1. Dispute over classification of printed polyester films as printing industry products (Chapter 49) or packaging industry products (Chapter 39) under the Central Excise & Tariff Act. (Para 2 )
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1999 Supreme(SC) 918
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 Points
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.
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.
Subject
Taxation Law - Excise Duty
Act Referred
Headnote
Central Excise Tariff Act, 1985 -Section 38B and Chapter 49 of Schedule-Classification of products-Printed polyester films backed with paper, backed with polythene films and backed with aluminium foils used either as labels, pouches or wrapper-At relevant time Circular dated 23.7.1986 as clartified by circular dated 7-8-1997 classifying above products as products of printing industry subject to duty under chapter 49-Subsequent circular No. 6/98 dated 16.1.1989 classifying products as products of packing industry coming within chapter 39 of Schedule-Show cause and demad notices on basis of new classification-Till circular No. 6/89 dated 16.1.1989 earnier Department bound by carlier circular-Show cause and demand noties are void ab inito same contrary to existing circulars.
Held : The 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. 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. 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. (Paras 4 & 5)
In the instant case 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. (Para 6)
Legal Category Hierarchy
Table of Contents
2. Appellant contends Board Circulars are binding on the Department; Union argues Circulars bind the Department but not the adjudicating authorities. (Para 2 )
3. The Department is precluded from challenging the correctness of Board Circulars or arguing they are inconsistent with statutory provisions to avoid their binding nature. (Para 4 , 5 )
4. Circulars issued under Section 37-B of the Central Excise Act are binding on the Department, ensuring uniform practice and consistency in tax administration. (Para 4 , 5 )
5. Appeals allowed, tribunal orders set aside, and show cause cum demand notices quashed. (Para 7 )
6. Are Circulars issued by the Board under Section 37-B of the Central Excise Act binding on the Department?
Yes, Circulars issued under Section 37-B are binding on the Department. The Department cannot take a stand contrary to the instructions issued by the Board to ensure uniform practice and consistency. (Para 4 , 5 )
7. Can the Revenue Department challenge a Board Circular on the grounds that it is inconsistent with a statutory provision?
No, the Revenue cannot repudiate a Circular or challenge its correctness on the basis that it is inconsistent with a statutory provision. (Para 4 , 5 )
8. Does the binding nature of Board Circulars apply to the assessee?
No, while Circulars are binding on the Department, an assessee is not bound by them and may contest the validity or legality of such instructions. (Para 4 )
9. How is a change in classification via a subsequent Board Circular applied to previous periods?
A change in the Board's view via a subsequent Circular is prospective from the date of issuance of that Circular; actions for prior periods must remain consistent with the Circular then in force. (Para 5 , 6 )
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 differen
