Circular No. 674/65/2002-CX
1^st Nov., 2002

F.No. 210 /01/2002-CX-6
Government of India
Ministry of Finance & Company Affairs
Department of Revenue
Central Board of Excise & Customs

Subject: - Raising of protective demands consequent to CERA objection- modification of circular 5/83-CX6 dated 10.3.83- reg.

            I am directed to draw your attention to Board’s circular No. 5/83-CX6 dated 10.3.83 issued from F.No. 210/28/81-CX6 and circular No. 444/10/99-CX dated 12.3.99 issued from F.No.210/1/99-CX6 wherein it has been, inter alia, directed that immediately on receipt of objection from CERA , demand-cum-show cause notice should be issued without any loss of time even if the Central Excise officers do not agree with Audit’s point of view. Later the instructions were modified to say that protective demands may not be raised pursuant to CERA objections which are contrary to orders issued by Board under section 37 B of Central Excise Act, 1944.

2.         The matter has been re examined by the Board. It is observed that the field formations continue to issue protective demands on the basis of the objections raised by CERA which are contrary to Board’s circulars/ instructions (not issued under section 37 B). Since the settlement of audit objection takes time, the protective demands go on piling up. In this regard, it is the consistent view of the Apex Court [Collector of Central Excise, Patna vs Usha Martin Industries] {1997(94)ELT 460(SC)} that the instructions/ circulars issued by Board or Ministry are binding on the field formations. These instructions/ circulars too have legal backing as these are part of the technical functions which are performed under the statute by Board. Therefore, the raising of protective demands contrary to Board’s circulars/ instructions shows inherent inconsistency. The Apex Court has also held in the case of Ranadey Micronutrients vs Collector of Central Excise that "…..Consistency and discipline are of far greater importance than the winning or losing of Court proceedings."[1996(87) ELT19(SC)] . In view of above it has become imperative to modify earlier instructions on the subject.

3.         Accordingly, it has been decided that wherever Board’s instructions or circulars (whether issued under section 37 B or not) exist on a particular issue, no protective demands should be raised on the basis of CERA objection if the objection is contrary to such Board’s instructions or circulars. However, in all such cases, the matter should be immediately referred to PAC section of the Board for resolving the issue with the C&AG of India.

4.        Field formations may please be informed suitably.

5.        Receipt of the same may be acknowledged.

6.        Hindi version will follow.