Consider this. A manufacturer bought ammonium nitrate of 75% to 82% and by the process of prilling concentrate converted the ammonium nitrate to 99%. A dispute arose whether such conversion amounts to manufacture warranting payment of central excise duty. The Commissioner (Appeals) held the decision in favour of the assessee. However, the executive Commissioner felt otherwise and he filed an appeal to the tribunal. A bench of three members of the tribunal decided the appeal in June 1985. In the case reported as Collector of Central Excise v Anil Chemicals Pvt. Ltd. [1985 (21) ELT 889(T)], the tribunal agreed with the Commissioner (Appeals). After four years, in July 1989, the Board accepted the tribunals decision and issued a circular that no excise duty was payable on prilled ammonium nitrate obtained from melt ammonium nitrate.

In September 1989, the Board issued another circular saying that the same would apply to the process of conversion of ammonium nitrate melted into crystalline coated ammonium nitrate. However, in June 1993, in IDL Chemicals Ltd v Collector of Central Excise [1993 (68) ELT 589] another bench of the tribunal took a contrary view. The difference of opinion was referred to a larger bench. In its judgment delivered in June 2000 and reported as Supreme Chemical Works v Collector of Central Excise [2000 (119) ELT 707], the larger bench held that the process amounted to manufacture. The larger bench thus overruled its decision in the case of Anil Chemicals Pvt Ltd. Be that as it may, after about seven years of the judgment of the larger bench, that is, in April 2007, the Board considered it wise to issue instructions to its field formations that the two circulars issued in 1989 should be treated as withdrawn. And this is all that is said by way of reasoning: It has been decided by the Board to accept the above said order of larger bench dated 7.6.2000, and final order of the tribunal dated 3.8.2000 on this issue.

Consequently, Board has decided to withdraw the circulars Nos 44/89-CX.3, dated 19.7.1989, and 56/89-CX.3, dated 21.9.1989, as they are inconsistent with the settled position of law. Therefore, the Circulars Nos 44/89-CX-3 & 56/89-Cx-3 may be treated as withdrawn. The awful delay of almost seven years after the decision of the larger bench was available is baffling, to say the least. It is to be noted that the larger benchs decision was in favour of revenue. True, it can be argued that it might be an isolated case of delayed response to judicial pronouncement. However, it does signal cause of concern. The Board would do well to remember that it is an apex body constituted under an Act of Parliament, the Central Board of Revenue Act, 1963. It is entrusted with the onerous responsibility of collecting indirect taxes and with the task of administering laws that have a strong bearing upon the economic well being of citizens at large. Administratively, the Board is a powerful organisation. It exercises control over a vast network of field formations spread throughout the country. In technical matters involving interpretation of law and procedures, the Board is empowered to issue instructions and circulars which are binding upon the field officers.

In other words, the field officers have no authority or jurisdiction to deviate from the decision taken by the Board even if it is contrary to law. Illustratively, section 37 B of the Central Excise Act says, The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board.

An observation by the Supreme Court in Collector of Central Excise v Dhiren Chemical Industries [2002 (139) ELT 3(SC)] puts the binding nature of Board circular more distinctively: We need to made it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue.

While the Board can boast of its vast powers, it need to be mindful of the fact that on its efficiency depends the quality of tax administration and the collection of revenues due to the government.

The author is ex-chief commissioner, Customs and Central Excise