Holding

The circular issued under Section 37B is prospective in nature; it cannot be used to levy differential duty for periods preceding its issuance, and the ITW Signode decision does not apply.

Summary

Jai Fibres Ltd manufactures HDPE bags and had been classifying them under Chapter 63 of the Central Excise Tariff Act for the period 1 April 1992 to 15 October 1992, paying duty accordingly. Different High Courts were split on whether such bags should fall under Chapter 39 or Chapter 63, the Madhya Pradesh High Court holding they belong to Chapter 39. While the appeal against that decision was pending, the Central Board of Excise and Customs issued a circular on 24 September 1992 (published 15 October 1992) under Section 37B, stating that HDPE strips and sacks would "henceforth" be classified under specific sub‑headings. The Revenue, relying on the circular, issued a show‑cause notice for differential duty for the period before the circular’s publication. The Tribunal allowed the Revenue, invoking the ITW Signode decision that permitted retrospective operation of the amendment to Section 11A. The appellant contended that the circular’s use of "henceforth" makes it prospective only, relying on HM Bags Manufacturer. The Supreme Court held that the circular was expressly prospective and could not be applied retrospectively; consequently, the Revenue could not recover duty for the earlier period and the ITW Signode precedent was inapplicable. The appeal was allowed and the Tribunal’s order set aside.

Issues considered

Whether the CBEC circular dated 24‑09‑1992, using the term "henceforth", has prospective or retrospective effect for the classification of HDPE bags.
Whether the Revenue can recover differential excise duty for the period prior to the circular under the amendment to Section 11A of the Central Excise Act.
The scope of the power conferred by Section 37B of the Central Excises and Salt Act to issue classification circulars.

Legislation cited

Central Excises and Salt Act, 1944s. 11A, s. 37B
Central Excise Tariff Act, 1985

Subjects

Excise dutyClassification of goodsHDPE bagsProspective effectCircularSection 37BSection 11ADifferential dutyRetrospective legislation

Judgment

·-

·~
"
A MIS. JAI FIBRES LTD.
v.
COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

NOVEMBER 15, 2007
B
[S.B. SINHA AND DALVEER BHANDARI, JJ.)

Central Excises and Salt Act, 1944-ss.37B and I IA-Different
High Courts had been taking different views with regard to appropriate
c classification ofHDPE bags under the TariffAct-Circular issued by
CBEC u/s. 3 7Bfor ensuring uniformity-Use ofword "henceforth" in
the circular-Held: Circular was expressly directed to have prospective
application-Differential duty could not be recovered on basis ofsaid
circular for period prior to date of its publication-Central Excise
D Tar!IJAct, 1985-Chapter Heading Nos. 39 and 63.
•'
Different High Courts had been taking different views as to
whether excise duty in respect ofHDPE bags was payable under
Ch?pter Heading 63 or Chapter Heading 39 of the Central Excise
E Tariff Act, 1985. The Madhya Pradesh High Court in the Raj Pack
Well Ltd. case* held that HDPE bags should be classified under
Chapter Heading 39 and not Chapter Heading 63. While appeal
against the aforesaid decision of the said High Court was pending
before this Court, the Central Board of Excise and Customs in order
F to bring about an uniformity in classification, issued a circular dated
24-09-1992 in exercise of powers conferred under Section 37-B of
the Central Excises and Salt Act, 1944, in terms of which HDPE strips
and tapes of width not exceeding 5 mm were to be "henceforth"
classified under sub-heading 3920.32 and sacks made therefrom
under sub-heading 3923.90 of the Tariff. The circular was published
G
on 15-10-1992.

