help: For instance, in 1972, Lord Morris had issued a similar caveat when delivering the judgment in Herrington vs British Railways Board: "There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case."

Again, on the same subject, there is locus classicus (an authoritative and often-quoted passage) attributed to Lord Denning: "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive."

He advised that precedent should be followed only so far as it marks the path of justice, though "you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches." Lord Denning's plea, therefore, was "to keep the path to justice clear of constructions which could impede it."

Returning to the Escorts case, the judges observed, "Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." Therefore, disposal of cases by blindly placing reliance on a decision is not proper, they said.

While concluding its verdict, the apex court was critical of the CEGAT — that the Tribunal did not consider the applicability of the Ashok Leyland case in the background of Rule 6 of the Valuation Rules though it has substantial bearing on the dispute. "In the aforesaid circumstances without expressing any view on the merits we remit the matter to the CEGAT for considering the factual aspect and the applicability of Ashok Leyland's case (supra) to the facts of the present case."

Is this a case that fell on a perpetual treadmill? Or just a reminder of what the Red Queen told Alice: "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

Tailpiece

"What's the last date for filing returns?"

"Which one: the extended last date or the extended-again date?"

Detaxification@TheHindu.co.in

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