Central Excise, Mumbai Vs. M/S. Hindoostan Spinning & WVG. M. Ltd & ANR
 INSC 778 (16 April 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5848 OF 2006
Commissioner of Central Excise, ....Appellant Mumbai Versus M/s. Hindoostan
Spinning & Wvg. M. Ltd. & Anr. ....Respondents
Dr. ARIJIT PASAYAT,
learned counsel for the parties.
order dated 12.12.2006 this court had directed that the present matter be
placed for disposal after the decision of this Court in CCE v. Ratan Melting
& Wire Industries, which had been referred to a larger bench. The larger bench
has rendered its judgment in the matter on 14.10.2008 which is reported in
Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries
[2008 1 (13) SCC 1].
a reference made by a Bench of three Judges in Commissioner of Central Excise,
Bolpur v. Ratan Melting and Wire Industries, Calcutta (2005 (3) SCC 57), these
matters were placed before the Five Judge Bench.
The reference was
necessitated because of certain observations by a Constitution Bench in
Collector of Central Excise v. Dhiren Chemical Industries (2002 (2) SCC 127).
During the hearing of the appeal before the three-Judge Bench it was fairly
conceded by the parties that the decision of this Court in Collector of Central
Excise, Patna v. Usha Martin Industries (1997 (7) SCC 47) on which the Customs,
Excise and Gold (Control) Appellate Tribunal placed reliance was over-ruled by
the subsequent decision of the Constitution Bench in Dhiren Chemical's case
(supra). But learned counsel for the assessee-respondent submitted that paragraph
11 of Dhiren Chemical's case (supra) operates in its favour. It reads as under:
"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."
was noted by the three-Judge Bench that the effect of the aforesaid
observations was noted in several decisions. In Kalyani Packaging Industry v.
Union of India and Anr. (2004 (6) SCC 719), it was noted as follows:
"We have noticed
that para 9 (para 11 in SCC) of Dhiren Chemical case (2004 (6) SCC 722) is
being misunderstood. It, therefore, becomes necessary to clarify para 9 (para
11 in SCC) of Dhiren Chemical case (2004 (6) SCC 722). One of us (Variava, J.)
was a party to the judgment of Dhiren Chemical case and knows what was the
intention in incorporating para 9 (para 11 in SCC). It must be remembered that
law law laid down by this Court is law of the land. The law so laid down is
binding on all courts/tribunals and bodies. It is clear that circulars of the
Board cannot prevail over the law laid down by this Court. However, it was
pointed out that during hearing of Dhiren Chemical case because of the
circulars of the Board in many cases the Department had granted benefits of
exemption notifications. It was submitted that on the interpretation now given
by this Court in Dhiren Chemical case the Revenue was likely to reopen cases.
Thus para 9 (para 11 in SCC) was incorporated to ensure that in cases where
benefits of exemption notification had already been granted, the Revenue would
remain bound. The purpose was to see that such cases were not reopened. However,
this did not mean that even in cases where the Revenue/Department had already
contended that the benefit of an exemption notification was not available, and
the matter was sub judice before a court or a tribunal, the court or tribunal
would also give effect to circulars of the Board in preference to a decision of
the Constitution Bench of this Court.
Where as a result of
dispute the matter is sub judice, a court/tribunal is, after Dhiren Chemical
case, bound to interpret as set out in that judgment. To hold otherwise and to
interpret in the manner suggested would mean that courts/tribunals have to
ignore a judgment of this Court and follow circulars of the Board. That was not
what was meant by para 9 of Dhiren Chemical case."
three-Judge Bench agreed with the view expressed in Kalyani's case (supra) and
observed that the view about invalidation was sufficient to clarify the
observations in paragraph 11 of Dhiren Chemical's case (supra). On taking note
of the fact that Dhiren Chemical's case (supra) was decided by a bench of five
Judges it was felt appropriate that a bench of similar strength should clarify
the position. Accordingly the reference was made.
In answering the
reference, it was held as follows:
instructions issued by the Board are no doubt binding in law on the authorities
under the respective statutes, but when the Supreme Court or the High Court
declares the law on the question arising for consideration, it would not be
appropriate for the Court to direct that the circular should be given effect to
and not the view expressed in a decision of this Court or the High Court. So
far as the clarifications/circulars issued by the Central Government and of the
State Government are concerned they represent merely their understanding of the
They are not binding
upon the court. It is for the Court to declare what the particular provision of
statute says and it is not for the Executive. Looked at from another angle, a
circular which is contrary to the statutory provisions has really no existence
As noted in the order
of reference the correct position vis-`-vis the observations in para 11 of
Dhiren Chemical's case (supra) has been stated in Kalyani's case (supra). 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.
assessee will not file an appeal questioning the view expressed vis-`-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
The reference is
accordingly answered holding that the correct view has been expressed by
Kalyani's case (supra) as noted in the reference order."
10. Without going
into the merits, the present matter is remanded to be decided by the CESTAT,
Mumbai, keeping in view the applicability and/or relevance of Ratan Melting's
11. All contentions
are left open to the parties.
12. The Civil appeal
and all interim applications are disposed of accordingly.
(Dr. ARIJIT PASAYAT)