Appellant-assessee classified HDPE bags manufactured by it \
~

under Chapter63 of the Tariff Act forthe period 1-4-1992to15-10-
1992. Relying on the said circular, Respondents issued a show cause
H 82
f M/S.JAIFIBRESLTD. v. COMMISSIONER OF CENTRAL 83
EXCISE, MUMBAI-III
'; notice upon the Appellants to pay differential duty under Chapter A
39 for the period 1-4-1992 to 15-10-1992. The cause having been
shown, the Assistant Commissioner dropped the proceedings. Appeal
filed by Revenue before the Commissioner was dismissed. Revenue
filed appeal before the Tribunal. Tribunal relying upon a three-Judge
Bench decision of this Court in /TW Signode case** held that in view B
of the amendment of Section llA of the Central Excise Act, the
validity whereof had been upheld, the Revenue was within its
jurisdiction to get the differential duty which had not been recovered.

In appeal to this Court, Appellant submitted that the Tribunal
failed to take into consideration a decision of this Court in HM Eags c
Manufacturer***, in its correct perspective, wherein it was b.eld that
the word "henceforth" used by the Board must lead to the conclusion
that only prospective effect thereto could be given and not a
retrospective effect.
D
Allowing the appeal, the Court
~

HELD: 1.1. Section llA of the Central Excise Act was amended
having regard to the Constitution Bench decision of this Court in
Cotspun Limited Amendment of Section llA was found in /TW
Signode as a validating legislation, retrospective operation whereof, E
therefore, was held to be permissible. [Para 11) [87-H; 88-A)

1.2. However, this Court is concerned with a different situation
herein. Whereas there cannot be any doubt that the Revenue is
entitled to rectify a mistake but implementation thereofwould depend F
,
' upon the statutory provisions. Section 37B of the Central Excise Act
confers powers upon the Central Board of Excise and Customs to
issue such orders, instructions and directions as the Central Excise
Officers may deem fit, if it considers necessary or expedient to do
so for the purpose of uniformity of classification of goods in a case
G
or with levies of duty of excise on such goods. It was, therefore,
necessary for the Tribunal to construe the said circular dated
24.9.1992 in its proper perspective. [Para 12) (89-C-D]

1.3. The circular refers to the fact that there had been lack of
uniform classification of the said goods as a result whereof disparity H
84 SUPREME COURT REPORTS (2007] 12 S.C.R.

A existed in the matter of pricing of commodity by the manufacturer.
It is on the aforementioned premise that the decision of the High
Court of Madhya Pradesh was referred to and sought to be acted
upon. But the Court was not unmindful of the fact that only by reason
of the said judgment, the law cannot be said to have been settled as
B an appeal had been preferred thereagainstwhich had been pending
decision. It was in the aforementioned fact situation that the Board
thought it fit and expedient in the interest of administration of taxing
statute to bring out uniformity in the assessment practice.
[Para 13) [89-E-F]
c 1.4. By reason of the said circular, proper classification was
made for the first time. It was done with the purpose of ensuring
uniformity therein. It was expressly directed to have prospective
application. Although the decision of the Madhya Pradesh High
Court was the basis for issuance of the said circular, it was to operate
D independent thereof as it was clearly noticed that the same had not
attained finality. The said circular, so far as the Revenue is
concerned, was, therefore, to operate irrespective of the decision
of the Madhya Pradesh High Court. The Board was not unmindful
of the consequences which may flow therefrom. It in exercise of its
E statutory power, therefore, directed its application from a future
date. HM Bags Manufacturer becomes relevant in view of the
terminology used by the Board in issuing the aforementioned
circular. Therein this Court clearly held that such a circular will have
prospective effect, particularly when the word "henceforth" has
F been used by the Board. HM Bags .Manufacturer, therefore, is a
binding precedent. If the Board itself did not intend to classify HDPE
bags with retrospective effect no demand for duty prior to issuance
of the said notice could be made.
[Paras 14, 15and16) [89-G-H; 90-A-C]
G
** ITW Signode India Ltd. v. Collector.ofCentral Excise, (2003)
158 E.L.T. 403 SC, distinguished.

