Holding

A Supreme Court judgment is binding on the Revenue and cannot be displaced by a Board circular; the matter was referred to a larger bench for clarification.

Summary

The Supreme Court considered the dispute between the Commissioner of Central Excise and Mis. Ratan Mel Ting & Wire Industries concerning the effect of Central Board of Excise and Customs circulars that interpreted a statutory provision differently from a Constitution Bench judgment in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries. The Court examined paragraph 11 of the Dhiren Chemical decision, which had been cited by the Revenue to claim that circulars could bind the department even after a Supreme Court ruling. The Court clarified that a judgment of the Supreme Court is the law of the land and cannot be overridden by administrative circulars; any contrary circular becomes non est. Since the issue required a definitive pronouncement, the Court referred the matter to a larger five‑Judge bench for further clarification. The order therefore did not dispose of the appeal on merits but sent the questions to a larger bench.

Issues considered

Whether a circular issued by the Central Board of Excise and Customs can override the interpretation of a statutory provision given by a Constitution Bench of the Supreme Court.
Whether paragraph 11 of Dhiren Chemical Industries case binds the Revenue to follow the Court's interpretation despite later circulars.

Subjects

Excise lawCircularsSupreme Court precedentStatutory interpretationDhiren Chemical caseLarger bench referralRevenue department

Judgment

COMMISSIONER OF CENTRAL EXCISE A
v.
MIS. RA TAN MEL TING AND WIRE INDUSTRIES, CALCUTTA

FEBRUARY 23, 2005

[RUMA PAL, ARIJIT PASAYAT AND C.K. THAKKER, JJ.] B

Excise Law:

Central Board of Excise and Customs-Circulars issued by-Placing
interpretation of a statutory provision different than the Supreme Court- C
Observation in Dhiren Chemical Industries' case-Clarification of-Matter
referred to f1Ve Judge Bench-Constitution of India-Article 141.

Collector of Central Excise, Vadodara v. Dhiren Chemical Industries,
(2002) 2 SCC 127 and Kalyani Packaging Industry v. Union of India and D
Anr., [2004] 6 SCC 719, referred to.

Collector of Central Excise, Patna v. Usha Martin Industries, [1997] 7
SCC 47, overruled in Dhiren Chemical Industries.

CCE v. Maruti Foam Pvt. Ltd, {2004] 6 SCC 722 and Commissioner E
of Customs, Calcutta and Ors. v. Indian Oil Corpn. Ltd. and Anr., (2004] 3
sec 488, cited.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4022 ot 1999.

From the Judgment and Order dated 22.1.99 of the Central Excise,
Customs and Gold (Control Appellate Tribunal, New Delhi in F.O. No. E/72/ F
99-Bl in A. No. E/4327 of 1989-Bl.

K.P. Pathak, Additional Solicitor General, K. Swami and B. Krishna
Prasad for the Appellant.

Ms. Praveena Gautam for Pramod and B. Agarwala for the Respondent. G
The following Order of the Court was delivere,d' :

ARIJIT PASAYAT, J. During hearing of this appeal it was fairly
329 H
330 SUPREME COURT REPORTS [2005) 2 S.C.R.

A conceded by learned counsel for the parties that the decision of this Court in
Collector of Central Excise, Patna v. Usha' Martin Industries, [1997] 7 SCC
47) on which CEGAT placed reliance was over-ruled by a subsequent decision
of a Constitution Bench in Collector of Central Excise, Vadodra v. Dhiren
Chemical Industries, [2002] 2 SCC 127. But learned counsel for the respondent
B submitted that paragraph I I of Dhiren Chemical's case (supra) operates in its
favour. It reads as follows: · ·

"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 interpr~ti~ior(upon the said phrase, that interpretation
c will be binding upon the Revenue."

Subsequently,· the effect of this observation was noted in several
decisions. In Kalyani Packaging Industry v. Union of India and Anr., [2004]
6 sec 719 it was noted as follows :
D "We have noticed that para 9 (para 11 in SCC) of Dhireri 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 an.d knows what was the intention in
E 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 ~odies. 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
F 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,
G 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 ju dice before a court or a tribunal, the court or. tribunal
would also give effect to circulars of the Board in preference to a
H decision of the Constitution Bench of this Court. Where as a result
C.C.E. v.RATAN MEL TING AND WIRE INDUSTRIES [PASA YAT, J.] 331
of dispute the matter is sub judice, a court/tribunal is, after Dhiren A
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."
B
A disparate view has been taken in CCE v. Maruti Foam Pvt. Ltd,
[2004] 6 SCC 722 para 7 and Commissioner of Customs, Calcutta and Ors.
v. Indian Oil Corpn. Ltd. and Anr., [2004] 3 SCC 488 para 34. It appears to
us that the law declared by this Court is binding on the Revenue/Department
and once the position in law is declared by this Court, the contrary view C
expressed in the circular should per force lose its validity and becomes non
est.

Though the view expressed in Kalyani 's case (supra), and our view
about invalidation might clarify the observations in para I I of Dhiren
Chemical's case (supra), we feel that the earlier judgment in Dhiren Chemical's D
case (supra), being by a Bench of five Judges, it would be appropriate for a
bench of similar strength to clarify the position. In the circumstances, we
refer the matter to a larger bench of five Hon'ble Judges. Let the papers be
placed before Hon 'ble the Chief Justice of India for constituting an appropriate
Bench.
E
R.P. Referred the Larger Bench.