The
Paper Products Ltd. Vs. Commissioner of Central Excise [1999] INSC 295 (24
August 1999)
S.P.Bharucha,
N Santosh Hegde SANTOSH HEGDE, J.
These
appeals are preferred against two orders of the Customs Excise and Gold
(Control) Appellate Tribunal (for short `the CEGAT') dated 21.10.1997 made in
Appeal No.E/4412/95-SB(WR) and an order dated 16.7.1997 made by the CEGAT
refusing to review/clarify its earlier order dated 21.10.1997. Both the appeals
arise out of the same dispute.
The
appellant in the above appeals is manufacturing (a) printed polyester films
backed with paper; (b) printed polyester films backed with polythene films; and
c printed polyester films backed with aluminium foils; all of which are used
either as labels, pouches or wrappers. It is the contention of the appellant
that by virtue of the Circulars issued by the Central Board of Excise &
Customs (hereinafter referred to as `the Board') dated 23.7.1986 and clarificatory
Circular issued by the Board dated 7.8.1987;
the
aforesaid products of the appellant are to be classified as the products of the
printing industry subject to duty under Chapter 49 of the Schedule to the
Central Excise & Tariff Act, 1985. Consequently, the appellants contend
that their products are entitled to the benefit of duty exemption available by
virtue of Notification Nos.122/75 and 234/82 as applicable at the relevant
time. It is the common case of the parties that the view taken by the Board in
the above-mentioned Circulars dated 23.7.1986 and 7.8.1987 was reviewed with
effect from 16.1.1989 by virtue of Circular No.6/89 of the Board dated
16.1.1989. Consequently, the said products of the appellant are now to be
classified as the products of the packaging industry coming within Chapter 39
of the Schedule to the Central Excise & Tariff Act, 1988.
The
appellant also submits that with effect from the said date the appellant is
classifying its products in terms of Circular No.6/89 dated 16.1.1989. However,
it is contended that in view of the fact that prior to issuance of the said
Circular dated 16.1.1989, Circular No.4/85 being in force, the appellant's
products are liable to be classified for duty under Chapter 49 of the Act. It
was also contended that these Circulars being binding on the Department, they
are bound in law to comply with the same and the show cause-cum-demand notices
issued by the authorities being contrary to the relevant Circulars in force,
the said notices/demands are liable to be quashed. On behalf of the Union, it is contended that though the Circulars in
question are binding on the Department, they are not binding on the
adjudicating authorities, therefore, it was open to the tribunal to have
independently considered the case and having done so correctly, the appellant's
appeals before us are devoid of any merit.
It is
not necessary to go into the facts of the case elaborately in view of certain
admitted facts. The respondent does not dispute that by virtue of Circular
dated 23.7.1986 and as clarified by Circular dated 7.8.1987, the products
manufactured by the appellant will have to be classified under Chapter 49 of
the Act at the relevant time but it contends that the Circulars referred to
above did not correctly reflect the correct classification and correct position
is as clarified by subsequent Circular of the Board dated 16.1.1989 and also in
view of the judgment of this Court in the case of Rollatainers Ltd. v. Union of
India (1994 (72) ELT 793), the tribunal was justified in dismissing the appeal
of the appellant.
The
question for our consideration in these appeals is: what is the true nature and
effect of the Circulars issued by the Board in exercise of its power under
Section 37-B of the Central Excise Act, 1944 ? This question is no more res integra
in view of the various judgments of this Court. This Court in a catena of
decisions has held that the Circulars issued under Section 37-B of the said Act
are binding on the Department and the Department cannot be permitted to take a
stand contrary to the instructions issued by the Board. These judgments have
also held that the position may be different with regard to an assessee who can
contest the validity or legality of such instructions but so far as the
Department is concerned, such right is not available. [See Collector of Central
Excise, Patna v. Usha Martin Industries (1997 7
SCC 47)]. In the case of Ranadey Micronutrients v. Collector of Central Excise
(1996 (87) ELT 19), this Court held that the whole objective of such Circulars
is to adopt a uniform practice and to inform the trade as to how a particular
product will be treated for the purposes of excise duty. The Court also held
that 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. (emphasis
supplied).
Consistency
and discipline are, according to this Court, of far greater importance than the
winning or losing of court proceedings. In the case of Collector of Central
Excise, Bombay v. Jayant Dalal Pvt. Ltd. (1997 10 SCC 402), this Court has held
that it is not open to the Revenue to advance an argument or even file an
appeal against the correctness of the binding nature of the Circulars issued by
the Board.
Similar
is the view taken by this Court in the case of Collector of Central Excise, Bombay v. Kores [India] Ltd.
(1997
10 SCC 338).
It is
clear from the abovesaid pronouncements of this Court that, apart from the fact
that the Circulars issued by the Board are binding on the Department, the
Department is precluded from challenging the correctness of the said Circulars
even on the ground of the same being inconsistent with the statutory provision.
The ratio of the judgment of this Court further precludes the right of the
Department to file an appeal against the correctness of the binding nature of
the Circulars. Therefore, it is clear that so far as the Department is
concerned, whatever action it has to take, the same will have to be consistent
with the Circular which is in force at the relevant point of time. As stated
above, it is an admitted fact that by virtue of Circular No.4/85 dated
23.7.1986 as clarified by Circular dated 7.8.1987, all the three products of
the appellant are to be treated as the products of the printing industry and
not that of the packaging industry. A change in the said view of the Board
occurred for the first time by virtue of its Circular No.6/89 dated 16.1.1989.
Further, the Board itself by its subsequent Circular No.29/89 dated 5.5.1989
has made it abundantly clear that the change notified in Circular No.6/89 will
be prospective from the date of issuance of Circular No.6/89, that is, from
16.1.1989. Therefore, it is clear that till the issuance of Circular No.6/89
which is dated 16.1.1989 the products of the appellant, by virtue of the two
Circulars dated 23.7.1986 and 7.8.1987, have to be classified under Chapter 49
of the Act as being products of the printing industry eligible for exemption of
duty under Notification Nos.122/75 and 234/82 as applicable at the relevant
time. The impugned show cause notices and consequent demand being ab initio bad
inasmuch as the same was contrary to the existing Circulars of the Board, the
same cannot be sustained.
That
being the case, these appeals are liable to be allowed and the impugned orders
of the tribunal are set aside. The show cause cum demand notices impugned in
these proceedings are quashed. The appellant will be entitled to all
consequential benefits flowing from this judgment. The bank guarantees stand
discharged. No costs.
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