Pinkeshwar Gangwar and Ria Tandon ((Student of Law, Dr. Ram Manohar Lohiya National Law University, Lucknow and Student of Law, University Of Petroleum And Energy Studies, Dehradun)).
The Department of Revenue of Ministry of Finance administers and supervises its subordinate bodies like Commissioners of Customs, Excise and Income Tax, Custom House etc, House etc, enforces the tax laws and frames policies concerning levy and collection of income tax, customs duty, central excise, service tax and other taxes This task is achieved by the department through the Boards namely- the Central Board of Direct Taxes (Income Tax, Wealth Tax and other direct taxes) and Central Board of Excise and Customs (Central Excise, Customs and Service Tax). These Boards are parts of the Central Government or the Department of Revenue and are administrative bodies. They are statutory authorities functioning under the Central Board of Revenue Act, 1963. Initially the Board was in charge of administering both direct and indirect taxes. However, as administration of taxes became too unmanageable for one Board to handle, the Board was split into two, namely the Central Board of Direct Taxes and Central Board of Excise and Customs with effect from 1.1.1964, a bifurcation brought about by section 3 of the Central Boards of Revenue Act, 1963. The Boards are headed by a Chairman and the members are all are ex-officio Special Secretary to Government of India. The Chairman and Members are selected from Indian Revenue Service (IRS), a premier civil service of India.
The Boards may, from time to time, issue orders, instructions and directions to subordinate tax authorities as it may deem fit for the proper administration. In this paper, I will deal with the binding nature of the instructions issued by the Boards. There have been many queries which have arisen from time to time on the binding nature of these instructions. Are these instructions binding only on the department’s authorities? Are they binding on the assessee? Is a tax officer bound by these instructions while adjudicating? When such instructions are in conflict with a Supreme Court judgment, which will prevail? These are some of the questions that I seek to address in this paper.
INSTRUCTIONS BY BOARDS
The CBEC and CBDT often issue instructions to subordinate authorities. This power is given to Central Government/Boards under the tax statutes.
The Customs Act, 1962 mainly focuses on levy, collection duties, import and export procedures, exportation of goods , penalties ((Available at http://www.alfasolutions.in/documents/customsLaw.pdf.))and the other offences but with reference to instruction of the Board which is CBEC in this case , we will be focusing on section 151 A of the Customs Act, 1962
It is the duty of the CBEC to give directions to the Custom officers which is clearly explained under the Section 151 A of the Custom Act, 1962 . Section 151A of the Customs Act, 1962 deals with the power which is provided to CBEC to give direction to the Custom officers if it deem fits for the purpose of uniformity to the classification of Goods which deals with classifying the goods with respect to the specific heading of the schedules to the Customs Traffic Act, 1975 ((Available at http://www.cbec.gov.in/customs/cst2012-13/cst1213-idx.htm)).
The First Schedule talks with reference to Harmonized Commodity Description which provides those commodities with description up to 4-digit (Heading) and 6-Digit( Sub Heading) levels and the Countries of WCO ((Available at http://www.cbec.gov.in/cs_manual2011.pdf))are only allowed to extend the codes up to any level they want provided that the 4 and 6 digits do not vary . The second schedule talks about goods which are liable for charge for export duty.
The provision of section 151 A of the Indian Customs Act 1962 can clearly be understood with the help of V.P.Rasheed vs The Government Of India ((Available at http://indiankanoon.org/doc/52716295/.))on 31 October, 2012 wherein the Petitioner had filed a write of Certiorarified Mandamus under the provision of Article 26 of the Constitution of India with reference to the record pertaining to the order which was passed by the second respondent via proceedings. No.F.No.336/25/2011-TRU dated 26.04.2012 and quashing of the same as being illegal, arbitrary and violating the principles of natural justice and in excess of power conferred under the Section 151-A of the Customs Act, 1962 and thereby, it was directed to the respondent number 4 and 5 from use of the conversion 1.8027 instead of conversion factor 1.416 to convert Hoppus Ton to Cubic Meter while filing Bills of Entry and at the same time directing the 5 th respondent to refund the special additional duty which was paid by the petitioner towards the goods which were imported .
