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April 2014

Circulars – Binding nature – Circulars cannot override statutory provisions: Administrative Law:

By Dr. K. Shivaram Senior Advocate, Ajay R. Singh Advocate
Reading Time 2 mins
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Glaxo Smithkline Pharmaceuticals Ltd vs. UOI & Others, AIR 2014 SC 410

The following principles emante out of this decision of the Supreme Court in relation to the Circulars issued by the Government under the fiscal laws (Income-tax Act and Central Excise Act):

1. Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that is contrary to a binding Circular by the Board. While a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that is not valid nor that it is contrary to the terms of the statute.

2. A show cause notice and demand contrary to the existing Circulars of the Board are ab initio bad.

3. It is not open to the Revenue to advance an argument or file an appeal contrary to the Circulars.

The above legal position is re-emphasised in Commissioner of Customs vs. Indian Oil Corporation (AIR 2004 SC 2799: 2004 AIR SCW 1310) has been followed in UOI vs. Arviva Inds. (I) Ltd.: (2007) 209 ELT 5 (SC)

4. It is well settled that if the departmental Circular provides an interpretation which runs contrary to the provisions of law, such interpretation will not bind the Court.

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