Sukumar Mukhopadhyay: Make CBEC orders binding

EXPERT EYE

The Supreme Court in its latest judgment in the Customs Commissioner vs Indian Oil Corporation case, 2004 (165) ELT 257 (SC), has again brought uncertainty to the issue whether the revenue officers are bound by the Central Board of Excise and Custom's (CBEC) instructions or not. In view of different judgments on the subject, the issue has been referred to the Constitution Bench.

About five years back, this issue was thought to be settled by the Supreme Court in the Paper Products Ltd vs Commissioner of Excise case, (1999) 7 SCC 84. The court had said all circulars issued by the CBEC were binding on all junior formations. The 1999 ruling had brought in a certainty in classification. Many analysts heaved a sigh relief then.

The history of this controversy is that for ages the CBEC had been giving some rulings to the departmental officers on classification of goods, which were binding. The officers used to swear by CBEC's ruling, which was sacrosanct. So there was uniformity and stability.

This continued till 1970, when the Supreme Court in the Orient Paper Mills vs Union of India case, 1978 ELT J 382, said the CBEC's rulings were not binding on the departmental officers doing adjudication on classification.

In practice, this led to a mayhem. It became a licence to thousands of assessing officers to do whatever they liked. Even unscrupulous action to harass taxpayers went in the name of independent decision. So the CBEC started giving Tariff Advice but they were not officially binding on the subordinates. To obviate this free-for-all, the government in December 1985 introduced Sections 37B on the central excise side and Section 151A on the Customs side, which enabled the CBEC to issue instructions, which would be binding on all officers of Customs and Excise and all other officers employed in execution of the Act.

Specifically, it has been provided in the Act that such instructions would not bind the collector on the appellate side. So it is obvious that the tribunal being the higher appellate body is also not bound by the CBEC's circular. In the Commissioner of Central Excise vs Usha Martin case, 1997 (94) ELT 460 (SC), the court said even if the instruction was issued without reciting the Section 37B, it was nevertheless binding on the department.

This is a U-turn from the original view taken by the court in the Oriental Paper Mills case in 1970. But it is all for the better. Now the 2004 judgment has upset the apple cart. Once again the issue has been referred to the Constitution Bench, which will take years to give a final decision.

What will happen in the meantime? The same mayhem will prevail. Since the 2004 judgment is not a definitive judgment, some will follow the 1999 judgment and treat all the orders as binding. Some will take the view that since the matter is sub judice, the CBEC order is not binding.

A situation of flip-flop such as this hurts the industry. This will create a paradise for the lawyers. To avoid this uncertainty, the CBEC should now direct all junior officers to follow the dictum given by the 1999 judgment that the Board's instructions are binding. The 1999 judgment has not been set aside or stayed by a larger Bench, which is yet to be constituted. So the best course is to follow the path of certainty rather than suffer from the Hamlet's doubt of "to follow or not to follow".

smukher2000@yahoo.com