Binding Nature of Circular

PJ/Case Laws/2012-13/1091

Case:COMMISSIONER OF CENTRAL EXCISE, BOLPUR V/S M/S RATAN MELTING AND WIRE INDUSTRIES

Citation:2008-TIOL-194-SC-CX-CB

Issue:- Whether a circular issued by Board can supersede the provisions of law or the order of Court?

Brief Facts:- The matter referred to the Constitution Bench due to observations made by the Constitution Bench in the case of Collector of Central Excise v. Dhiren Chemical Industries (2002 (2) SCC 127). It was observed in the case of Dhiren Chemical Industries that if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon a phrase, that interpretation will be binding upon the Revenue.

The Supreme Court noted that decision of this Court in Collector of Central Excise, Patna v. Usha Martin Industries (1997 (7) SCC 47) on which the Tribunal had placed reliance was over-ruled by the subsequent decision of the Constitution Bench in Dhiren Chemical's case.

It was noted that the judgment in Dhiren Chemical Industrieswas interpreted in decision given Kalyani Packaging Industry v/s Union of India and Anr. (2004 (6) SCC 719)as under:

“….It must be remembered that law law laid down by this Court is law of the land. The law so laid down is binding on all courts/tribunals and bodies. It is clear that circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of Dhiren Chemical case because of the circulars of the Board in many cases the Department had granted benefits of exemption notifications. It was submitted that on the interpretation now given by this Court in Dhiren Chemical case the Revenue was likely to reopen cases. Thus, Para 9 (para 11 in SCC) was incorporated to ensure that in cases where benefits of exemption notification had already been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopened. However, this did not mean that even in cases where the Revenue/Department had already contended that the benefit of an exemption notification was not available, and the matter was sub judice before a court or a tribunal, the court or tribunal would also give effect to circulars of the Board in preference to a decision of the Constitution Bench of this Court. Where as a result of dispute the matter is sub judice, a court/tribunal is, after Dhiren Chemical case, bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that courts/tribunals have to ignore a judgment of this Court and follow circulars of the Board. That was not what was meant by para 9 of Dhiren Chemical case…”

Appellant’s Contention:- Revenue contended that circular issued by CBEC can never supersede the provision of law, court orders, and revenue and revenue cannot be held liable. That the law declared by the Supreme Court is supreme law of the land under Article 141 of the Constitution of India, 1950. The circulars cannot be given primacy over the decision.

Respondent’s Contention:- The respondent contended that once the circular has been issued it is binding on the revenue authorities and even if it runs counter to the decision of the court the revenue authorities cannot say that they are not bound by it. It was also submitted that once the board issues a circular, the revenue authorities cannot take advantage of the court decision.

Reasoning of Judgment:-The Larger Bench held that the Circulars and instructions issued by the Board are no 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.

It was stated that if the submissions of assessee are accepted, it would mean that there is no scope for filing an appeal. In that case, there is no question of a decision of this Court on the point being rendered. Obviously, the assessee will not file an appeal questioning the view expressed vis--vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by the Supreme Court and the binding effect in terms of Article 141 of the Constitution.

Thus, the reference was accordingly answered holding that the correct view has been expressed by Kalyani's case.

Decision:- Revenue’s appeals allowed. Appellant’s appeal dismissed.

Comments

PJ/Case Laws/2012-13/1091

Post a Comment

Query