Bombay HC Flags 'Judicial Chaos,' Urges Uniform Litigation Policy Over Contradictory Stands Taken by Tax Depts

The Bombay High Court has recently flagged a persistent issue of the tax and customs department taking inconsistent stands on the same legal question before different High Courts, warning that such conduct leads to “judicial chaos” and needs correction through a uniform litigation policy.

A bench of Justice G. S. Kulkarni and Justice Aarti Sathe held that once a legal issue has reached finality against the department, it cannot be reopened elsewhere by taking a contrary stand.

The court observed, “once the issue has attained finality, qua the department in view of an authoritative pronouncement by a High Court, similar contended issues ought not to be agitated by the department before the other High Courts. The situation further worsens by the department asserting a contrary position before such different High Courts, thereby inviting different interpretations and orders leading to judicial chaos. Such an issue certainly needs to be addressed by the Government of India either in the National Litigation Policy, so that uniform policy in respect of such issues is followed in proceedings before different High Courts in relation to Central Legislations and more particularly in tax matters."

The case arose from a batch of petitions filed by sugar exporters who were denied benefits under the Remission of Duties and Taxes on Export Products scheme, which refunds embedded taxes on exported goods. The customs authorities refused the benefit after sugar exports were placed under a “restricted” category in May 2022.

At the same time, exports continued to be permitted with prior government approval and within notified quotas. The Gujarat High Court had earlier allowed similar claims by exporters such as Shree Renuka Sugars Ltd. and Satyendra Packaging Ltd., holding that benefits could not be denied where exports were carried out in compliance with permissions.

The department challenged those rulings before the Supreme Court, but the challenge was dismissed. Communications placed on record showed that the department accepted those rulings as final and proceeded to implement them.

The exporters argued that once exports were permitted under specific approvals, they could not be treated as prohibited to deny incentives. They said the restriction was regulatory in nature and did not take away eligibility under the scheme. They also pointed out that the department had already accepted the Gujarat High Court rulings and granted relief in identical cases, yet continued to oppose similar claims before the Bombay High Court.

The revenue relied on scheme conditions to argue that restricted goods were ineligible for the benefit, though it did not dispute that exports were allowed under permissions or that earlier rulings had attained finality.

The court rejected the department's stand. It held that sugar exports during the relevant period were not prohibited but were permitted subject to conditions, and denying benefits in such circumstances was arbitrary.

It emphasised that uniformity in applying central tax laws is essential and that decisions of one High Court should ordinarily be followed by others unless clearly incorrect.

Allowing the petitions, the court directed the authorities to grant RoDTEP benefits to the exporters, refund amounts already recovered with interest at six per cent per annum, and ensure that no coercive recovery action is taken.

For Petitioner:  Advocates Abhishek Rastogi with Pooja M. Rastogi with Meenal Songire with  Aarya More and Chayank Bohra

For Respondents: Advocates Jitendra B. Mishra with Ashutosh Mishra with  Rupesh Dubey with Vikas Salgia, for Respondent No.2,  Advocates Yogendra Mishra with Jaimala Ostwal with  Ruju Thakkar with  Sangeeta Yadav, for Customs Department/Respondent No.3,  Jaymal Ostwal, for Respondent No.4