There is a prevailing belief amongst assessees on the basis of which they have approached Tribunals and Courts which goes thus. If the Tribunal passed an order in favour of an assessee and if Revenue has not chosen to challenge it in the Court, then the position enunciated by the Tribunal becomes law and Revenue cannot undo this by issuing a circular. If the law has to be changed, it must be done by an amendment passed in the Parliament.
This position is incorrect. The Tribunal's order never becomes law. It only becomes precedent. The binding effect of a precedent is subject to so many considerations. It is not a straight case. So what we shall now discuss in this treatise is whether the precedent created by Tribunal's order can be changed by a circular.
The precedent is surely in relation to the assessee whose case went to the Tribunal. Other assessees also would get the benefit of it. But if the circular is issued which states the position in a contrary manner, that is to say, in contradiction to the order of the Tribunal, then the circular will prevail or not is now the question for discussion.
There are some judgements which say that the Tribunal's order is precedent and must be obeyed. One is a High Court judgement in the case of Tata Motors, reported in 2009(244)ELT337Bom. Another is a Supreme Court judge-ment in the case of New Dec-ent Footwear, reported in 2008(231)ELT26SC. This position is unexceptionable. But at the same time the Supreme Court has said in the case of MCC PTA India reported in 2010(249)ELT370 that even if an appeal has not been filed in a case, in another case of the same nature an appeal can be filed by Revenue.
If a circular has been issued clarifying a certain position it has to be binding on all assessees. A particular assessee cannot take the plea that it has got an order in its favour from the Tribunal. For if the asses-see gets the advantage of the order and the others are to follow the circular, then there will be a piquant situation.
So the Circular has to be binding once it has been issued on all. Under Section 151A of Customs Act and a similar Section under the Central Excise Act, the Board may issue instructions to officers of Customs and Central Excise for the purpose of uniformity in the classification of goods or with respect to the levy of duty thereon and all officers of customs are bound to fol-low such orders. The only exception is that the Commissio-ner of Customs Appeal is not bound by this.
One can argue that if the Commissioner (Appeal) is not bound by the Circular of the Board, the Tribunal which is a higher authority cannot be logically bound by the Board's order. The Constitutional Bench of the Supreme Court has given its latest ruling in the case of CCE, Bolpur vs. Ratan Melting and Wire Industries - 2008(231)ELT 22(SC), that (i) Department circular is binding on the departmental officers but not on the Courts (ii) If a Court's decision is contrary to the circular, the circular becomes non est. However, the Supreme Court has not clarified whether in case of a difference between Tribunal's order and Board's Circular, which one will prevail. The Supreme Court has stopped after giving clarification only in regard to Court's order.
The conclusion is that as a practical administrative solution the Board should file appeal in important theoretical matters which are of repetitive nature. If it misses the time limit, it should file an appeal in a similar case. In the meantime it can issue a circular but in the circular it should explain why the circular's conclusion is different from the conclusion of the Tribunal. Some new factors should be brought in the circular like pointing out that the Tribunal's order did not follow the correct legal position or did not take into account all the factual positions etc. That will avoid the direct confrontation between a Tribunal's order and a Board's circular.
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