A very piquant situation has arisen after the judgement of the Supreme Court in the Ratan Melting case. One of my ex-colleagues who is known to be as knowledgeable as he is serious, rang me up with a lot of concern that this judgement now authorises the CBEC to file appeal in the Supreme Court against an action taken in pursuance of its own circular. This concern emanates from reading of paragraph 7 of the judgement which is quoted below:
“Obviously, the assessee will not file an appeal questioning the view expressed vis-a-vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him (should be ‘it’) and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution.”
It does look somewhat unusual the CBEC would file an appeal against something done on the basis of its order. However, a proper reading of the circumstances under which this order was passed by the Supreme Court would show there can be such circumstances and it is not an anomaly.
In this particular case the existing circular of the Board was beneficial to the assessee but a Supreme Court judgement was against the circular of the Board. So the Board (through the Commissioner) filed an appeal to the Supreme Court not to give effect to the circular but to judgment of the Supreme Court. The assessee took the position in the Court that “once the Board issues a circular, the Revenue cannot take advantage of a decision of the Supreme Court”.
In this case the Supreme Court finally gave the ruling that while the circulars of the Board are binding on the authorities under the statutes, they are not binding on the Court. “It is for the court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle a circular which is contrary to the statutory provision has really no existence in law”.
The crux of the decision is that the Court decision is binding under Article 141 of the Constitution as the law of the land. The Board’s circular is definitely binding on the Department but not if it is against the Court’s decision.
Now in a case like the present one (Ratan Melting), the circular is in favour of the assessee. The Court judgement is against the assessee. So the CBEC has to follow the Court judgement. Obviously the CBEC can change the circular according to the Court’s decision. But if it has not done so already and if the assessee has got the benefit according to the circular, the Board can certainly approach the Supreme Court to nullify the benefit taken according to the circular. This has to be in a case which comes to the Supreme Court if the Tribunal or the High Court has given the benefit to the assessee in pursuance of the existing circular of the Board. So it is not an anomalous situation but it does look piquant. It only means that this principle applies only in very special circumstances as I have described above.
Conclusion is that the CBEC should immediately amend its circulars as soon a Court Judgment is received which is against its circulars. Or at least it should file appeal immediately against a High Court judgment if it does not agree with it. and get the issue settled in the Supreme Court.
Otherwise the Departmental officers will not be able to ignore the Board’s circular on the basis of a Supreme Court decision. If it is a High Court order, the situation is more uncertain as it is not known if the Department has filed an appeal against it. So the rule should be that the departmental officers must follow the circular till it is changed.
