Directorate General of Valuation Central Board of Excise & Customs Government of India

467/41/2001 Cus V Cir.No.85/2002

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Circular No. :467/41/2001 Cus V Cir.No.85/2002 Dated : 11/12/2002

Valuation (Customs) Related person Binding effect of decision of Supreme Court

Circular No. 85/2002-Cus., dated 11-12-2002

F. No. 467/41/2001-Cus.V

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise Customs, New Delhi

Subject :Supreme Courts decision in the case of GMMCO [2001 (127)E.L.T.508] in the context of Related Party Transaction - Regarding

I am directed to refer to the Tribunals decision against Revenue in the case ofCollector of Customs, Madrasv.General Marketing and Manufacturing Co. Ltd. (GMMCO), reported in [2001 (127)E.L.T.508], dated 25th August, 2000. An Appeal Nos. 2772-73/2001 filed in the Honble Supreme Court against the Tribunal decision, has been dismissed in limine which reads as under :

Delay condoned. The Civil Appeal is dismissed.

The effect of this judgment has been examined in consultation with Ministry of Law and Justice. The Opinion of Ministry of Law and Justice is as follows :

The Honble Supreme Court in a case reported in 1991 JT Vol. III, State of U.P. v. M/s. Synthetics and Chemicals Ltd. and Another p. 268 where therein our lordships have observed, a decision which is not expressed and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgments without any occasion is not ratio decidendi.

The Honble Apex Court in a matter reported in AIR 1967S.C. Shama Raov.State of Pondicherryp. 1680 has held :

It is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles laid down therein any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be a declaration of or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for sake of stability and overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law.

Here in the present matter, it is an admitted fact that the order of the Supreme Court is not a speaking one, as such, the same cannot be said to be a reasoned order. So, in view of the ratio of the judgments inM/s. Syntheticscase (supra) andShama Raoscase (supra), no binding effect should be given to it and should not be treated as precedent.

The Opinion of the Law Ministry as above should be taken into account while dealing with similar matters.

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Wednesday, December 11, 2002