In this case the clarification which is issued by the sole decision making authority CBEC passed under section 151 A of the Customs Act, based on the direction were issued by the Kerala High Court as to bring uniformity in the conversion factor which is the matter of contention.
Through this case we can conclude with reference to section 151 A and 37 B as well since both work on the same line that the need for instruction arises when there is vague attributes in the matters . This is possible because of the varying views of the Custom officials since the result of this can be uncertain or confusion. Hence so as to avoid these kind of confusion section 151 A has be enacted exactly like Section 37 A of the Central Excise Act. The need to issue circular is required when there is no prominent view by the Court on the subject. Once the Court gives its judgement , the basis of these circulars disappears.
The explanation with regards to the proviso of section 151 A makes it clear that the Custom officer who is entrusted with a particular assignment of assessment then he is not bound by these orders or instructions or the directions of the Board. An assessing Authority because of its quasi judicial nature has to act independently when it is exercising its power. Section 151A in no way affect the discretion of the quasi judicial body.
Section 37 B of Central Excise Act also applies in the Service Tax cases because of Section 83 of Finance Act Act as section 37B relates to the service tax as they apply to a duty of excise. Section 119 of the Income Tax Act 1961 contains material enactments , are found to be identical enactment. However the Board in this case is CBDT and not CBEC.
Instructions directed to subordinate authorities- Section 119 (1) states that the Board may issue orders, instructions to other income-tax authorities whom they deem fit with regards to the administration of this Act, and such authorities and others those who are in charge with the execution of this Act will be bound to follow the directions of the Board and the same two conditions apply here as that is present in Section 151A of the Customs Act, 1962 . (2) Without prejudice to the generality of the foregoing power,—
(a) The Board may if it thinks necessary for carrying out proper management work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 115P, 115S, 115WD, 115WE,115WF, 115WG, 115WH, 115WJ, 115WK,] 62[139,] 143, 144, 147, 148, 154, 155 , 158BFA, sub-section (1A) of section 201, sections 210, 211, 234A, 234B, 234C, 271 and 273 or otherwise), general or the special orders of any varying class of incomes or benefits or
or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;
(b) Section 119 (2) (b) can be understood through case in Jay Vijay Express Carriers vs Commissioner Of Income on 5 March, 2013 in this case the Petitioner ha challenged order dated 6.2.2012 which was passed by the Commissioner of Income-Tax with reference to the exercise of powers under Section 119(2)(b) of the Income Tax Act, 1961 (the Act for short). In this case petition was allowed since it was observed that before the Commissioner in the petition under Section 119(2)(b) of the Act, Assessing Officer had satisfied with the reason that the expenditure was disallowed only because of the grounds of non-deduction and deposit of tax at source. The genuineness of the expenditure was not look into hence it was left open for being assessed by the Assessing officer to do so.
(c) The board may, if it thinks necessary for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:—
(i) The default which is in compliance with such requirement which were due to circumstances beyond the control of the assessee; and
(ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed :
Provided only in the case wherein the Central Government where the order issued by it under this clause is laid before each of the parliament.
It is clear from these sections that the power to issue instructions is given by the Board to the officers of the Revenue department subordinate to the Board. These instructions are issued by the Boards in pursuance of its administrative power ((Sirpur Paper Mills Ltd. v. Commissioner of Wealth Tax, Hyderabad (1970) 1 SCC 795.)). The need to issue such instructions arises when there is a doubt or ambiguity in relation to levy of tax, classification of goods etc. The possibility of varying views being taken by the officials of revenue department- while administering may bring about uncertainty and confusion ((Id.)). In order to avoid this situation, Section 151A Customs Act, Section 37B of the Central Excise Act and Section 119 of Income Tax act were enacted.
It is noteworthy to mention here that Section 10 of Wealth Tax Act 1957, Section 9 of Gift Tax Act 1958, Section 6(2) of Expenditure Tax Act 1987, Section 3(2) of the Interest Tax Act 1974 are in pari materia with the above stated enactments.
