Binding Effect of circulars / orders / instructions - Indian Laws - General

Binding Effect of circulars / orders / instructions The binding nature of circulars and instructions issued by the Central Board of Direct Taxes (CBDT) is an important aspect of tax administration in India. These circulars and instructions facilitate the clear administration of taxing statutes. They serve a clarificatory purpose, helping to elucidate the legislative intent or the context behind a particular law. As such, circulars can be considered contemporaneous expositio, providing valuable insights into understanding otherwise complex tax provisions. Binding nature of circulars on department : In Hindustan Aeronautics Ltd., [2000 (5) TMI 3 - SUPREME COURT] - Held that, It is well settled that instructions/circulars cannot be inconsistent with the provision of the parent act when they seek to tone down the rigours of the Act. In any event, circulars/instructions are only binding on the Revenue, not on the assessees and certainly not on the Hon ble Courts. The principles laid down by considering several decisions are : (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad. (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars. INDIAN OIL CORPORATION LTD.- 2004 (2) TMI 66 - SUPREME COURT Whether a circular contrary to the provisions of law is valid and enforceable in the eyes of law? No. If the departmental circular provides an interpretation which runs contrary to the provisions of law, such interpretation cannot bind the Court. See: GLAXO SMITHKLINE PHARMACEUTICALS LIMITED - 2014 (3) TMI 113 - SUPREME COURT