1999 JTR(SC) 918
1999 AIR(SC) 3341 ; 1999 AIR(SCW) 3337 ; 2001 165 CTR 693 ; 1999 112 ELT 765 ; 2001 247 ITR 128 ; 1999 6 JT 185 ; 1999 5 Scale 172 ; 1999 7 SCC 84 ; 2001 115 Taxman 147 ; 1999 KHC 1370 ; 1999 2 KLT(Online) 905 ; 1999 7 Supreme 375
1999(7) Supreme 375
Supreme Court of India
(From CEGAT, New Delhi)
S.P. Bharucha & N. Santosh Hegde, JJ.
The Paper Products Ltd. etc. -Appellant
versus
Commissioner of Central Excise -Respondent
Civil Appeal No. 5950 of 1997
With
Civil Appeal No. 8301 of 1997
Decided on 24-8-1999
Counsel for the Parties :
For the Appellant : Ashok Desai, D.A. Dave, Sr. Advocates, R.N. Karanjawala, Ms. Ruby Ahuja, Ms. Avantika Keswani, Raghu Kothari, Ms. Manik Karanjawala, Advocates.
For the Respondent : T.L.V. Iyer, Sr. Advocate, Tara Chandra Sharma, P. Parmeshwaran, Advocates.
Important Point
Circulars issued under Section 37-B of the Central Excise Tariff Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Board; it is not open to the Revenue to advance an argument or even file an appeal against the correctness of the binding nature of the Circulars issued by the Board.
Act
Referred
:CENTRAL EXCISE ACT : S.37(b)
CENTRAL EXCISE TARIFF ACT : S.38(b)
(A) The Central Excise Tariff Act, read in conjunction with the Central Excise Act, operates as the governing statutory framework for the classification and taxation of manufactured goods. The relevant Sections, specifically Section 38(b) of the Central Excise Tariff Act and Section 37(b) of the Central Excise Act, provide the authority for issuing binding administrative directives. In this dispute, these provisions were invoked through a series of Circulars issued by the Central Board of Excise & Customs that mandated the classification of appellants printed polyester films as products of the printing industry, thereby placing them under Chapter 49 of the Act and making them eligible for duty exemptions. The legal contest centered on whether the executive and quasi-judicial authorities were bound by these departmental instructions.
(B) The core legal principles established are that Circulars issued under Section 37-B of the Central Excise Act are binding on the Revenue Department, and the Department is estopped from challenging their correctness or filing appeals against them. Furthermore, such Circulars are intended to provide uniform guidance to the trade, and administrative directions must be followed consistently by adjudicating authorities.
Facts of the case:
The appellant manufactured printed polyester films used as labels, pouches, or wrappers. At the relevant time, official Circulars classified these products under Chapter 49 of the Act as printing industry goods, attracting duty exemptions. Subsequently, a later Circular reclassified them under Chapter 39 as packaging goods. The appellant challenged orders of the Customs Excise and Gold (Control) Appellate Tribunal that were based on the new classification and demand notices issued pursuant to the revised interpretation.
Findings of Court:
The Court found that the earlier Circulars were in force at the material time and were binding on the Department. The Tribunal was deemed to have correctly dismissed the appeal based on the then-applicable law. The subsequent change in departmental interpretation was held to be irrelevant to the assessment period in question, and the show cause notices and consequent demands were inherently bad.
Issues:
The primary issue was whether the appellants products should be classified under Chapter 49 (printing) or Chapter 39 (packaging) of the Central Excise Tariff Act, and whether the Revenue authorities could disregard binding departmental Circulars while issuing demands and show cause notices.
Ratio Decidendi:
The binding nature of administrative Circulars issued under Section 37-B of the Central Excise Act precludes the Department from taking a contrary stance. The classification applicable at the relevant time must be the one in force, and the quasi-judicial body is required to act in accordance with the binding instructions, not retrospective reinterpretations.
Result:
The appeals were allowed. The impugned orders of the tribunal were set aside, the show cause cum demand notices were quashed, and the appellant was entitled to consequential benefits with no costs awarded.