EFFECT OF BOARDS’ INSTRUCTIONS ON REVENUE OFFICERS
Sec 151A Customs Act clearly states that the instructions by the Boards are issued to subordinate revenue officers and the revenue authorities are to follow and observe such instructions, orders and directions. This means that the Boards’ instructions are binding on revenue officers and they cannot contend otherwise. A Jammu and Kashmir High court decision succinctly states the effect of such instructions on revenue officers. It held:
“Section 119(1) of the Act in clear terms provides that all authorities employed in the execution of the Act are duty-bound to observe and follow the orders, instructions, and directions of the Board. It is well settled that circulars issued by the board are binding on the officers and persons employed in the execution of the Act, more so circulars beneficial to the assessee which tone down the rigour of the law. The benefit of such circulars is available to the assessee even though the circulars might have mitigated from the strict tenor of the statutory provision and mitigated the rigour of the law. In view of the binding nature of the circulars, it is not open to the revenue to raise a contention which is contrary to the circulars and instructions issued by the Board ((The Commissioner of income Tax v. Abdul Ahad Najar, Srinagar, (2001) 1 J & K Law Reporter 123)).”
Navnitlal C. Javeri v K.K. Sen, Appellate Assistant Commissioner of Income-tax, ‘D’ Range, Bombay ((Navnitlal C. Javeri v K.K. Sen, Appellate Assistant Commissioner of Income-tax, ‘D’ Range, Bombay, AIR 1965 SC 1375))is a case on Income-tax Act, 1922. Question arose with regard to the constitutional validity of Sections 2(6A)(e) and 12(1B) which were introduced in the Indian Income Tax Act 1922 by the Finance Act 1955 with effect from 1st April, 1955. These sections provided that any payment made by a closely held company ( it is a type of company which is managed by a small number of people, has limited liability and in it public is not interested“This type of company is referred in Sec.2(22)(e)” and Sec. 79.) to its shareholder by a way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under the Act and this would include any loan or advance made in any previous year relevant to any assessment year prior to the assessment year 1955-56, if such loan or advance remained outstanding on the first day of the previous year relevant to the assessment year 1955-56. The constitutional validity of these two sections was challenged on the ground that they imposed unreasonable restrictions on the assesse’s fundamental right under Article19(1)(f) and (g) of the Constitution by taxing outstanding loans or advances of past years as dividend. In this case, there was a circular issued by the Central Board of Revenue under Section 5(8) of the Indian Income-tax Act 1922 which corresponded to Section 119 of the present act. It was realised by the Government that such a step was necessary to stop causing extreme hardship and a circular [No. 20(XXI-6) /55] was issued by the Central Board of Revenue on the 10th May, 1955. The circular provided that if any such outstanding loans or advances of past years were repaid on or before 30th June 1955, they would not be taken into account in determining the tax 1iability of the shareholders to whom such loans or advances were given. The Court held that “It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act.” The same principle was reiterated in Ellerman Lines Ltd v. Commissioner of Income-tax, West Bengal, Calcutta ((Ellerman Lines Ltd v. Commissioner of Income-tax, West Bengal, Calcutta , [1971] 82 ITR 913(SC).)).
In K.P. Varghese v. Income Tax Officer, Ernakulam and Anr ((K.P. Varghese v. Income Tax Officer, Ernakulam and Anr ,AIR 1981 SC 1922)), question arose regarding interpretation of Section 52 (2) of Income Tax Act, 1961. The provision under section 52 (2) is that of consideration for the Transfer in cases of understatement ((http://www.vakilno1.com/bareacts/incometaxact/incometaxact.html#Section_52_CONSIDERATION_FOR_TRANSFER_IN_CASES_OF_UNDERSTATEMENT))present. This section was omitted by the Finance Act in 1987, with effect from 1-4-1988.
The question was whether understatement of consideration in transfer of property is necessary condition for applicability of Section 52 (2). Soon after the introduction of Sub-section (2), the Central Board of Direct Taxes, in exercise of the power conferred under Section 119 of the Act, issued a circular dated 7th July, 1964 explaining the scope and object of Sub-section (2). The Circular stated that Section 52(2) was enacted ‘with a view to countering evasion of tax on capital gains through the device of an under-statement of the full value of the consideration received or receivable on the transfer of a capital asset.’ The Circular clearly stated that:
Sub-section (2) enables the computation of capital gains arising on transfer of a capital asset with reference to its fair market value as on the date of its transfer, ignoring the amount of the consideration shown by the assessee, only if the following two conditions are satisfied:
(a) the transferee is a person who is directly or indirectly connected with assessee, and
(b) the Income-tax Officer has reason to believe that the transfer was effected with object of avoidance or reduction of the liability of assessee to tax on capital gains.