***HM. Bags Manufacturer v. Collector of Central Excise,
(1997) 94 E.L.T. 3 SC, relied on.
H
MIS. JAI FIBRES LTD. v. COMMISSIONER OF CENTRAL 85
EXCISE, MUMBAI-III [SINHA, J.]
Collector ofCentral Excise, Baroda v. Cotspun Limited, (1999) A
113 E.L.T. 353 SC, referred to.

*Raj Pack Well Ltd. v. Union of India, (1990) 50 ELT 201,
referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1950 of B
2006.
From the Impugned Order No. A/48-49/WZB/2005/C-Il/EB dated
09.08.2005 passed by the Customs Excise and Service Tax Appellate
Tribunal, Mumbai in Appeal No. E/313 7/1999-Mum.
c
A.P. Madhav Rao, Monish Panda and M.P. Devanath for the
Appellant.
R.G. Padia, Neera Gupta and B. Krishna Prasad for the
Respondents.
D
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Delay condoned.
2. Interpretation of a Circular dated 24.09.1992, which was
published on 15.10.1992 in the Trade Circular by the Central Board of E
Excise and Customs, is in question in this appeal which arises out of a
judgment and order dated 9.8.2005 passed by the Central Excise and
Service Tax Appellate Tribunal in Appeal No. E/3137/99 (Mumbai) and
E/C0/389/99 (Mumbai), whereby and whereunder an appeal preferred
~
by the respondent herein from a judgment and order dated 30th June, F
1999 passed by the Commissioner of Central Excise (Appeals), Mumbai,
was allowed.
3. The basic. fact of the matter is not in dispute. The appellant herein
manufacture HDPE bags. They used to classify the said bags for the
purpose of payment of excise duty under Chapter 63 of the Central Excise G
Tariff Act (hereinafter referred as 'the Act'). The period for which the
excise duty was payable is 1.4.1992 to 15.10.1992. Excise duty was paid

-
accordingly. It is also not in dispute that different High Courts took different
views as to whether the duty is payable under Chapter Heading 63.54
·u H
86 SUPREME COURT REPORTS [2007] 12 S.C.R. ·~

A or Chapter heading 39 of the Act.
4. It is furthennore not in dispute that a Division Bench of the High
Court of Madhya Pradesh in Raj Pack Well Ltd v. Union of India,
(1990) 50 ELT 201, took the view that the HDPE bags should be
classified under Chapter heading 39 of the Central Excise Tariff Act, 1985
B
and not under Chapter heading 63 thereof Indisputably, again the Central
Board of Excise and Customs upon noticing that the appeal against the
aforesaid decision of the Division Bench of the High Court is pending
before this Court for final decision, issued a circular on 24.9.1992, the
relevant portion whereof is as under:
c
"Now, therefore, in exercise of the powers conferred under Section
37-B of the Central Excises and Salt Act, 1944(1of1944)
(henceforth referred to as the Act) and for the purpose of
ensuring uniformity in the classification of the said goods, the
D Central Board of Excise and Customs hereby orders that HDPE
strips and tapes of a width not exceeding 5 mm shall be
henceforth classified under sub-heading 3920.32 and sacks
made therefrom under sub-heading 3923.90 of the Tariff."
(Emphasis supplied)
E
5. Relying on or on the basis of the said circular letter, a show cause
notice was issued upon the appellants herein by the respondents to pay
the differential duty under Chapter 39 for the period 1.4.1992 to
15.10.1992.
F 6. The cause having been shown, the Assistant Commissioner of
Central Excise by an order dated 21. l 0.1997 dropped the proceedings.
Revenue being not satisfied therewith preferred an appeal thereagainst
before the Commissioner of Central Excise under Section 3SE(4) of the
Central Excise and Salt Act, 1944. By a judgment and order dated 30th
G June, 1999 the said appeal was dismissed. Feeling aggrieved, Revenue
preferred an appeal before the Tribunal which, as noticed hereinbefore,
has been allowed by reason of the impugned judgment. \

7. The Tribunal in its judgment relied upon a three-Judge Bench
H decision of this Court in ITW Signode India Ltd v. Collector ofCentral
--
/
f- M/S.JAIFIBRESLTD. v. COMMISSIONEROFCENTRAL 87
EXCISE, MUMBAI-III [SINHA, J.]

