REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4022 OF 1999
Commissioner of Central Excise, Bolpur ...Appellant
Versus
M/s Ratan Melting & Wire Industries ...Respondent
WITH
Civil Appeal No. 1469/2002
Civil Appeal No. 3197/2000
Civil Appeal No. 3589-3592/2005
Civil Appeal No. 4789/2000
JUDGMENT
Dr. ARIJIT PASAYAT, J.
1. On a reference made by a Bench of three Judges in Commissioner of Central
Excise, Bolpur v. v. Ratan Melting and Wire Industries, Calcutta (2005 (3) SCC 57),
these matters were placed before this Bench. The reference was necessitated because of
certain observations by a Constitution Bench in Collector of Central Excise v. Dhiren
Chemical Industries (2002 (2) SCC 127). During the hearing of the appeal before the
three-Judge Bench it was fairly conceded by the parties that the decision of this Court in
Collector of Central Excise, Patna v. Usha Martin Industries (1997 (7) SCC 47) on which
the Customs, Excise and Gold (Control) Appellate Tribunal placed reliance was over-
ruled by the subsequent decision of the Constitution Bench in Dhiren Chemical’s case
(supra). But learned counsel for the assessee-respondent submitted that paragraph 11 of
Dhiren Chemical’s case (supra) operates in its favour. It reads as under:
“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.”
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2. It was noted by the three-Judge Bench that the effect of the aforesaid observations
was noted in several decisions. In Kalyani Packaging Industry v. Union of India and Anr.
(2004 (6) SCC 719), it was noted as follows:
“We have noticed that para 9 (para 11 in SCC) of Dhiren
Chemical case (2004 (6) SCC 722) is being
misunderstood. It, therefore, becomes necessary to
clarify para 9 (para 11 in SCC) of Dhiren Chemical case
(2004 (6) SCC 722). One of us (Variava, J.) was a party
to the judgment of Dhiren Chemical case and knows
what was the intention in incorporating para 9 (para 11
in SCC). 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.”
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3. The three-Judge Bench agreed with the view expressed in Kalyani’s case (supra)
and observed that the view about invalidation was sufficient to clarify the observations in
paragraph 11 of Dhiren Chemical’s case (supra). On taking note of the fact that Dhiren
Chemical’s case (supra) was decided by a bench of five Judges it was felt appropriate that
a bench of similar strength should clarify the position. That is why reference was made.
4. Learned counsel for the Union of India submitted that the law declared by this
Court is supreme law of the land under Article 141 of the Constitution of India, 1950 (in
short the `Constitution’). The Circulars cannot be given primacy over the decisions.
5. Learned counsel for the assessee on the other hand submitted that once the circular
has been issued it is binding on the revenue authorities and even if it runs counter to the
decision of this Court, the revenue authorities cannot say that they are not bound by it.
The circulars issued by the Board are not binding on the assessee but are binding on
revenue authorities. It was submitted that once the Board issues a circular, the revenue
authorities cannot take advantage of a decision of the Supreme Court. The consequences
of issuing a circular are that the authorities cannot act contrary to the circular. Once the
circular is brought to the notice of the Court, the challenge by the revenue should be
turned out and the revenue cannot lodge an appeal taking the ground which is contrary to
the circular.
6. 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
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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.
7. As noted in the order of reference the correct position vis-`-vis the observations in
para 11 of Dhiren Chemical’s case (supra) has been stated in Kalyani’s case (supra). If
the submissions of learned counsel for the 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 this Court and the binding effect in terms of Article 141 of the
Constitution.
8. The reference is accordingly answered holding that the correct view has been
expressed by Kalyani’s case (supra) as noted in the reference order.
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9. The appeals filed by the revenue are allowed while those filed by the assessee stand
dismissed.
………………………….CJI.
……………………………..J.
(Dr. ARIJIT PASAYAT)
……………………………..J.
(HARJIT SINGH BEDI)
……………………………..J.
(P. SATHASIVAM)
……………………………..J.
(J.M. PANCHAL)
New Delhi,
October 14, 2008
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