This issue is an important issue and the debate became hot after the decision of the Honorable Supreme Court's decision in the matter of COLLECTOR OF C. EX., VADODARA Versus DHIREN CHEMICAL INDUSTRIES [2007 -TMI - 1709 - SUPREME COURT OF INDIA] dated 12-12-2001. The paragraph 9 of this decision is reproduced as under:

               "We need to made it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue."

After that the debate get worsen on the issue that whether a circular can have primacy over Supreme Court Decisions and change the Supreme Law of Land.

Now, the five member constitutional bench of the Honorable Supreme Court has decided this issue once again.  

In COMMISSIONER OF CENTRAL EXCISE, BOLPUR Versus M/s RATAN MELTING & WIRE INDUSTRIES [2008 -TMI - 31136 - SUPREME COURT OF INDIA], the apex court says,

              " ………………….. If the submissions of learned counsel for the assessee are accepted, it would mean that there is no scope for filing an appeal. In that case, there is no question of a decision of this Court on the point being rendered. Obviously, the assessee will not file an appeal questioning the view expressed vis-a-vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution."

In conclusion a circular can not take primacy over the decision of the Court. The revenue authorities are entitled to challenge the validity of the circular issued by the board. And we hope that this decision shall be taken as final words on this issue.

Primacy of judicial precedent: administrative circulars cannot override judicial interpretations and may be challenged by revenue authorities. The summary establishes that judicial precedent retains primacy over contrary administrative circulars; circulars issuing a different interpretation cannot displace court-declared legal principles. Revenue authorities are entitled to challenge the validity or interpretation of board circulars through legal processes rather than accepting a circular that would foreclose appellate or constitutional scrutiny.