Binding tax circulars and micronutrient classification under Heading 31.05 defeated the excise duty demand.

Board circulars issued to secure uniform classification and levy were treated as binding instructions, even though they did not expressly recite section 37B, because they were addressed to the excise hierarchy and required field formations to act on them. A later circular, issued after consultation with technical and agricultural authorities, clarified that micronutrients recognised under the Fertiliser Control Order, 1985 and falling within the relevant tariff treatment were classifiable as other fertilisers under Heading 31.05. The Revenue could not disregard an operative circular or insist that it applied only prospectively. On that basis, the excise duty demand could not be sustained.

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Issues: Whether the Board's circulars issued in relation to micronutrients were binding on the Department under section 37B, and whether micronutrients were classifiable under Heading 31.05 as other fertilisers so as to exempt them from excise duty.

Analysis: The circulars were addressed to the excise hierarchy, required the contents to be circulated to field formations, and directed that pending assessments be finalised accordingly. In that setting, the absence of an express recital under section 37B did not detract from their character as instructions issued for securing uniformity in classification and levy. The later circular, issued after consultation with the technical authorities and the Ministry of Agriculture, clarified that micronutrients recognised under the Fertiliser Control Order, 1985 and falling within the relevant tariff treatment were to be classified as other fertilisers. The Revenue could not repudiate a binding circular while it remained operative, and it could not resist the classification position adopted therein on the ground that the circular was contrary to the statute. The contention that the later circular operated only prospectively was also rejected.

Conclusion: The circulars were treated as binding instructions under section 37B, and micronutrients were held classifiable under Heading 31.05 as other fertilisers, with the result that the demand of excise duty could not be sustained.

Ratio Decidendi: Circulars issued by the Board to secure uniform classification and levy are binding on the Revenue under section 37B, and the Department cannot disregard such circulars while they remain in force even if a contrary statutory contention is available.

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