Therefore, as per CBDT circular Section 52(2) was not aimed at perfectly honest and bonafide transactions where the consideration in respect of the transfer was correctly disclosed or declared by the assessee. However, CBEC came up with another circular on similar lines. The Court held that it must be remembered that instructions of the Board are legally binding on Income Tax authorities in the administration or implementation of Section 52(2). The Income-tax Officers are bound to follow the instructions issued by the Board ((Id.)).
In another case Commissioner of Income Tax, Bangalore v. Vasudeo v. Dempo ((Commissioner of Income Tax, Bangalore v. Vasudeo V. Dempo , [1992] 196 ITR 216 (SC).)), the Supreme Court held that “We, however, consider it necessary to observe that the circulars issued by the Department are normally meant to be followed and accepted by the authorities. We do not find any justification for the officers not following it nor was the Department justified in pursuing the matter further in this Court.”
In Ranadey Micronutrients v. Collector Of Central Excise ((Ranadey Micronutrients v. Collector Of Central Excise, 2002-TIOL-184-SC-CX.)), the Court held that, “Such circulars are not advisory in character but binding on the Central Excise Officers – Department cannot be allowed to plead that such circular was not valid.”
In Commissioner of Customs Calcutta v Indian Oil Corporation Ltd ((Commissioner of Customs Calcutta v Indian Oil Corporation Ltd , 2004 (165) E.L.T. 257 (SC).)), Justice P. Venkatarama Reddi held that , “I have no reservations in accepting the principle that the circulars issued by the Board under Section 151A of the Customs Act or Section 37B of the Central Excise Act are generally binding on the Revenue”.
The learned judge in Commissioner of Customs Calcutta v Indian Oil Corporation Ltd ((Ib))also reiterated a principle observed in Sirpur Paper Mills Ltd. v. Commissioner of wealth Tax, Hyderabad ((Sirpur Paper Mills Ltd. v. Commissioner of wealth Tax, Hyderabad , [1970] 77 ITR 6 (SC).))that such instructions and circulars are not binding on Revenue officers while adjudicating or acting in quasi-judicial capacity. The Court held in Sirpur Paper Mills Ltd Case that , “Normally, the instructions issued by the superior authorities on administrative side cannot fetter the exercise of quasi judicial power and the statutory authority invested with such power has to act independently in arriving at a decision under the Act ((Id.)).” The Court held that the instructions issued by the Board may control the exercise of the power of the departmental officials in matters administrative but not quasi-judicial ((Ibid ; See also A.L.A. Firm v. CIT [1976] 102 ITR 622 (Mad.).)). However, when there is a statutory mandate to observe and follow the orders and instructions of the Board in regard to specified matters, that mandate has to be complied with. It is not open to the adjudicating authority to deviate from those orders or instructions which the statute enjoins that it should follow. If any order is passed contrary to those instructions the order is liable to be struck down on that very ground ((Commissioner of Customs Calcutta v Indian Oil Corporation Ltd, 2004 (165) E.L.T. 257 (SC).)).
Bengal Iron Corporation v Commercial Tax Officer is another case which held that the Boards’ instructions ((1993 [66] ELT 13 SC))are not binding on revenue officers where they are acting as quasi-judicial body. It held that it is doubtful whether such clarifications and, circulars bind the quasi-judicial functioning of the authorities under the Act. While acting in quasi judicial capacity, they are bound by law and not by any administrative instructions, opinions, clarifications or circulars. Law is what is declared by this Court and the High Court – to wit, it is for this Court and the High Court to declare what does a particular provision of statute say, and not for the executive.
EFFECT OF BOARDS’ INSTRUCTIONS ON ASSESSEE
In Commissioner of Customs Calcutta v Indian Oil Corporation Ltd ((Commissioner of Customs Calcutta v Indian Oil Corporation Ltd , 2004 (165) E.L.T. 257 (SC).)), the Court stated that instructions/circulars by CBEC are not binding on the assessee. In Vikrant Tyres v. First ITO also it was held that the circular of the Board was not binding on the assessee ((1993 [202] ITR 454 Kar)). In CIT v. Hero Cycles (P.) Ltd ((CIT v. Hero Cycles (P.) Ltd , [1997] 94 Taxman 271/228 ITR 463 (SC).)). The Court held that it is well-settled principle that Boards’ instructions are not binding in assesses.