(A) The Central Excise Tariff Act, read in conjunction with the Central Excise Act, operates as the governing statutory framework for the classification and taxation of manufactured goods. The relevant Sections, specifically Section 38(b) of the Central Excise Tariff Act and Section 37(b) of the Central Excise Act, provide the authority for issuing binding administrative directives. In this dispute, these provisions were invoked through a series of Circulars issued by the Central Board of Excise & Customs that mandated the classification of appellants printed polyester films as products of the printing industry, thereby placing them under Chapter 49 of the Act and making them eligible for duty exemptions. The legal contest centered on whether the executive and quasi-judicial authorities were bound by these departmental instructions.
(B) The core legal principles established are that Circulars issued under Section 37-B of the Central Excise Act are binding on the Revenue Department, and the Department is estopped from challenging their correctness or filing appeals against them. Furthermore, such Circulars are intended to provide uniform guidance to the trade, and administrative directions must be followed consistently by adjudicating authorities.
Facts of the case:
The appellant manufactured printed polyester films used as labels, pouches, or wrappers. At the relevant time, official Circulars classified these products under Chapter 49 of the Act as printing industry goods, attracting duty exemptions. Subsequently, a later Circular reclassified them under Chapter 39 as packaging goods. The appellant challenged orders of the Customs Excise and Gold (Control) Appellate Tribunal that were based on the new classification and demand notices issued pursuant to the revised interpretation.
Findings of Court:
The Court found that the earlier Circulars were in force at the material time and were binding on the Department. The Tribunal was deemed to have correctly dismissed the appeal based on the then-applicable law. The subsequent change in departmental interpretation was held to be irrelevant to the assessment period in question, and the show cause notices and consequent demands were inherently bad.
Issues:
The primary issue was whether the appellants products should be classified under Chapter 49 (printing) or Chapter 39 (packaging) of the Central Excise Tariff Act, and whether the Revenue authorities could disregard binding departmental Circulars while issuing demands and show cause notices.
Ratio Decidendi:
The binding nature of administrative Circulars issued under Section 37-B of the Central Excise Act precludes the Department from taking a contrary stance. The classification applicable at the relevant time must be the one in force, and the quasi-judicial body is required to act in accordance with the binding instructions, not retrospective reinterpretations.
Result:
The appeals were allowed. The impugned orders of the tribunal were set aside, the show cause cum demand notices were quashed, and the appellant was entitled to consequential benefits with no costs awarded.
Judgment
Santosh Hegde, J.-These appeals are preferred against two orders of the Customs Excise and Gold (Control) Appellate Tribunal (for short ‘the CEGAT’) date 21.10.1997 made in Appeal No. E/4412/95-SB(WR) and an order dated 16.7.1997 made by the CEGAT refusing to review/clarify its earlier order dated 21.10.1997. Both the appeals arise our of the same dispute.
2. The appellant in the above appeals is manufacturing (a) printed polyester films backed with paper; (b) printed polyester films backed with polythene films; and (c) printed polyester films backed withaluminium foils; all of which are used either as labels, pouches or wrappers. It is the contention of the appellant that by virtue of the Circulars issued by the Central Board of Excise & Customs (hereinafter referred to as ‘the Board’) dated 23.7.1986 and clarificatory Circular issued by the Board dated 7.8.1987; the aforesaid products of the appellant are to be classified as the products of the printing industry subject to duty under Chapter 49 of the Schedule to the Central Excise & Tariff Act, 1985. Consequently, the appellants contend that their products are entitled to the benefit of duty exemption available by virtue fo Notification Nos. 122/75 and 234/82 as applicable at the relevant time. It is the common case of the parties that the vieew taken by the Board in the above-mentioned Circulars dated 23.7.1989 by virtue of Circular No. 6/89 of the Board dated 16.1.1989. Consequently, the said products of the appellant are now to be classified as the products of the packaging industry coming within Chapter 39 of the Sehedule to the Central Excise & Triff Act, 1988. The appellant also sub nits that with effect from the said date the appellant is classifying its products in terms of Circular No. 6/89 date 16.1.1989. However, it is contended that in view of the fact that prior to issuance of the said Circular dated 16.1.1989, Circular No. 4/85 being in force, the appellant’s products are liable to be classified for duty under Chapter 49 of the Act. It was also contended that these Circulars being binding on the Department, they are bound in law to comply with the same and the show cause-cum-demand notices issued by the authorities being contrary to the relevant Circulars in force, the said notices/demands are liable to be quashed. On behalf of the Union, it is contended that though the Circulars in question are binding on the Department, they are not binding on the adjudicating authorities, therefore, it was open to the tribunal to have independently considered the case and having done so correctly, the appellant’s appeals before us are devoid of any merit.
3. It is not necessary to go into the facts of the case elaborately in vieew of certaion admitted facts. The respondent does not dispute that by virtue of Circular dated 23.7.1986 and as clarified by Circular dated 7.8.1987, the products manufactured by the appellant will have to be classified under Chapter 49 of the Act at the relevent time but it contends that the Circulars referred to above did not correctly reflect the correct classification and correct position is as clarified by subsequent Circular of the Board dated 16.1.1989 and also in view of the judgment of this Court in the case of Rollatainers Ltd. v. Union of India1 , the tribunal was justified in dismissing the appeal of the appellant.
4. The question for our consideration in these appeals is : What is the true nature and effect of the Circulars issued by the Board in exercise of its power under Section 37-B of the Central Excise Act, 1944? This question is no more resintegra in view of the various judgments of this Courts. This Court in a catena of decisions has held that the Circulars issued under Section 37-B of the said Central Excise Tariff Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. These judgments have also held that the position may be different with regard to an assessee who can contest the validity or legality of such instructions but so far as the Department is concerned, such right is not available. (See Collector of Central Excise, Patna v. Usha Martin Induatries2). In the case of Ranadey Micronutrients v. Collector of Central Excise3, this Court held that the whole objective of such Circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. The Court also held that it does not lie in the mouht of the Revenue to repudiate a Circular issued by the Board on the basis that it is inconsistent with a statutory provision. (emphasis supplied). Consistency and discipline are, according to this Court, of far greater importance than the winning or losing of court proceedings. In the case of Collector of Central Excise, Bombay v. Jayant Dalal Pvt. Ltd.4, this Court has held that it is not open to the Revenue to advance an argument or even file an appeal against the correctness of the binding nature of the Circulars issued by the Board. Similar is the vieew taken by this Court in the case of Collector of Central Excise, Bombay v. Kores (India) Ltd.5.
5. It is clear from the abovesaid pronouncements of this Court that, apart from the fact that the Circulars issued by the Board are binding on the Department, the Department is precluded from challenging the correctness of the said Circulars even on the ground of the same being inconsistent with statutory provision. The ratio of the judgment of this Court further precludes the right of the Department to file an appeal against the correctness of the binding nature of the Circulars. Therefore, it is clear that so far as the Department is concerned, whatever action it has to take, the same will have to be consistent with the Circular which is in force at the relevant point of time.
6. As stated above, it is an admitted fact that by virtue of Circular No. 4/85 date 23.7.1986 as clarified by Circular dated 7.8.1987, all the three products of the appellant are to be treataed as the products of the printing industry and not that of the packaging industry. A change in the said view of the Board occurred for the first time by virtue of its Circular No. 6/89 dated 16.1.1989. Further, the Board itself by its subsequent Circular No. 29/89 dated 5.5.1989 has made it abundantly clear that the change notified in Circular No. 6/89 will be prospective from the date of issuance of Circular No. 6/89, that is , from 16.1.1989. Therefore, it is clear that till the issuance of Circular No. 6/89 which is dated 16.1.1989 the products of the appellant, by virtue of the two Circulars dated 23.7.1986 and 7.8.1987, have to be classified under Chapter 49 of the Act as being products of the printing industry eligible for exemption of duty under Notification Nos. 12/75 and 234/82 as applicable at the relevant time. The impugned show cause notices and consquent demand being ab initio bad inasmuch as the same was contrary to the existing Circulars of the Board, the same cannot be sustained.
7. That being the case, these appeals are liable to be allowed and the impugned orders of the tribunal are set aside. The show cause cum demand notices impugned in these proceedings are quashed. The appellant will be entitled to all consequential benefits flowing from this judgment. The bank guarantees discharged. No costs.
(C.R.) Appeals allowed.
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