Full Judgment Text
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PETITIONER:
THE PAPER PRODUCTS LTD.
Vs.
RESPONDENT:
COMMISSIONER OF CENTRAL EXCISE
DATE OF JUDGMENT: 24/08/1999
BENCH:
S.P.Bharucha, N Santosh Hegde
JUDGMENT:
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
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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
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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.