' Excise, (2003) 158 E.L.T. 403 SC for arriving at its decision that in view A
of the amendment of Section I IA of the Central Excise Act, the validity
whereof had been upheld, the revenue was within its jurisdiction to get
the differential duty which has not been recovered.
8. Mr. Madhav Rao, learned counsel appearing on behalf of the B
appellant would, in support of its appeal, submit that the Tribunal went
wrong in passing the impugned judgment in so far as it failed to take into
consideration a decision of this Court in HM Bags Manufacturer v.
Collector of Central Excise, (1997) 94 E.L. T. 3 SC, in its correct
perspective, wherein it has clearly been opined that the word "henceforth"
used by the Board must lead to the conclusion that only prospective effect C
thereto could be given and not a retrospective effect.
9. Dr. Padia, learned senior counsel appearing on behalf of the
revenue, on the other hand, placed strong reliance on the judgment of
this Court in ITW Signode India Ltd. (supra). It was submitted by Dr. D
Padia that although at one point of time, classification of excisable items
might have been approved but if such approval was based on a wrong
premise, which was sought to be corrected, Section l lA which has been
amended with retrospective effect from 17.11.1980, could be brought into
service for the purpose ofrecovery of the differential amount of duty. It E
was urged that for the said purpose, neither penalty is leviable nor the
period for which the duty can be demanded exceeded six months and in
view of the fact that the notice issued by the appellant herein was for a
period of six months, the decision of this Court ITW Signode (supra) is
squarely applicable.
F
10. Drawing our attention to the decision of the Madhya Pradesh
High Co1trt; relying on or on the basis whereof, the Circular letter dated
24.10.1992 has been issued, it was contended that the validity of the said
circular letter having not been challenged by reason thereof, the mistake
committed by the revenue in classifying HDPE bags under Chapter G
heading 63 came to be known to them in terms of the said judgment.
11. It is beyond any pale of doubt that Section llA of the Central
Excise Act was amended having regard to the Constitution Bench decision
of this Court in Collector of Central Excise, Baroda v. Cotspun H
88 SUPREME COURT REPORTS (2007] 12 S.C.R.

A Limited, (1999) 113 E.L.T. 353 SC. Amendment of Section 1lA was f
found in ITW Signode (supra) as a validating legislation, retrospective
operation whereof, therefore, was held to be permissible. In arriving at
the said decision, this Court noticed a large number of binding precedents
operating in the field to hold that as the basis for the decision rendered in
B Cotspun Limited (supra) has been taken away by reason thereof, the
Parliament was entitled to give the same retrospective effect and retroactive
operation. While applying the said law, this Court in 1TW Signode (supra)
opined:
"Section 11 A deals with a case when inter alia excise duty has
c been levied or has been, short-levied or short-paid. The word
'such' occurring after the words 'whether or not' refers to non-levy,
non-payment, short-levy or short-payment or erroneous refund. It
is, therefore, not correct to contend that the word 'such' indicates
only such short levy which has been held to be non-existent in
D Cotspun having regard to Rule 173B. Such short-levy or non-levy
may be on the basis of any approval, acceptance or assessment
relating to the rate of duty on or valuation of excisable goods. Thus,
any approval made in terms of Rule 10, in the event, any mistake
therein is detected, would also come within the purview of the
E expression 'such short-levy or short-payment'. Such notice is to
be served on the person chargeable with the duty which inter alia
has been short-levy or short-paid."
It was further held:
F "Cotspun (supra) was decided when the matters relating to
classification, approval thereof as also short-levy or upon detection
of a mistake were governed by the rules. Rule 10 and Rule 173 B
were to be read in conjunction with each other and the Constitution
bench merely followed the said principle of interpretation of statute.
G A different situation has arisen now having regard to the fact hat
not only the substantive provision dealing with the consequence of \
non-levy, non-payment of short levy or short-payment or erroneous
refund but also has laid down the procedure therefor."
"A statute, it is trite, must be read as a whole. The plenary power
H
I
f·
' MIS. JAI FIBRES LTD. v. COMMISSIONER OF CENTRAL 89
EXCISE, MUMBAI-III [SINHA,J.]

