Precedent – Circulars – Binding on Revenue – Implied overruling – Earlier ruling of smaller Bench held, stands overruled if a subsequent larger bench lays down law to the contrary: Constitution of India Article 141:

The Hon’ble Court held that the circulars issued by the Central Board of Excise and Customs are binding on the Department and the Department cannot be permitted to urge that the circulars issued by the Board are not binding on it. The Court in a series of decisions has held that the circulars issued u/s. 119 of the I.T. Act 1961 and section 37-B of the Central Excise Act, 1944 are binding on the Revenue.

However, a slightly different approach was taken by this Court in Hindustan Aeronautics Ltd. vs. CIT (2000) 5 SCC 365 by two learned Judges which runs counter to the earlier decisions. The view taken in Hindustan Aeronautics Ltd. (supra) being contrary to the subsequent decision of the Constitution Bench of this Court in CCE vs. Dhiren Chemical Inds. (2002) 254 ITR 554 / (2002) 2 SCC 127, cannot be taken to be good law. Earlier ruling of Smaller Bench held stands over rule if a subsequent larger bench lays down law to the contrary.