Binding departmental circulars can satisfy an exemption condition where nil-duty clearances are treated as duty already paid.

Binding departmental circulars governed the exemption claim for waste, parings and scrap arising from manufacture of flexible polyurethane foam. The Board had construed the expression "already been paid" to include inputs cleared at nil duty, and those circulars remained operative during the relevant period. The Revenue was therefore bound to apply that interpretation, even though a later judicial view read the expression differently. On that basis, the condition in the exemption notification was treated as satisfied and the assessee was entitled to the exemption for the period in question.

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Issues: Whether the waste, parings and scrap arising from manufacture of flexible polyurethane foam were entitled to exemption under the relevant notifications, and whether the expression "already been paid" in the exemption condition included goods cleared at nil rate of duty pursuant to binding departmental circulars.

Analysis: The Court noted that, for the relevant period, the Central Board of Excise and Customs had issued circulars construing the phrase "already been paid" to include cases where the duty on the input goods was nil. Although a later decision had taken a different view of the expression, it had also been held that a contrary circular issued by the Board would bind the Revenue so long as it remained in force. Since the circulars were operative during the period in dispute and were withdrawn only later, the Revenue could not ignore them. The Court therefore declined to decide the larger question of overlap between the notifications.

Conclusion: The binding circulars required the Revenue to treat the condition as satisfied, and the assessee was entitled to the exemption for the period in question.

Ratio Decidendi: A departmental circular that is in force and adopts a view favourable to the assessee binds the Revenue, even if a judicial interpretation of the same expression is different, and nil-rated duty may satisfy a condition framed in terms of duty having been "already been paid" where the circular so provides.

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