CBEC CIRCULARS/ORDERS/INSTRUCTIONS RELATING TO SERVICE TAX

[Mr. M. GOVINDARAJAN]

The tax cannot be recovered from the public without the authority of law.   The Central Government as well as State Governments is authorized by the Constitution of India to levy various types of taxes.   For this purpose the respective Governments have passed Acts and Rules.   Notifications are also issued by the Board in order to convey the major decisions to implement the tax provisions.   The date of effect of particular provision in an Act, text of rules, amendments to rules, exemptions granted to tax etc., are contained in the Notifications.  Besides the circulars are issued by the respective Departments.   In this article the effect of circulars, orders, instructions issued by the CBEC relating to service tax is discussed with the decided case laws.

CBEC issued circulars relating to service tax now and then.  Sec. 95 of the Finance Act empowered the Central Government to remove difficulties, if any arises in respect of implementing or assessing the value of any taxable service or any other matter incorporated by any of the Finance Act, by order published in the official gazette, which is not inconsistent with the provisions of service tax within the period as stipulated.

CBEC issues orders under Sec. 37B of the Central Excise Act, 1944, as applicable for the purposes of service tax vide Sec. 83 of Finance Act, 1994.   In addition to this Director General of Service tax also issues instruction letters from time to time in the nature of internal communications of the Department.

The circulars, orders issued by CBEC are binding on CBEC and its officers.  Given the following are various cases decided by the tribunals/Courts as to the effect of circulars/orders issued by CBEC:

1. Jindal Vijayanagar Steels Ltd.,V. Commissioner of Central Excise, Mangalore,- 2008 (11) STR 108 (Tri. Bang)

The CBEC's instructions are binding on the Revenue even if the Supreme Court places a different interpretation.

2. Suchitra Components Ltd., V. Commissioner of Central Excise, Gundur - 2007 -TMI - 1061 - SUPREME COURT OF INDIA

The Court held that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively.  Thus when the circular is against the assessee they have right to claim enforcement of the same prospectively.

3. Union of India V. Arviva Industries Ltd., - 2007 -TMI - 1095 - SUPREME COURT OF INDIA

The Supreme Court held that this court in a series of decisions has held that circulars issued under Sec. 119 of the Income Tax Act, 1961 and Sec. 37B of the Central Excise Act, 1944 are binding on the Revenue.   The Department cannot be permitted to urge that the circulars issued by the Board are not binding on it.

4. Tata Iron & Steel Co., Ltd., V. Commissioner of Central Excise & Customs, Kolkatta - 2008 (10) STR 515 (Tri. Kolkatta)

It is settled law that circulars and instructions issued by the Central Board of Excise and Customs are binding on the department unless they are contrary to the law laid by the Supreme Court on the issue.

5. Fenner India Ltd., V. Collection of Central Excise - 2004 (167) ELT 18 SC

The Commissioner (Appeals) was bound to follow the instructions of the Board as in the Manual.

6. Magus Constructions Pvt. Ltd., V. Union of India - 2008 -TMI - 4479 - HIGH COURT OF GAUHATI

CBEC Master Circular clarifying impugned issue is binding on the department.

7. Keshavji Ravji & Co.,

Supreme Court in this case held that a circular is binding on all officers and persons employed in execution of the Act, where under the circular may have been issued, even if the circular deviates from the provisions of the Act.   However the ultimate responsibility of interpreting the provisions of a given law is the business of courts and though the courts may not be bound by the circulars issued by the Board, the officers of the department to whom the circular applies, are bound by such circulars and cannot deviate therefrom.

8. Electrical Inspectorate, Government of Karnataka V. Commissioner of Service Tax, Bangalore - 2008 -TMI - 3442 - CESTAT, BANGALORE

CBEC circular dated 18.12.2006 clarifying statutory activities of sovereign/public activities not liable to service tax.  Impugned circular being beneficial to the assessee is applicable retrospectively.

9. Paper Products Ltd., V. Commissioner of Central Excise (1999) 7 SCC 84

The circulars issued by CBEC are binding on the departmental authorities.   They cannot take a contrary stand.   The Department cannot repudiate a circular issued by the Board on the basis that it was inconsistent with a statutory provision.   The assessee can contest the validity or legality of such circulars or instructions.   Department does not have right to file an appeal against the correctness or binding nature of a circular.   Department's action has to be consistent with the circulars.

10. Poulose and Mathew V.  Commissioner of Central Excise

Where two opinions are possible on the text of a circular, the assessee should be given the benefit of doubt and that opinion which is in its favor should be given effect to.

11. Commissioner of Central Excise V. Dhiren Chemical Industries (2002) 2 SCC 127

If there are circulars which have been issued by Central Board of Excise and Customs which place a different interpretation upon a phrase, that interpretation will be binding upon the revenue.

12. Modern Petrofils V. Commissioner of Central Excise, Vadodara - II - 2007(6) STR 175 (Tri. Ahamedabad)

Circular was set aside by the Apex Court.   It is deemed to be set aside on the same day as it was issued, though the litigation over it may be continued.