TNC Rajagopalan: Questions over CBEC circulars affecting trade

EXIM MATTERS

The debate regarding the binding effect of circulars issued by the Central Board of Excise and Customs (CBEC) has flared up again.

The issue seemed settled after the Constitution Bench of the Supreme Court had held in the case of Dhiren Chemicals [2003(143) ELT 19 SC] that "regardless of the interpretation that we have placed on the said phrase, if there are circulars that have been issued by the CBEC placing a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue."

Relying on the above decision, a division Bench of the apex court dismissed the Revenue appeal in the case of Indian Oil Corporation [2004 (165) ELT 257 (SC)] regarding loading ship demurrage costs for the purpose of valuation of imported goods.

One of the judges, however, raised a question as to whether the Dhiren Chemicals judgment led to unintended consequences, especially where the CBEC instructions ran contrary to the Supreme Court judgments.

He pleaded for an authoritative pronouncement by a Constitutional Bench on the extent and parameters of the binding character of the CBEC circulars. The trade, meanwhile, struggles with the CBEC circulars that are contrary to court judgements.

For example, some time back, the Supreme Court, in the case of Tolin Rubbers Pvt Ltd [2004 (163) ELT 289 (SC)], set aside the assessment order based on the depreciation method prescribed by the CBEC for the valuation of imported second-hand capital goods.

In other words, the lower authorities erred in adopting the prescribed depreciation method without first rejecting the transaction value of imported goods.

Similarly, the judgments say London Metal Exchange (LME) should not be substituted for the transaction value of imported goods in question.

Yet, the field formations continue to reject the transaction value without following the Supreme Court judgment in the case of Eicher Tractors Ltd 2000 (122) ELT 321 (SC) or in the case of Punjab Processors [2003 (157) ELT 625 (SC)].

The departmental instructions, however, mandate the field formations to do so. The problem is that the CBEC circulars are not revised every time the Supreme Court settles a point of law.

As a result, the field formations follow the CBEC circulars knowing very well that what they do is contrary to the law of the land. The importers are thus forced to approach the courts for justice, burdening the judiciary and incurring unnecessary costs.

The CBEC had brought out a manual of supplementary instructions in September 2001. The CBEC should immediately update the manual and issue fresh instructions consistent with the court decisions that hold the field.

The courts must also instruct the CBEC to revise its instructions in accordance with the judgements that have acquired certain finality.

tncr@sify.com