2008 (8) TMI 3 - SC - Central Excise

Board circular cannot override statutory exemption notification; cannot impose 50% customs duty requirement, appeals dismissed

M/s. Sandur Micro Circuits Ltd. Versus Commissioner of Central Excise, Belgaum

SC held that a Board circular cannot negate or impose conditions contrary to a statutorily issued exemption notification and therefore cannot restrict, ... Effect of circular issued by Central Board of Excise and Custom (Board) Vs. Notification No. 2/95-CE dated 4.1.1995 as amended by other notifications - claim of liability to pay 50% of the aggregated customs duty on the goods cleared to the Domestic Tariff Area ('DTA') - HELD THAT:- The issue relating to effectiveness of a Circular contrary to a Notification statutorily issued has been examined by this Court in several cases. A Circular cannot take away the effect of Notifications statutorily issued. In fact in certain cases it has been held that the Circular cannot whittle down the Exemption Notification and restrict the scope of the Exemption Notification or hit it down. In other words it was held that by issuing a circular a new condition thereby restricting the scope of the exemption or restricting or whittling it down cannot be imposed. The principle is applicable to the instant cases also, though the controversy is of different nature. The appeals fail and are dismissed. Issues:Effect of circular issued by Central Board of Excise and Custom (Board) vs. Notification No. 2/95-CE dated 4.1.1995 as amended by other notifications.Analysis:The Supreme Court granted leave in Special Leave Petitions (SLP) 16719 of 2006 and 16947 of 2006, involving common questions directed against the judgment of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The key issue revolved around the impact of Circular No. 42 of 1997 dated 19.9.1997 issued by the Central Board of Excise and Custom (Board) in relation to Notification No. 2/95-CE and its amendments. The CESTAT had ruled that the notifications would override the circular, specifically addressing the liability to pay 50% of aggregated customs duty on goods cleared to the Domestic Tariff Area (DTA).The appellants argued that the Circular was based on representations by various assessees and thus should prevail over the statutory Notification. Conversely, the respondents contended that the Notification, issued under the powers conferred by the Central Excises and Salt Act, 1944, held overriding effect. The Court delved into the issue of the effectiveness of a Circular vis-`a-vis a statutorily issued Notification, citing precedents where Circulars could not diminish the impact of Exemption Notifications or impose new conditions restricting exemptions.The Court emphasized that Circulars could not undermine Notifications issued under statutory authority. It clarified that Circulars could not impose new conditions or restrict the scope of exemptions provided in Notifications. While acknowledging the specific nature of the controversy in this case, the Court held that the principle applied, concluding that the Circular in question could not override the statutory Notification. Consequently, the appeals were dismissed, affirming the primacy of Notifications over Circulars in matters of statutory interpretation and application.