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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.