The Boards have been empowered to issue such orders, instructions directions to its subordinate authorities as it may deem fit for the proper administration of the Act and such authorities and all other persons employed in the execution of the tax laws shall observe and follow such orders, instructions and directions of the Board. Under, Income Tax Act in section 119(2), however, it has been laid down that the Board may issue direction for the purpose of proper and efficient management of the work of assessment and collection of revenue, provided the instructions are not prejudicial to the assessee. Therefore, any instruction to be issued by the Board should not adversely affect the interests of the assessees. If such directions are issued then they have to be held ultra vires the scope of section 119(2) of the Act. Similar provisions are there in other tax statutes. The instructions cannot be adverse to the assessee. Though the circulars are not binding on assessee, the assessee can take benefit of them.
EFFECT OF BOARDS’ INSTRUCTIONS ON STATUTORY ENACTMENTS
The question that is to be addressed here is whether Boards’ instructions can override an express provision of a statute. According to Bombay High Court in Banque Nationale De Paris v. CIT ((Banque Nationale De Paris v. CIT, [1999] 237 ITR 518 (Bom).))where this question was taken into consideration, that section 119 of the Income Tax Act 1961 had empowered the Board to issue orders, instructions or directions for the `proper administration’ of the Act or for such other purposes specified in sub-section (2) of the section. Such an order, instruction or direction cannot override the provisions of the Act; that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provisions of law enacted by the parliament. In taking this view, the Bombay High Court relied on the decision of the Supreme Court in State Bank of Travancore v. CIT ((State Bank of Travancore v. CIT [1986]158 ITR 102 (SC).))wherein it was expressly held that circulars cannot detract from the Act.
This aspect was further clarified by the Hon’ble Supreme Court in Kerala Financial Corporation v Commissioner of Income-tax ((Kerala Financial Corporation v Commissioner of Income-tax, AIR 1994 SC 2416 (1994).)), in the following paragraphs.
“…Shri Salve would however, urge that a little different view of the matter had been taken by two-Judge bench of this Court in K.P. Varghese v. Income Tax Officer [1981]131 ITR 597(SC) in which it was observed at page 613 that circulars issued under the aforesaid provisions are binding on all officers “even if they deviate from the provisions of the Act” as to what was sought to be conveyed by the word “deviate’ is not clear to us. This much, however, is apparent that this Court did not mean, while saying as above, that circulars can override any provision of the Act ((Id. At Para 12)).”
“…Such an order, instruction or direction cannot override the provisions of the Act; that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament ((Id. at para 14)).”
Also in landmark case of Commissioner of Customs, Calcutta v Indian Oil Corporation Ltd ((Commissioner of Customs, Calcutta v Indian Oil Corporation Ltd, (2004) 3 SCC 488)). the position was settled for once and for all that in case of conflict between a circular issued by a Board and a Statutory provision or mandate, it will always be the Statutory mandate that will prevail. It said in its para 24 –
“…when there is a statutory mandate to observe and follow the orders and instructions of the Board in regard to specified matters, that mandate has to be complied with. It is not open to the adjudicating authority to deviate from those orders or instructions which the statute enjoins that it should follow. If any order is passed contrary to those instructions the order is liable to be struck down on that very ground ((Id. at para 24)).”
BOARDS’ INSTRUCTIONS AS AID TO CONSTRUCTION OF STATUTE
Apart from the binding nature of Boards’ instructions on the revenue department, they are clearly in the nature of contemporanea exposition furnishing legitimate aid in the construction of tax statutes ((K.P. Varghese v. ITO [1981]131ITR597(SC).)). The Rule of contemporanea expositio is that “administrative construction (i.e., contemporaneous construction placed by administrative or executive officers) generally should be clearly wrong before it is overturned; such a construction commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive ((Crawford on Statutory Construction, 1940 Ed)).”
