REPORTABLE

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

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Heard learned counsel for the parties.  

2. By 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

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(13) SCC 1].

3. On 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.”

4. It  was  noted  by  the  three-Judge  Bench  that  the  effect  of  the

aforesaid observations was noted in several decisions. In  Kalyani Packaging 2

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.”  

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5. The 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:

“Circulars  and  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 statutory provisions.

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 in law.

As noted in the order of reference the correct position vis-à-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

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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.

Obviously,  the  assessee  will not file an appeal  questioning the

view expressed  vis-à-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 Constitution.   

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 case (supra).

11. All contentions are left open to the parties.

12. The Civil appeal and all interim applications are disposed of accordingly.  

……….………………….……….J. (Dr. ARIJIT PASAYAT)

        ……..…………………………….J. (ASOK KUAMR GANGULY)

New Delhi,

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April 16, 2009

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