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Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

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Publish Date: 03 Dec, 2015
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Binding Nature of Board Circulars-Confusion Settled or Created?

Binding Nature of Board Circulars-Confusion Settled or Created?

 
An Article By:-
CA PRADEEP JAIN
CA NEETU SUKHWANI
 

Introduction:-The binding nature of the Circulars issued by Board is the issue that has been a matter of litigation since inception. There have been a number of decisions on this matter, that too, of Supreme Courts which have added fuel to the fire of litigation. There has been a constant fight between assessees and revenue department regarding the applicability and precedential value of the circulars issued by the Board. However, it appears that the Board has resorted to put an end to this controversy by issuing clarification vide Circular no. 1006/13/2015-CX dated 21.09.2015. This circular issued by the Board is the centre of attraction of this article.  

Backdrop of History:-Before proceeding further, it is pertinent to look at the history of decisions delivered in this context by the Apex Court as follows:-

ØPAPER PRODUCTS LTD. VERSUSCOMMISSIONER OF CENTRAL EXCISE [1999 (112) E.L.T. 765  (S.C.)]:-
 
In this decision, it was held that circulars issued by CBEC are binding on the departmental authorities and they cannot take a contrary stand. However, assessee can contest the validity or legality of such departmental circulars or instructions. It was further held that department does not have right to file an appeal against the correctness or binding nature of circular and department’s action have to be consistent with the circulars. The ratio of this judgment precluded the right of the department to file an appeal against the correctness of the binding nature of the circulars.
 
ØCOLLECTOR OF C. EX., VADODARA VERSUS DHIREN CHEMICAL INDUSTRIES [2002 (139) E.L.T. 3 (S.C.)]:-
 
It was concluded that Circulars issued by CBEC are binding on revenue even if placing different interpretation than that adopted by the Supreme Court. In this decision, as per Supreme Court, the phrase ‘appropriate amount of duty of excise has already been paid’ cannot include products on which ‘nil’ rate of duty is prescribed. However, the Apex Court also stated that if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue. In nutshell, it was interpreted that according to this decision, Board Circulars are binding on departmental officers even if they are contrary to the judgments of the Supreme Court.  

ØKALYANI PACKAGING INDUSTRY VERSUS UNION OF INDIA [2004 (168) E.L.T. 145 (S.C)] :-

It was held that the Board’s Circular cannot prevail over law laid down by the Supreme Court. Furthermore, the Court/Tribunal cannot ignore judgment of Supreme Court and follow CBEC circular. It was also clarified that the statement in Dhiren Case that if there is any circular placing different interpretation of phrase ‘appropriate amount of duty of excise has already been paid’, the interpretation would be binding on revenue was made only to prevent revenue from re-opening cases wherein benefit of notification was granted based on circulars issued by board. Hence, it was concluded that the board circulars are binding on the departmental officers only upto the period where there is no judgment of High Court or Supreme Court. However, after the decision of the High Court or the Supreme Court is pronounced, the board circulars are not to be followed if they are contrary to the law laid down by the High Court or Supreme Court.  
 
 
ØCOMMISSIONER OF C. EX., BOLPUR VERSUS RATAN MELTING & WIRE INDUSTRIES [2008 (231) E.L.T. 22 (S.C.)]:-
 
In this decision, the five member constitutional bench agreed with the view taken in the case of Kalyani Packaging Industry. It was held that the circulars and instructions issued by the Board are not doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. Also, in passing, it was also concluded that it is wrong to say that revenue department cannot challenge the provisions clarified in a circular in appeal as it would be against the concept of majesty of law and would tantamount to depriving the right of appeal to the revenue department. Hence, this decision took a dubious stand as regards binding nature of the board circular. It pronounced that although board circulars are binding on the department but simultaneously, the revenue authorities have also right to file appeal against the clarifications given in the board circulars.
 
Gist of the Circular no. 1006/13/2015-CX dated 21.09.2015:-The circular gives reference of the Supreme Court judgment given in the case of M/s Ratan Melting & Wire Industries wherein it was concluded that no doubt board circulars are binding on the departmental authorities but when High Court or Supreme Court lays down ratio on a particular issue then, the ratio laid down by the Courts is required to be treated as binding precedent and not the clarification of the board circular. This circular has reiterated the analogy of the decision given by the Five Member Bench in the case of Ratan Melting & Wire Industries wherein it was held that circulars contrary to the statutory provisions have really no existence in law. Therefore, the key points of the circular are highlighted as follows:-
ØBoard circulars contrary to the judgments of Supreme Court become non-est in law and not to be followed.
ØReference to such circulars should be made to the Board so that initiatives may be taken to rescind such circulars. Board may also rescind such circulars suo motto.
ØDecisions pronounced after Supreme Court/High Court judgments on the issue should conform to the ratio laid down by the Supreme Court or High Court, as the case may be, irrespective whether circulars have been rescinded or not.