The validity of this principle was recognised in Baleshwar Bagarti v. Bhagirathi Dass ((Baleshwar Bagarti v. Bhagirathi Dass ILR (1908)Cal 701, 713))where the Court held that, ‘It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it…by those whose duty it has been to construe, execute and apply it.” The rule has also been quoted with approval by the court in Deshbandhu Gupta & Company v. Delhi Stock Exchange Association Ltd ((Deshbandhu Gupta & Company v. Delhi Stock Exchange Association Ltd., [1979]3SCR373))and Union of India and anr v Azadi Bachao Andolan and anr ((Union of India and anr v Azadi Bachao Andolan and anr,.[2003]263 ITR 706 (SC).)).
In K.P. Varghese v. ITO ((K.P. Varghese v. ITO , [1981]131ITR597(SC).)), the Court held –
It is clear from these two circulars that the Central Board of Direct Taxes, which is the highest authority entrusted with the execution of the provisions of the Act, understood Sub-section (2) as limited to cases where the consideration for the transfer has been under-stated by the assessee and this must be regarded as a strong circumstance supporting the construction which we are placing on that sub-section.
EFFECT OF CIRCULAR ON A CONFLICTING SUPREME COURT DECISION
A very controversial question arises when one has to make a choice between circular by a Board against a decided Supreme Court precedent, especially when they talk in contradictory voices. A great debate was raised by Dhiren Chemical Industries case ((Collector of Central Excise, Vadodra v Dhiren Chemical Industries, AIR 2002 SC 453.))when circulars were given priority in the following words –
“We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, 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 ((Id. at para 9)).”
The ambiguity created by para 9 of Dhiren Chemical case was clarified by Kalyani Packaging Industry v Union of India ((Kalyani Packaging Industry v Union of India, (2004) 6 SCC 719)).
“We have noticed that Para 9 of Dhiren Chemical’s case is being misunderstood. It therefore becomes necessary to clarify Para 9 of Dhiren Chemical’s case. One of us (Variava, J.) was a party to the Judgment of the Dhiren Chemical’s case and knows what was the intention in incorporating Para 9. It must be remembered that 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’s case because of 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’s case, the Revenue was likely to reopen cases. Thus Para 9 was incorporated to ensure that 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 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’s 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’s case ((Kalyani Packaging Industry v Union of India, (2004) 6 SCC 719 at para 6.)).”
In the recent case of Commissioner of Central Excise, Bolpur v Ratan Melting And Wire Industries ((Commissioner of Central Excise, Bolpur v Ratan Melting And Wire Industries, (2008) 13 SCC 1.)), the above line of reasoning was further recognised and this can be seen in the following words of the Hon’ble Court –
“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 ((Commissioner of Central Excise, Bolpur v Ratan Melting And Wire Industries, (2008) 13 SCC 1 at para 6)).”
“… 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 this Court and the binding effect in terms of Article 141 of the Constitution ((Commissioner of Central Excise, Bolpur v Ratan Melting And Wire Industries, (2008) 13 SCC 1 at para 7)).”
Finally Commissioner of Customs, Calcutta v Indian Oil Corporation Ltd ((Commissioner of Customs, Calcutta v Indian Oil Corporation Ltd, (2004) 3 SCC 488)). concludes how a circular of a Board will not act as an overriding authority to a case decided by Supreme Court or a High Court. It says –
“… I am unable to reconcile myself to the view that even after the highest Court settles the law on the subject, the view expressed by the Central Board on the same point of law should still hold the field until and unless it is revoked ((Id. At para 24)).”
“The apparent need to issue such circulars is felt when there is no authoritative pronouncement of the Court on the subject. Once the relevant issue is decided by the Court at the highest level, the very basis and substratum of the circular disappears ((Id. At para 24)).”
“I am of the view that in a situation like this, the Customs authority should obey the constitutional mandate emanating from Article 141 read with Article 144 rather than adhering to the letter of a statutory provision like Section 151A of the Customs Act ((Id. At para 26)).”
CONCLUSION
It is intended that discussed provisions shall aid in preventing discrimination among assessees and ensuring uniformity in the application of these statutes. They require that all officers employed in the execution of these statutes shall observe and follow any orders, instructions and directions so issued. For the purposes of assessing the binding value of orders, instructions and directions under these provisions, it must be kept in mind that these provisions are in pari materia with one another.
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. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings.
The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied.