2005 (2) TMI 138 - SC - Central Excise

DEPARTMENTAL CIRCULARS - SCOPE OF BINDING NATURE - Held that - A disparate view has been taken in CCE v. Maruti Foam Pvt. Ltd. 2004 (1) TMI 328 - SUPREME COURT OF INDIA and Commissioner of Customs, Calcutta and Ors. v. Indian Oil Corpn. Ltd. and Another 2004 (2) TMI 66 - SUPREME COURT OF INDIA . 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 expressed in the circular should per force lose its validity and becomes non est - Though the view expressed in Kalyani' case ( 2004 (5) TMI 78 - SUPREME COURT OF INDIA ), and our view about invalidation might clarify the observations in Para 11 of Dhiren Chemical's case ( 2001 (12) TMI 3 - SUPREME COURT OF INDIA ), we feel that the earlier judgment in Dhiren Chemical's 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 - Decided in favour of Revenue.

Summary

Issues:
1. Interpretation of circulars issued by the Central Board of Excise and Customs.
2. Binding nature of judgments of the Supreme Court on Revenue/Department.
3. Clarification on the validity of circulars vis-a-vis Supreme Court judgments.
4. Referral to a Larger Bench for clarification on conflicting views.

Interpretation of Circulars:
The appeal highlighted a discrepancy between two Supreme Court decisions, one overruling the other. The respondent argued that a specific paragraph in the overruled decision favored their case. This paragraph stated that circulars issued by the Central Board of Excise and Customs, if differing in interpretation from the Court's decision, would be binding on the Revenue. Subsequent cases noted this observation but clarified that Court decisions are the law of the land and must be followed by all Courts, Tribunals, and bodies. Circulars cannot override Supreme Court decisions, ensuring uniformity in legal interpretation.

Binding Nature of Supreme Court Judgments:
The Court emphasized that its decisions are binding on the Revenue/Department, rendering any contrary views expressed in circulars invalid. The law declared by the Supreme Court prevails over circulars, which lose their validity once the Court establishes a legal position. This principle ensures consistency and adherence to the highest judicial authority in legal matters.

Validity of Circulars vs. Supreme Court Judgments:
While previous judgments attempted to clarify the implications of the paragraph in question from the overruled decision, the Court expressed the need for a Larger Bench to provide definitive clarification. Despite attempts to interpret and align with the earlier decision, the Court deemed it appropriate for a Bench of similar strength to address and resolve any ambiguity, emphasizing the importance of clarity and consistency in legal interpretation.

Referral to Larger Bench:
Acknowledging the need for a comprehensive resolution due to conflicting views in different cases, the Court referred the matter to a Larger Bench comprising five Judges. This referral aimed to ensure a thorough examination and clarification of the legal position, particularly concerning the interpretation of circulars vis-a-vis Supreme Court judgments. The papers were to be placed before the Chief Justice of India for the constitution of the appropriate Bench, underscoring the significance of resolving the issue with a robust and authoritative decision.