Customs Act | Once the Department Accepted the Appellate Order, It Could Not Reopen the Drawback Eligibility: Orissa High Court Invokes Functus Officio Doctrine Against Revenue

“The Commissioner (Appeals) Became Functus Officio Once the Earlier Order Attained Finality”, Orissa High Court delivered a significant ruling reinforcing judicial discipline and finality in quasi-judicial proceedings under the Customs Act, 1962. The Division Bench comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman held that once an Order-in-Appeal granting duty drawback subject to reversal of Input Tax Credit (ITC) was accepted by the Department and not challenged further, the Commissioner (Appeals) could not revisit or nullify that decision while deciding an appeal against a consequential order.

The Court set aside the impugned Order-in-Appeal dated 30.09.2025, observing that the action amounted to an impermissible review and violated the doctrine of functus officio and principles analogous to res judicata.

In a judgment with far-reaching implications for customs adjudication and appellate discipline, the Orissa High Court examined whether a Commissioner (Appeals) could effectively overturn an earlier unchallenged appellate order while hearing an appeal arising from a consequential Order-in-Original.

The Court ruled in favour of Vedanta Limited, holding that the Commissioner (Appeals) exceeded jurisdiction by re-adjudicating an issue already settled in an earlier Order-in-Appeal dated 30.09.2023, which had attained finality after being accepted by the Department. The impugned order was set aside and the matter remitted for fresh consideration confined to permissible grounds.

Vedanta Limited, operating units in both the Special Economic Zone (SEZ) and Domestic Tariff Area (DTA), claimed brand rate duty drawback under Section 75 of the Customs Act read with the Customs and Central Excise Duties Drawback Rules, 1995, for exports made during April 2017 to March 2018.

The Joint Commissioner fixed the brand rate at 15.61%. However, the Assistant Commissioner rejected the drawback claim through an Order-in-Original dated 04.06.2020. On appeal, the Principal Commissioner (Appeals) (In-Situ), Bhubaneswar, by Order-in-Appeal dated 30.09.2023, partly allowed the claim and held that drawback was admissible at 15.61% for four Bills of Export, “subject to reversal/adjustment of ITC”.

Significantly, the Department accepted this order and did not prefer any further appeal.

Thereafter, the Assistant Commissioner passed a consequential Order-in-Original dated 24.01.2024 sanctioning drawback after adjusting ITC and interest, resulting in payment of ₹75.88 crore to Vedanta.

Both Vedanta and the Department filed appeals against this consequential order. In the impugned Order-in-Appeal dated 30.09.2025, the Commissioner (Appeals) held that since ITC had been availed, Vedanta was not eligible for drawback at all, thereby setting aside the entire sanction.

Vedanta approached the High Court challenging this action as beyond jurisdiction.

The central question was whether the Commissioner (Appeals), while deciding an appeal against a consequential order, could reopen and nullify findings contained in an earlier Order-in-Appeal that had attained finality.

The controversy involved:

“Application of the doctrine of functus officio to quasi-judicial authorities”

“Whether principles analogous to res judicata and issue estoppel apply in tax adjudication”

“Scope of appellate jurisdiction under Section 128 of the Customs Act”

“Judicial discipline in implementing binding appellate orders”

Doctrine of Functus Officio and Finality

The Court relied extensively on Supreme Court jurisprudence including Ajay Mohan v. H.N. Rai, Odisha Administrative Tribunal Bar Association v. Union of India, and Davinder Pal Singh Bhullar, reiterating that once an authority renders a final decision, it becomes functus officio unless statutory review power exists.

The Court observed:

“The doctrine of functus officio exists to provide a clear point where the adjudicative process ends and to bring quietus to the dispute.”

Since the 30.09.2023 Order-in-Appeal was accepted by the Department and not challenged, it attained finality inter se parties. The Commissioner (Appeals) could not, in a subsequent proceeding, sit in review over that order.

Impermissible Review in the Garb of Appeal

The High Court categorically held that the Commissioner (Appeals), by denying drawback altogether, effectively nullified the earlier appellate order.

The Court found:

“Such conclusion arrived at by the Commissioner (Appeals), Bhubaneswar apparently depicts as if he is sitting in review against the earlier Appellate Order dated 30.09.2023… Nonetheless, he revised and/or nullified the decision rendered in appeals.”

It emphasized that no provision of the Customs Act confers review power upon the Commissioner (Appeals) in such circumstances.

Res Judicata and Issue Estoppel in Quasi-Judicial Proceedings

Although Section 11 CPC does not strictly apply to tax proceedings, the Court invoked principles of issue estoppel and finality, quoting Dadu Dayalu Mahasabha and Bhanu Kumar Jain:

“Once an issue has been finally determined, parties cannot subsequently in the same suit advance arguments… directed to showing that the issue was wrongly determined. Their only remedy is to approach the higher forum.”

The Court stressed that reopening settled issues undermines public policy and certainty in litigation.

Judicial Discipline and Binding Nature of Appellate Orders

Citing the landmark ruling in Union of India v. Kamlakshi Finance Corporation Ltd., the Court reiterated:

“The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities.”

The High Court warned that permitting such reopening would lead to “administrative chaos and harassment”.

The Court held that the impugned Order-in-Appeal dated 30.09.2025 was “flawed and pernicious” and could not withstand judicial scrutiny.

It set aside the order and remitted the matter to the Commissioner (Appeals), Bhubaneswar, directing that while reconsidering the appeals, he must not reopen findings already attained finality in the earlier appellate order.

The writ petition was allowed to that extent, with no order as to costs.

This judgment stands as a robust reaffirmation of finality in tax adjudication. The Orissa High Court has made it clear that quasi-judicial authorities cannot exercise a disguised power of review under the pretext of appellate jurisdiction.

By invoking the doctrines of functus officio, issue estoppel, and judicial discipline, the Court ensured that once the Department accepts an appellate order, it cannot later unsettle settled rights through collateral proceedings.

The ruling reinforces stability in tax administration and prevents revenue authorities from perpetuating litigation on issues already adjudicated.

Date of Decision: 24 February 2026