Circulars issued by the Central Board of Excise and Customs, as well as those under the Income Tax Act and Central Excise Act, are binding on the Department and the Revenue. The Revenue cannot take a stand contrary to the instructions issued by the Board, and show-cause notices and demands contrary to existing circulars are invalid.

ORDER :

1. Leave granted in the special leave petitions. We agree with the view taken, Arviva Industries (I) Ltd. v. Union of India, (2004) 5 Bom CR 664 by the High Court that the circulars issued by the Central Board of Excise and Customs are binding on the Department and the Department cannot be permitted to urge that the circulars issued by the Board are not binding on it.

2. This Court in a series of decisions has held that the circulars issued under Section 119 of the Income Tax Act, 1961 and Section 37-B of the Central Excise Act, 1944 are binding on the Revenue. [See Navnit Lai C. Javeri v. K.K. Sen, AIR 1965 SC 1375, Ellerman Lines Ltd. v. CIT, (1972) 4 SCC 474, K.P. Varghese v. ITO, (1981) 4 SCC 173 Union of India v. Azadi Bachao Andolan, (2004) 10 SCC 1, CCE v. Usha Martin Industries, (1997) 7 SCC 47, Ranadey Micronutrients v. CCE, (1996) 10 SCC 387, CCE v. Jayant Dalai (P) Ltd., (1997) 10 SCC 402, CCE v. Kores (India) Ltd., (1997) 10 SCC 338, Paper Products Ltd. v. CCE, (1999) 7 SCC 84 and Dabur India Ltd. v. CCE, (2004) 13 SCC 107]

3. A slightly different approach was taken by this Court in Hindustan Aeronautics Ltd. v. CIT, (2000) 5 SCC 365 by two learned Judges which runs counter to the decisions referred to above. The view taken in Hindustan Aeronautics Ltd., (2000) 5 SCC 365 being contrary to the subsequent decision of the Constitution Bench of this Court in CCE v. Dhiren Chemical Industries, (2002) 2 SCC 127 cannot be taken to be good law.

4. This Court in Commr. of Customs v. Indian Oil Corpn. Ltd, (2004) 3 SCC 488, after examining the entire case law, culled out the following principles: (SCC p. 497. para 12)

"(1) Although a circular is not binding on a court or an assessce. it is not open to the Revenue to raise a contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute.

(2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board.

(3) A show-cause notice and demand contrary to the existing circulars of the Board are ab initio bad.

(4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars."

5. In this particular case, the Board's Circular No. 39/99-Cus. dated 25-6-1999 extends the benefit of the brand rate of drawback to compensate exporters for the re-rolled steel products and processed fabrics. The High Court has rightly come to the conclusion that the circulars issued by the Board are binding on the Department. An effort was made by the learned Solicitor General to get this case referred to a larger Bench. We do not accept this contention in view of a number of decisions and especially the Constitution Bench decision in Dhiren Chemical Industries, (2002) 2 SCC 127.

6. The civil appeals are dismissed. No costs.

TC(C) No. 51 of 2006, TCs Nos. 52-56, 58-74, 76-79 of 2006

7. All these transferred cases are sent back to the respective High Courts for being decided afresh in view of the law laid down by us today in Union of India v. Arviva Industries (I) Ltd., Set out in paras 1 to 7, above, as expeditiously as possible.