Board's power to issue circulars itself is questionable?
WE received this mail from Mr. S J Singh, Advocate and retired Commissioner of Central Excise.
This is with respect to Circulars issued by CBEC and publication of the latest 1006/13/2015 - CX dated Sept 21, 2015 in your columns.
I believe that Board's power to issue circulars itself is questionable in view of the judgement of honourable Supreme Court in the case of Union of India vs Karvy Stock Exchange Ltd. 2015-TIOL-170-SC-ST. In this case, honourable High Court of Andhra Pradesh had struck down a circular, 66/15/2003 dated Nov 5, 2003, on the ground that the said Circular was contrary to Proviso to Section 37B. On appeal by the Union of India, the honourable Supreme Court has upheld the decision of the High Court.
The Proviso to Section 37B prohibits Circulars/directions with respect to a particular assessment, disposal of a case in particular manner and which interfere with the discretion of Commissioner (Appeal).
If one reads the Circular dated 05-11-2003, it is a general Circular with respect to the service of applicability of service tax on commission income earned on distribution and marketing of units of mutual fund but it has been found to be violative of Proviso to Section 37B.
Under main provision of Section 37B the Board is empowered to issue circulars/directions in order to achieve uniformity of classification and levy of duty/taxes. Though the Circular dated 05.11.2003 sought to achieve the uniformity in the practice of levy of service tax on a particular service and not with respect to a particular assessment or disposal of a particular case yet it failed the test of judicial review. The Circular has been struck down on the ground that the Board cannot issue circular/direction foreclosing the discretion or judgement of a quasi-judicial authority.
As a general rule the tax payer pays tax on self assessment but if a competent officer finds that the assessment is not in consonance of the law, he may, after issuing the show cause notice and after following the procedure prescribed, change the classification, value and rate of duty. The applicability of exemption notification has ramifications on the rate of duty. Similarly, admissibility of input tax credit may also be a quasi -judicial function. The quasi-judicial functions of the field officers, as per the above judgement, are beyond the purview of the Board to be controlled by Circular/direction.
Since any circular/direction which is contrary to law as interpreted by the Supreme Court is void ab-initio, majority of the Circulars/Directions/Orders which fetter the discretion or colour the vision of quasi-judicial authorities are bad directions to be followed. Both the Board and the field formations have a task at hand.