Effective implementation of the clarification:-It is observed that the government has not only issued this circular for the sake of issuing and has also made sincere endeavour to implement it. A perfect example of implementation of this circular is the recent withdrawal of Circular no. 890/10/2009 dated 03.06.2009 regarding classification of coconut oil packed in small containers suo moto vide Circular no. 1007/14/2015-CX dated 12.10.2015. The circular no. 890/10/2009 dated 03.06.2009 clarified that the coconut oil packed in small container of sizes upto 200 ml are basically meant for use as hair oil and merits classification under chapter 33 and not classifiable as vegetable edible oil under chapter 15. However, this circular was recently quashed by the Hon’ble Madras High Court in the case of VVD AND SONS (PVT.) LTD. VERSUS CENTRAL BOARD OF EXCISE AND CUSTOMS [2014 (310) E.L.T. 718 (Mad.)] wherein this circular was declared as arbitrary, unreasonable and contrary to the provisions of the Central Excise Act, 1944 and was declared as ultra vires. Not only this, the view that the classification of coconut oil packed in small containers is not to be done as ‘hair oil’ under chapter 3305 was also confirmed by the Apex Court in the case of COMMISSIONER V. INDIAN VEG. OIL & CHEMICALS CO. PVT. LTD.- 2015 (318) E.L.T. A37 (S.C.)]. As the law laid down by the High Court and Supreme Court was contrary to the circular no. 890/10/2009 dated 03.06.2009, the same was suo motto withdrawn by the Board. This is definitely appreciated by the Trade and Industry and government deserves to receive a huge round of applause.

Ratan Melting decision Vs Binding nature of board circulars:-It is submitted that although the circular no. 1006/13/2015-CX dated 21.09.2015 is issued in the context of decision of Apex Court in the case of Ratan Melting & Wire Industries, but there is inbuilt anomaly in the decision of Ratan Melting & Wire Industries. The decision although rules out that circulars contrary to the statutory provisions of law are not binding even on the departmental officers from the date of judgment but at the same time this decision also pronounces that even the revenue department has right to appeal against the clarifications issued by a board circular. This leads to the following conclusion in simple words:-
·        The board circulars are binding on the revenue authorities till the provisions of the circular are not proved contrary to law by High Court or Supreme Court.
·        The board circulars are not to be relied upon once they are declared as contrary to the provisions of law by the Courts. However, this does not mean that the decisions taken by the revenue department prior to the pronouncement of judgment on the basis of circular become void or invalid.
·        The revenue authorities also have right to file appeal against the clarifications of the circular.
The ratio of the decision that even department can file appeal against the clarification of the circular puts a big question mark on the binding nature of the circulars. This is for the reason that if the departmental authorities may file appeal challenging the circular then it means that even the departmental authorities are not bound by the clarifications issued by the board circulars. This would lead to distortion of the principle of binding nature of board circulars on the departmental authorities and renders the circulars issued by the Board as irrelevant and not having any significance. CBEC issues circulars to put an end to the possible litigations on a matter and if the departmental officers do not follow these circulars on the contention that they have right to challenge the circulars, the very purpose of issuing circulars will be defeated. However, we may conclude that the circulars are binding on the departmental authorities until the contrary decisions have been pronounced by the Courts. However, the said circulars can also be challenged by the departmental authorities in appeal.

Good Bye words:- Although, the clarification issued by Circular no. 1006/13/2015-CX dated 21.09.2015 is a good start for inculcating judicial principle to be followed by the departmental officers but practically, the clarifications issued by the Board are hardly adhered to by the departmental officers; unless and until, the clarification aids in collecting more revenue for the government. Moreover, even if the Supreme Court or High Court quashes the validity of Rules or any other provision, the government comes up with the amendment in the said Rule or provision. Say for example, Delhi High Court declared Rule 5 of Service Tax (Determination of Value Rules, 2006) as ultra vires which seeks to include value of reimbursable expenses in the taxable value of service in the case of INTERCONTINENTAL CONSULTANTS & TECHNOCRAFTS PVT. LTD. VS UNION OF INDIA [2013 (29) S.T.R. 9 (DEL)]. Thereafter, amendment was made in the section 67 of the Finance Act, 1994 thereby amending the defination of consideration to include reimbursable expenses also. As such, when the government has the power to amend the law on having a contrary judgment by High Court or Supreme Court, the present circular issued to nullify the effect of circulars contrary to the provisions of law cannot be of much help to the assessees. Nevertheless, we can say that this is definitely a positive initiative on the part of the government to inculcate the feeling amongst the revenue authorities that the law laid down by the Supreme Court and the High Courts are binding precedent. Well, how far this circular will be implemented in true spirit will get to know in the days to come!

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