2003 (4) TMI 107 - SC - Customs

Warehoused goods removed after expiry: duty rate set by payment date u/s15(1)(c), circular bound Department

The dominant issue was whether, on expiry of the warehousing period, the goods were subject to 'deemed removal' so as to attract duty at the rate ... Binding nature of Board circulars issued under Section 37B - departmental inability to repudiate Board circulars - applicability of residual provision for warehoused goods removed after expiry and rate of duty on date of paymentBinding nature of Board circulars issued under Section 37B - departmental inability to repudiate Board circulars - Whether the Department could ignore and challenge the Board's circular dated 12-7-1989 and deny the benefit of subsequent notifications to the assessee - HELD THAT: - The Court held that the question is governed by earlier precedents, notably the Paper Products Ltd. decision , which affirmed that circulars issued by the Board under Section 37B are binding on the Department and the Department cannot take a stand contrary to such instructions. The Court observed that consistency and discipline in following Board instructions are of overriding importance and that the Revenue cannot repudiate a circular even by contending inconsistency with a statutory provision. Applying that principle, the circular dated 12-7-1989 - which provided that where goods are removed from warehouse after expiry the residual provision (Section 15(1)(C)) would apply and the rate of duty would be that prevailing on the date of payment of duty - could not be set aside by the Department in these appeals. Although the circular was withdrawn subsequently by a 1997 circular, at the relevant time the Collector of Customs (Appeals) acted in conformity with the Board's circular in granting the benefit of the exemption notifications, and that order could not lawfully be challenged by the Department before the Tribunal.The Department was not entitled to repudiate the Board's circular; the Collector of Customs (Appeals) correctly granted the benefit of the notifications in accordance with the circular.Applicability of residual provision for warehoused goods removed after expiry and rate of duty on date of payment - Whether the assessee was entitled to duty at the rate prevailing on date of payment for goods removed from warehouse after expiry of the warehousing period under the Board's circular - HELD THAT: - On the facts, goods were warehoused and the assessee sought extension; the relevant notifications reducing/exempting duty were issued thereafter and the assessee filed the bill of entry in time to claim benefit. The Collector of Customs (Appeals) allowed the appeal and granted benefit in conformity with the Board circular dated 12-7-1989, which directed that in such cases the residual provision would apply and the rate to be the rate prevalent on date of payment. Applying the binding effect of the circular as affirmed by this Court, the Collector's order granting the exemption could not be held illegal or erroneous by the Department.The assessee was entitled to the benefit of the notifications in accordance with the Board circular; the Collector of Customs (Appeals) order stands restored.Final Conclusion: Appeals allowed; the Customs, Excise and Gold (Control) Appellate Tribunal's orders are set aside and the Collector of Customs (Appeals) judgment granting benefit of the notifications in conformity with the Board's circular is restored. Issues:Appeal against judgments and orders of Customs, Excise and Gold (Control) Appellate Tribunal based on circular dated 12-7-89 issued by Central Board of Excise & Customs; Extension of bonded warehouse period; Department's appeal against Collector of Customs (Appeals) judgment; Validity and binding nature of circulars issued by the Board under Section 37B of Central Excise Act, 1944.Analysis:The case involves an appeal against judgments and orders of the Customs, Excise and Gold (Control) Appellate Tribunal based on a circular issued by the Central Board of Excise & Customs. The appellant contended that the circular dated 12-7-89, along with a previous court decision, should invalidate the Tribunal's decisions. The goods in question were sent to a bonded warehouse for three months, with the period set to expire on 2-12-1991. The appellant sought an extension by filing an application on 18th November, 1991, which was deemed rejected. Despite subsequent requests for extension, the Department asked the appellant to clear the goods on 23rd December, 1991. The appellant did not comply, leading to a final assessment order in April 1992 that did not grant the benefit of certain notifications.The Department appealed the Collector of Customs (Appeals) judgment, which had granted the benefit of exemption notifications based on the Board's circular. The Tribunal allowed the Department's appeal, citing a previous court decision. However, the Supreme Court found that the issue was already addressed in a prior judgment concerning the validity and binding nature of circulars issued by the Board under Section 37B of the Central Excise Act, 1944. The Court emphasized that circulars issued under Section 37B are binding on the Department, and the Department cannot take a stand contrary to these instructions. The Court highlighted the importance of consistency and discipline in following such circulars.In light of the clear pronouncements by the Court on the binding nature of circulars, the Supreme Court held that it was not open to the Department to challenge the Collector of Customs (Appeals) judgment. Despite the withdrawal of the circular in question, the Court found that the Collector of Customs (Appeals) judgment was not illegal or erroneous at the relevant time. Therefore, the Court allowed the appeals, setting aside the Tribunal's judgments and orders, and restored the judgment and order passed by the Collector of Customs (Appeals) due to the peculiar facts and circumstances of the case.