Consistency and discipline are of far greater importance than winning or losing of court proceedings
CONSISTENCY and discipline are of far greater importance than the winning or losing of court proceedings,declared the Supreme Court in Ranadey Micronutrients case - 2002-TIOL-184-SC-CX.
The concept that Board Circulars are binding on the Department had been successfully confused all these years. What the Courts had held was that the Board should not be seen arguing against its own instructions and they should be binding on the field.
Once upon a time it was believed that adjudicating authorities are independent judicial officers who were required to pass reasoned orders based on their own reasoning un-influenced by instructions or advice from their superior officers. The Central Excise adjudication manual published in 1988 (that was perhaps its last publication), in para 39 directed that Board Orders and reference numbers should not be quoted in the Adjudication Orders. It was further advised that Law ministry's opinion is confidential and should never be communicated in the same language to even sub-ordinate officers. There were several Assistant Commissioners who used to boast “I am an adjudicating authority and not bound by the Board orders.”
A few years down the lane and the whole concept changed. It is now well known that the Board circulars are binding on the departmental officers. This concept enunciated by the Supreme Court was also taken to ridiculous levels. What the Courts meant was that if a Board circular gave a benefit to the assessee, the department is barred from arguing that the circular was wrong.
In Dhiren Chemicals - , the Supreme Court explained the meaning of, “appropriate duty has already been paid”, but went on to add that if there was any circular of the Board contrary to the Supreme Court's interpretation, the Board's interpretation would prevail (in favour of the assessee). This was taken to mean that the Board was supreme and can give instructions even against the Supreme Court's orders and they would be binding on the officers.
In the famous RANADEY MICRONUTRIENTS v COLLECTOR OF CENTRAL EXCISE - case, the Supreme Court held that,
Such circulars are not advisory in character but binding on the Central Excise Officers - Department cannot be allowed to plead that such circular was not valid.
One should have thought that an officer of the Ministry of Finance would have greater respect for circulars such as these issued by the Board. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings.
It is not open to the Revenue to raise a contention that is contrary to a binding circular issued by the Board.
In COLLECTOR OF C. EX., VADODARA v DHIREN CHEMICAL INDUSTRIES - , the Supreme Court observed,
We need to make 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.
This binding nature was doubted in COMMISSIONER OF CUSTOMS, CALCUTTA v INDIAN OIL CORPORATION LTD. - , by one of the judges and it was suggested that the matter needs to be examined by a Constitutional bench.
Proposition of law that even after highest Court settles law on the subject, view expressed by Central Board on same point of law should still hold the field until and unless revoked, is doubted - Customs authority should act subservient to decision of highest Constitutional Court and not to Circular of Board which is denuded of its rationale and substratum under impact of authoritative pronouncement of highest Court.
Common thread not running through decisions of Supreme Court - Dicta/observations in some of decisions need to be reconciled/explained - Need to redefine succinctly extent and parameters of binding character of circulars of Board looms large - Constitution Bench's authoritative pronouncement of subject, is desirable.
Though it was suggested that this issue requires examination by a Constitution bench, it was not really referred.
Finally the Supreme Court Constitution Bench in Ratan Melting & Wire Industries Vs Commissioner of Central Excise, Bolpur - he ld that a circular which is contrary to the statutory provisions has really no existence in law. And this is what the Board reiterates after 7 years, probably because there are still doubts in the field about this.
Yesterday I asked a senior IRS Officer whether this latest circular will be followed by the field adjudicators. He said, "even if they don't follow, the assessee can easily win in the next stage of appeal."
Board Circulars were not anyway binding on the
1. Assessees
2. Tribunals
3. High Courts and
4. Supreme Court
Sometime back we had covered the classic case of an Assistant Commissioner who dismissed the entire theory of precedence and held that the decision of the High Court in the case of another assessee was not applicable to the assessee before her. Each assessee had to get his own order. [Please see DDT 2342 & .]