2007 (1) TMI 6 - SC - Central Excise

CBEC Circular 39/99 upholds brand-rate drawback for re-rolled steel and processed fabrics; departmental circulars binding on revenue

SC held that CBEC Circular No. 39/99-Cus. (25 June 1999) validly extended brand-rate drawback to exporters of re-rolled steel products and processed ... Binding nature of Board Circulars on the Revenue - Circulars issued under Section 119 of the Income Tax Act and Section 37B of the Central Excise Act are binding on the revenue - Revenue estopped from adopting a stance contrary to Board Circulars - Show-cause notices and demands contrary to Board Circulars are ab initio bad - Brand Rate Drawback entitlement for re-rolled steel products and processed fabrics as per Board Circular No.39/99-Cus. - Precedential conflict resolved by disapproving Hindustan Aeronautics Ltd. to the extent inconsistent with the Constitution Bench decision in CCE v. Dhiren Chemical IndustriesBinding nature of Board Circulars on the Revenue - Revenue estopped from adopting a stance contrary to Board Circulars - Show-cause notices and demands contrary to Board Circulars are ab initio bad - Circulars issued by the Central Board of Excise & Customs are binding on the department and the department cannot be permitted to take a position contrary to such circulars. - HELD THAT: - The Court agreed with the High Court's conclusion that Board circulars bind the revenue and that the department may not contend that a binding circular is not binding on it. The Court recalled its precedents holding that while a circular is not binding on a court or an assessee, it is not open to the Revenue to raise contentions contrary to a binding circular; when a circular remains in operation the Revenue is bound by it and cannot contend that it is invalid or contrary to the statute. The Court endorsed the principles that the Department cannot be permitted to act contrary to Board instructions and that show-cause notices and demands issued in contradiction of existing circulars are ab initio bad. [Paras 2, 3, 5]The circulars issued by the Board are binding on the department and the Revenue cannot advance a case contrary to those circulars; consequential show-cause notices or demands are invalid.Brand Rate Drawback entitlement for re-rolled steel products and processed fabrics as per Board Circular No.39/99-Cus. - Board Circular No.39/99-Cus. dated 25th June, 1999 extends the benefit of Brand Rate Drawback to re-rolled steel products and processed fabrics and the High Court correctly applied that circular. - HELD THAT: - Applying the settled principle that Board circulars bind the Revenue, the Court held that Circular No.39/99-Cus. extends Brand Rate Drawback benefit to the specified goods and that the High Court rightly concluded that the department is bound by that circular. An attempt to refer the matter to a larger Bench was declined in view of existing precedents, particularly the Constitution Bench decision in CCE v. Dhiren Chemical Industries. [Paras 6]The Board's Circular No.39/99-Cus. confers Brand Rate Drawback benefit on the goods in question and the High Court's conclusion to that effect is upheld.Precedential conflict resolved by disapproving Hindustan Aeronautics Ltd. to the extent inconsistent with the Constitution Bench decision in CCE v. Dhiren Chemical Industries - The contrary view taken by two-Judge Bench in Hindustan Aeronautics Ltd. is not good law insofar as it conflicts with the subsequent Constitution Bench decision in CCE v. Dhiren Chemical Industries. - HELD THAT: - The Court observed that the approach in Hindustan Aeronautics Ltd., adopted by two learned Judges, runs counter to earlier and subsequent decisions, and in particular is inconsistent with the Constitution Bench ruling in Dhiren Chemical Industries; consequently Hindustan Aeronautics Ltd. cannot be regarded as good law on the point. [Paras 4]Hindustan Aeronautics Ltd. is disapproved to the extent of its inconsistency with the Constitution Bench decision in Dhiren Chemical Industries.Binding nature of Board Circulars on the Revenue - Transferred cases remitted to High Courts for fresh decision in light of the law declared by this Court. - HELD THAT: - In consequence of the law laid down regarding the binding effect of Board circulars and related principles, the Court directed that the transferred cases be sent back to the respective High Courts for fresh adjudication applying the principles explained in the present decision. [Paras 8]The transferred cases are remitted to the respective High Courts to be decided afresh in accordance with the law declared in this judgment.Final Conclusion: Leave granted; Civil Appeals dismissed. The Court confirmed that Board circulars bind the Revenue and that the Revenue cannot act contrary to them, applied that principle to uphold the effect of Board Circular No.39/99-Cus., disapproved the inconsistent two-Judge view in Hindustan Aeronautics Ltd., and remitted the transferred cases to the High Courts for fresh decision in conformity with this law. Issues:Interpretation of the binding nature of Circulars issued by the Central Board of Excise & Customs on the revenue department.Analysis:The Supreme Court granted leave in special leave petitions and agreed with the High Court's view that Circulars issued by the Central Board of Excise & Customs are binding on the department. The Court cited various decisions to support this, emphasizing the binding nature of Circulars issued under specific sections of relevant Acts on the revenue department. However, a different view in Hindustan Aeronautics Ltd. was deemed contrary to a subsequent Constitution Bench decision, thus not considered good law. The Court highlighted that the revenue department cannot take a stand contrary to the Circulars issued by the Board, as established in previous judgments.Further Analysis:The Court referenced Circular No. 39/99-Cus., dated 25th June, 1999, extending benefits to exporters for specific products. It affirmed the binding nature of Circulars issued by the Board on the department, rejecting the contention to refer the case to a larger Bench. The judgment dismissed Civil Appeals without costs and directed transferred cases to respective High Courts for fresh decisions based on the law laid down in the current judgment, emphasizing expeditious resolution.