2008 (10) TMI 5 - SC - Central Excise

Administrative circulars and government clarifications not binding on courts; circulars conflicting with statute have no legal effect

COMMISSIONER OF CENTRAL EXCISE, BOLPUR Versus M/s RATAN MELTING & WIRE INDUSTRIES

SC held that administrative circulars and government clarifications cannot override judicial decisions; they reflect executive understanding and are not ... Board Circular not to prevail over Supreme Court Order - HELD THAT:- 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 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. The reference is accordingly answered holding that the correct view has been expressed by Kalyani's case [2004 (5) TMI 78 - SUPREME COURT] as noted in the reference order. The appeals filed by the revenue are allowed while those filed by the assessee stand dismissed. Issues:Interpretation of circulars issued by the Central Board of Excise and Customs vis-a-vis decisions of the Supreme Court.Analysis:The Supreme Court, in a judgment delivered by a Constitutional Bench, addressed the issue of the binding nature of circulars issued by the Central Board of Excise and Customs in relation to decisions of the Court. The reference to this Bench was made due to conflicting observations in previous cases. The Court noted that circulars and instructions issued by the Board are binding on revenue authorities but not on the assessee. However, when there is a conflict between a circular and a decision of the Court, the Court's decision prevails. The Court emphasized that circulars contrary to statutory provisions hold no legal standing. The judgment clarified that the law declared by the Supreme Court is supreme and must be followed by all courts and tribunals, emphasizing the importance of upholding the majesty of law. The Court held that the correct position on the issue was already stated in a previous case, affirming that the circulars cannot override the decisions of the Court.The Court rejected the argument that revenue authorities are bound by circulars even if they conflict with Court decisions. It emphasized that the revenue authorities cannot rely on circulars to avoid following the law as declared by the Court. The judgment highlighted that allowing circulars to prevail over Court decisions would undermine the judicial process and deny parties the right to challenge decisions in higher courts. The Court's decision reinforced the principle that circulars issued by the Board are not above the law declared by the Supreme Court or High Courts.In conclusion, the Supreme Court answered the reference by affirming the position established in a previous case regarding the supremacy of Court decisions over circulars issued by the Board. The Court allowed the appeals filed by the revenue authorities and dismissed those filed by the assessee, maintaining the precedence of Court decisions in interpreting the law over conflicting circulars.