The petitioners were engaged in the business of manufacturing of plain particle boards and prelaminated particle boards popularly known as ‘Bagasse boards’, which are goods falling under Chapter 44 of the First Schedule to the Central Excise Tariff Act, 1985.
According to the petitioners, bagasse is remains of sugarcane after the juice has been extracted by pressure between rolls of a mill. The Central Government issued a notification u/s. 5A of the Central Excise Act dated 1st March 2006, thereby granting exemption as well as concessional rate of duties for various goods. At Serial No. 82 of the Table of this Notification, “Bagasse boards” are classified at clause (vi) and rate of duty prescribed for these goods is nil.
The petitioner company came to know from the Association that the goods in question were chargeable to nil rate of duty and that other members of the Association at Kolhapur, State of Maharashtra, were allowed to clear these goods at nil rate of duty. Petitioner wrote a letter dated 1st June 2006 requesting the Assistant Commissioner for clarification whether Bagasse boards manufactured by the petitioner were chargeable to nil rate of duty or not. The petitioner did not receive any response from the excise authorities. As there was no reply at the end of the Assistant Commissioner or from any other excise authorities, the petitioner started clearing their goods, namely, bagasse boards at nil rate of duty.
Ultimately, the Additional Commissioner of Central Excise issued a show-cause notice dated 20th June 2007, proposing to recover a sum of Rs. 28,75,624/- as excise duty on the quantities of Bagasse boards cleared by the petitioner company on the ground that the goods were covered under another Notification dated 1st March 2006.
In the course of hearing of Writ Petition, it was pointed out three clarification were issued by the Government of India and the Board, two letters of the C.B.E. & C. addressed to the Chief Commissioner, Hyderabad and the Chief Commissioner, Pune are specifically relied upon by the Commissioner, Central Excise, Pune while allowing benefit to one M/s. Eco Board Industries Limited.
It had been clarified by the Government of India through the Board that benefit of Notification was available to pre-laminated bagasse board, such clarification is binding to all Central Excise Officers and no officer of the Central Excise could take a contrary view, more so, when the Central Excise Officers of Patna, Lucknow, Sholapur, Kolhapur, Pune, Hyderabad, etc. have followed the clarifications and allowed the benefit of exemption for similar products, namely, pre-laminated bagasse board, to manufacturers within their jurisdiction.
The Court observed that firstly, any clarification issued by the Board is binding on the Central Excise Officers who are duty-bound to observe and follow such circulars. Whether Section 37B is referred to in such circular or not is not relevant. The Court quoted the observations made by the Supreme Court in the case of Ranadey Micronutrients vs. Collector of Central Excise 1996 (87) ELT 19 (SC), wherein a circular which was in favour of the assessee issued by the Board was sought to be repudiated by the Central Excise Department on the ground that it was only a letter and not an order issued u/s. 37B. The Apex Court observed in paragraph 13 of the judgment as under:
“There can be no doubt whatsoever, in the circumstances, that the earlier and later circulars were issued by the Board under the provisions of Section 37B, and the fact that they do not so recite does not mean that they do not bind Central Excise Officers or become advisory in character. There can be no doubt whatsoever that after 21st November, 1994, Excise duty could be levied upon micronutrients only under the provisions of Heading 31.05 as “other fertilisers”. If the later circular is contrary to the terms of the statute, it must be withdrawn. While the later circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid.”
Therefore, the submission that the letters issued by the Board in the present case were communications answering queries raised by the Commissioners of particular areas and hence, such letters were not binding because they were not issued u/s. 37B is not the correct proposition as canvassed by the Counsel appearing for the Revenue.
When other Central Excise authorities of equal and higher rank have followed and acted as per the clarifications, the Commissioner, Surat, could not have taken a contrary view on the assumption that the clarifications were only letters and not orders u/s. 37B.
If Excise authority of a particular Commissionerate or State refuses to allow benefit of exemption to manufacturers located in that Commissionerate or State but other manufacturers located elsewhere are allowed such exemption, then the same would be in violation of Article 14 of the Constitution of India and also of Article 19(1)(g)of the Constitution of India.
Darshan BoardLam. Ltd vs. UOI 2013 (287) E.L.T. 401 (Guj.)
