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CBEC circulars: Need for more clarity
December, 19th 2006

The Central Board of Excise and Customs (CBEC) is the apex body entrusted with the responsibility of administration and implementation of excise and customs laws and procedures. By design, the Indian tax structure is complex and difficult to administer. In the day to day implementation of any tax law, disputes are bound to arise.

Under the CBEC functions a well-designed hierarchy of departmental officers deal with the day to day administration of taxes. In terms of the departmental scheme the assistant commissioner/deputy commissioner is the lowest officer in the hierarchy who adjudicates the disputes.

The appeal against the order passed by officers below the rank of commissioner lies to commissioner (appeals), who is a departmental officer but not concerned with the executive functions performed in the department. The disputes are also adjudicated by senior officers up to the rank of commissioner of Central Excise depending upon the nature of disputes and the amount of duty involved.

The appeal against the order passed by commissioner (appeals) or commissioner of Central Excise lies to the tribunal which is an independent appellate authority.

The hierarchical structure of appellate remedies notwithstanding, efficient tax administration demands that doubts and issues raised by the tax payers are resolved and responded to at the earliest. The Central Excise Act empowers the CBEC by law to issue clarifications, instructions and directions. These are binding upon all the departmental officers. Typically, section 37B 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."

The Supreme Court has also upheld the binding effect of board circulars upon the field officers.

Many, however, believe that of late the CBEC is reluctant to issue the circular even when differences of practice are brought to its notice. This may not be desirable in the interest of augmenting efficiency of tax administration. The CBEC is expected to oversee the implementation of central excise law through various commissionerates.

It is also in the interest of uniformity that on issues that are susceptible to different interpretations the CBEC examines them and issues necessary clarifications. It is to be noted that the policy intention is better known to the CBEC than the field officers.

The approach that is being followed also deserves to be commented upon. Since the past few months, the board is following the practice of putting up the draft of the circular on its website to seek for comments and views of the trade and industry and also of its field formations. In itself it seems to be a healthy trade. However, should it be followed as a ritual even when not necessary?

Recently, the CBEC has put a draft circular on its website as regards the applicability of exemption to ready packaged food items like namkeen, bhujia, etc. The circular says, "References have been received from the field formations seeking clarifications as to whether ready to eat packaged food items like namkeen, bhujia etc are eligible for full exemptions or are liable to 8% excise duty under notification No.3/2006- CE dated March 1, 2006."

The doubt raised by the field officers on such a trivial matter speaks poorly of their understanding of law. In any event, the draft circular ends with the conclusion that the benefit of full duty exemption is applicable to namkeen, bhujia etc. Since the board circular intends to accord the benefit of the exemption, the question of soliciting comments and views from the trade and industry should not arise.

There is a saying in Hindi: If you wish to do something to somebody, why ask him? It is only when a draft circular intends to affect the interest of the taxpayers that its publicity seeking comments and views may be justified. Hopefully, this assertion is not a 'disputed' one requiring adjudication!

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

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