1999 (8) TMI 70 - SC - Central Excise

s.37B circulars binding on Department; earlier show-cause notices invalid; goods classified under Chapter 49 until 16-1-1989

The SC held the Board's Circulars under s.37B are binding on the Department, which cannot challenge their correctness; the appellant's products were to be ... Binding nature of Board Circulars issued under Section 37B of the Central Excise Act - department precluded from repudiating or litigating correctness of Board Circulars - prospective operation of a subsequent Board Circular - classification of goods governed by Board Circulars to ensure uniform practiceBinding nature of Board Circulars issued under Section 37B of the Central Excise Act - department precluded from repudiating or litigating correctness of Board Circulars - classification of goods governed by Board Circulars to ensure uniform practice - Legal effect of Circulars issued by the Central Board of Excise & Customs under Section 37B on the Department and on classification of goods - HELD THAT: - The Court held that Circulars issued under Section 37B are binding on the Department and the Department cannot take a stand contrary to instructions issued by the Board. The Court reiterated settled precedents that the object of such Circulars is to ensure uniform practice and inform trade how a product will be treated for excise purposes, and that the Revenue is precluded from repudating a Board Circular or contesting its correctness even on the ground of inconsistency with statute. Consistency and discipline in administration, as reflected in the cited authorities, require the Department to act in conformity with the Circular in force at the relevant time. [Paras 4, 5]Circulars under Section 37B are binding on the Department and the Department cannot challenge their correctness in departmental adjudication or appeal.Prospective operation of a subsequent Board Circular - classification of goods governed by Board Circulars to ensure uniform practice - Whether the appellant's products were correctly subject to classification under Chapter 49 prior to the Board's change of view dated 16-1-1989, and whether the demands issued before that date were valid - HELD THAT: - It was admitted that Circular dated 23-7-1986 (as clarified 7-8-1987) classified the appellant's products as products of the printing industry under Chapter 49. The Board's change of view by Circular dated 16-1-1989 was held by the Board itself to be prospective from that date (clarified by Circular No. 29/89 dated 5-5-1989). Consequently, until 16-1-1989 the appellant's products had to be treated in accordance with the earlier Circulars and were eligible for the exemptions applicable to printing industry products. Show cause-cum-demand notices issued contrary to the Circulars in force prior to 16-1-1989 were therefore ab initio invalid. [Paras 6, 7]The products must be classified in accordance with the Board Circulars in force prior to 16-1-1989; demands made contrary to those Circulars are quashed.Final Conclusion: Appeals allowed; impugned orders of the Tribunal set aside; show cause-cum-demand notices quashed; appellant entitled to consequential benefits and bank guarantees discharged; no costs. Issues:Classification of products under Central Excise & Tariff Act, 1985 based on Circulars issued by the Central Board of Excise & Customs; Binding nature of Circulars on the Department; Validity of show cause-cum-demand notices issued by authorities.Classification of Products:The appellant manufactured various products and contended that based on Circulars issued by the Central Board of Excise & Customs, their products should be classified under Chapter 49 of the Central Excise & Tariff Act, 1985. However, the Board revised its position through Circular No. 6/89, dated 16-1-1989, classifying the products under the packaging industry in Chapter 39. The appellant argued that until the issuance of Circular No. 6/89, their products should be classified under Chapter 49, making them eligible for duty exemption under specific notifications. The Tribunal upheld the Board's revised classification, leading to the dispute.Binding Nature of Circulars:The Supreme Court analyzed the binding nature of Circulars issued by the Board under Section 37B of the Central Excise Act, 1944. It reiterated that such Circulars are binding on the Department, preventing them from taking a stance contrary to the instructions issued. The Court emphasized that while an assessee can challenge the legality of Circulars, the Department is obligated to comply. The judgments highlighted the importance of consistency and adherence to Circulars, barring the Department from disputing their validity or filing appeals against their binding nature.Validity of Show Cause-Cum-Demand Notices:The Court ruled that the show cause-cum-demand notices issued by the authorities were invalid as they contradicted the Circulars in force at the time. Since the Circulars classified the appellant's products under Chapter 49 until the issuance of Circular No. 6/89, the notices were deemed unsustainable. Consequently, the Court allowed the appeals, set aside the Tribunal's orders, quashed the notices, and discharged the bank guarantees, granting the appellant consequential benefits without costs.