Binding effect of Circulars is not absolute. It is often it is discussed among the Departmental Officers as to what extent Circulars issued by CBIC is binding on the Officers. The question comes to mind what would be the consequences for the non-observance. Let us examine the issue on few touchstones:
Compliance by Officers is Mandatory
Circulars has statutory legal backing and emanate through delegated legislation or subordinate legislation. Non-observance with the provisions of circulars can attract Departmental Enquiry/proceedings, even if the act discharged is out of innocence. On the ground of innocence, protection under section 155 of the Act is not available as it amounts to negligence. Therefore, it leaves no doubt that the compliance by officers is mandatory, even it is producing absurdity and until it is not rescinded by the Board.
Whether Binding upon Court/quasi Judicial Authority
The next question which crosses the mind , whether it is also binding upon Court or Quasi Judicial authority, or the Appellate Authority, the answer is in negative. It is settled law that circulars are not binding upon the court. It is for the court to declare what the particular provision of statute says. Looked at from other angle, a circular which is contrary to the statutory provisions has really no existence in law. In various cases, it is held that circulars are also not binding upon Quasi -Judicial authority. Refer Orient Paper Mills v UOI-AIR1969 SC 48 decision. The Appellate Authority has been excluded from the binding effect of circular by the express provisions of Section 151A(b). Assesses/importer/exporter can contest the legality of the Circular and take a recourse to Court for quashing it.
Source of Power Under Customs Act
Under the Customs law, the power of issuance of these circulars can be traced to Section 151A of the Customs Act. So far as the clarification/circulars issued by the central Government are concerned they represent merely their understanding of the statutory provisions. Circular and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes. In this regard our Board has issued a Circular No. 1006/13/2015-CX, dated 21-9-2015 vide F. No. 96/90/2015-CX, which reiterate the binding nature of circular and also discuss the extent of binding effect of circular contrary to the decision of Apex Court.
Circulars Contrary to the Judgement of Apex Court Must be Rescinded
Circulars contrary to the judgment of highest court is non-est in law, when the law is declared by Apex Court and such circulars contrary to decision should not be followed.( Refer Article 141 of the Constitution). Reference of such circulars should be made to the Board so that further action of rescinding these circulars can be expeditiously taken up. Board may also initiate such action suo motu. All pending cases on the issue, including those in the Call-Book, decided after the date of the judgment should, conform to the law laid by the Hon’ble Supreme Court , as the case may be, irrespective of whether it has been rescinded or not.
The S.C in the case of COMMISSIONER OF CUSTOMS, CALCUTTA Versus INDIAN OIL CORPORATION LTD,2004 (165) E.L.T. 257 (S.C.) has held that in a catena of decisions it have been held that the Circulars issued under Section 37B of Central Excise Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Board.
It was also held that although a circular is not binding on a Court or an assessee, Revenue cannot raise contention contrary to binding nature of circular issued by Board – When a circular remains in operation Revenue is bound by it and cannot be allowed to plea that it is not valid nor that it is contrary to the terms of statute –
In another case, COMMISSIONER OF C. EX., BOLPUR Versus RATAN MELTING & WIRE INDUSTRIES, the Apex Court, 2008 (231) E.L.T. 22 (S.C) has held that the Circulars and instructions issued by C.B.E. & C. is binding on authorities under respective statutes.
The High Court of Judicature at Allahabad in the case of Hindustan Coca Cola Beverages Pvt Lld. Versus U.O.I in Para 18 has discussed the scope of Departmental Circulars and held that they are issued in exercise of statutory power by Departments, and are binding on authorities and officials of Department.
In the High Court OF Gujrat at Ahmedabad, in the case of SMARTCHEM TECHNOLOGIES LTD Versus UNION OF INDIA in Special Civil Application No. 15713 of 2003, decided on 19-4-2011, the Court has held that Departmental instructions has binding effect. Revenue officers cannot take stand contrary to C.B.E.C. Circulars despite decisions of Tribunal taking contrary views – Such circulars hold field till withdrawn by subsequent C.B.E.C. Circulars.
In the case of Bharat Heavy Electricals Ltd .Versus Commr. of Customs. & C. Ex., Bhopal , it was held that Departmental clarification/instruction by C.B.E.C issued for maintaining discipline/consistency in Department and C.B.E. & C. being highest statutory authority, any circular issued by it has to be followed by departmental officers unless shown to be contrary to any law laid down by Supreme Court or High Court. They are binding even if not issued under statutory provision – Departmental officers cannot refuse to follow same in garb of being an administrative circular, advisory in nature.
It may also be noted that circulars cannot have prevailing effect on statute or exemption notification. Right bestowed by statute or exemption notification cannot be whittled down by circular.
Circular Contrary to Statutory Provisions are Binding on Revenue Authorities
Sometimes it is seen that, the Circular issued by the Board are apparently in conflict with statutory provisions of Customs Act 1962. One such pronounced instance is the Board Circular No. 27 of 2015 dated 23.10.2015 with regard to the provisions laid under Section 135 of the Customs Act and. This Circular enumerates ‘Guidelines for launching of prosecution’ ( arrest and bail) for the offences under Customs Act in suppression of the earlier guidelines. The said circular, contrary to the statutory limit of Rs.50 lakhs laid under Customs Act for which arrest can be effected as the same are non-bailable, raised the threshold limit of evasion (duty/exemption/drawback availment) to Rs 01 Crore.
The assesses through the relaxed norms of evasion stand benefited by such generosity. They would never contest the validity of the Circular vis-a-vis conflict provisions of Section 135. A cogent argument thus is, that the Departmental Officers are bound to observe the relaxed stipulation( raised evasion threshold) by the said Circular.
The instance makes a pretty good example of how the provisions of a Circulars which although not fully in sync with Customs Act continues into play. And how the revenue cannot refuse to observe the same.
Hope the article has made a lot of sense to you as a departmental officer or as a general stakeholder. Feel free to cite the instances that support or negate the theme of this article.
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