' of legislation of the Parliament or the State Legislature in relation A
to the legislative fields specified under Seventh Schedule of the
Constitution of India is not disputed. A statutory act may be enacted
prospectively or retrospectively. A retrospective effect indisputably
can be given in case of curative and validating statute. In fact
curative statutes by their very nature are intended to operate upon B
and affect past transaction having regard to the fact that they operate
" on conditions already existing. However, the scope of the Validating
Act may vary from case to case."

12. However, we are concerned with a different situation herein.
Whereas there cannot be any doubt that the revenue is entitled to rectify c
a mistake but implementation thereof would depend upon the statutory
provisions. Section 37B of the Central Excise Act confers powers upon
the Central Board of Excise and Customs to issue such orders, instructions
and directions as the Central Excise Officers may deem fit, if it considers
necessary or expedient to do so for the purpose of uniformity of D
' classification of goods in a case or with levies of duty of excise on such
goods. It was, therefore, necessary for the Tribunal to construe the said
circular dated 24.9.1992 in its proper perspective.
13. The circular refers to the fact that there had been lack of uniform E
classification of the said goods as a result whereof disparity existed in the
matter of pricing of commodity by the manufacturer. It is on the
aforementioned premise that the decision of the High Court of Madhya
Pradesh was referred to and sought to be acted upon. But the Court was
~ not unmindful of the fact that only by reason of the said judgment, the F
law cannot be said to have been settled as an appeal preferred against
the judgment of the Madhya Pradesh High Court had been pending
decision. It was in the aforementioned fact situation that the Board thought
it fit and expedient in the interest of administration of taxing statute to bring
out uniformity in the assessment practice.
G
14. By reason of the said circular, proper classification was made
for the first time. It was done with the purpose of ensuring unifmmity
. therein. It was expressly directed to have prospective application .
Although the decision of the Madhya Pradesh High Court was the basis
for issuance of the said circular, it was to operate independent thereof as H
90 SUPREME COURT REPORTS [2007] 12 S.C.R.

A it was clearly noticed that the same had not attained finality. The said f
circular, so far as the Revenue is concerned, was, therefore, to operate
irrespective of the decision of the Madhya Pradesh High Court.
15. Having said so, the Board was not unmindful of the
consequences which may flow therefrom. It in exercise of its statutory
B power, therefore, directed its application from a future date.
16. HM Bags Manufacturer (supra) becomes relevant in view of
the terminology used by the Board in issuing the aforementioned circular.
Therein this Court clearly held that such a circular will have prospective
c effect, particularly when the word "henceforth" has been used by the
Board. H.M. Bags Manufacturer, therefore, is a binding precedent. If the
Board itself did not intend to classify HDPE bags ""1th retrospective effect,
in our opinion, no demand for duty prior to issuance of the said notice
could be made.
D 17. ITW Signode which was rendered in a different fact situation
and dod not deal '>'.1th the proposition oflaw with which we are concerned
herein, in our considered view, could not have been applied by the
Tribunal for the purpose of determining the issue in question.

E 18. For the reasons aforementioned, we are of the opinion that the
impugned judgment caru10t be sustained which is set aside accordingly.
The appeal is allowed. However, in the facts and circumstances of this
case, there shall be no order as to costs.
B.B.B. Appeal allowed.

\