The Delhi High Court has ruled in a writ petition that all Administrative, executive and adjudicatory authorities are bound by the Tribunal rulings of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) in the absence of a ruling to the contrary by a higher authority.
The issuance of contrary Circulars by the CBIC was censured by the High Court.
The division bench comprising of Chief Justice Dhirubhai Naranbhai Patel and Justice C. Hari Shankar made this observation in the combined judgement of Khandwala Enterprise Private Limited v. Union of India and Ors, and Credence Commodities Exports v. Union of India and Ors.
The grounds of the case is that the petitioners imported gold coins from South Korea and the Revenue challenged the classification as inappropriate. The Revenue issued circular pointing two cases of similar facts, i.e., Sri Export versus Commissioner of Customs, Hyderabad [Final Order No.A/31494/2018, dated 27.11.201 8 in Appeal No. C/30812/2018] and Sri Export Versus CC Bangalore Cus [arising out of No. 344/2018 dated 12.10.2018 passed by Commissioner of Customs, Bangalore-1]. The Circular issued clarified that the Order passed in the previous cases were not being legal and proper. The discussion arose as to whether the Circulars and Show-cause issued contradicting the Orders of the commission were valid and proper.
The court, in strong language, criticised the act of the CBIC in issuing circulars and show cause to supersede the orders of the Tribunal. The court further stressed that such rulings are not only ex facie unsustainable but is also contemptuous of the Tribunal.
The court also clarified that it is completely impermissible for the CBIC to direct field formations to deal with consignments pending clearance at airports in accordance with the view of the CBIC, rather than the orders of the Tribunal. The court stated that “dealing with consignments pending clearance at ports and airports involves a process of adjudication, and that it was not open to any such authority, dealing with such consignments, to act in violation of binding decisions of the Tribunal”. The court ruled that such actions from the CBIC are in direct and conscious violation of the proviso to Section 151A of the Customs Act.
The Court stressed that the powers of the CBIC, as conferred by Section 151A of the Customs Act, cannot extend to issuance of executive instructions, or Office Memoranda, pronouncing on the merits of issues which are pending before adjudicating authorities. The court hence ruled that all gold coins are to be, therefore, classifiable under Sub-Heading 7118 9000, of the Tariff, as well as of the ITC (HS).
The court held that, “it is completely impermissible for the Revenue to issue a Show Cause Notice and, thereafter, seek to support, or even supplement, the recitals in the Show Cause Notice by way of Office Memoranda, or executive instructions”.
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