Can Departmental circulars be inconsistent with the law?

Supreme Court in case of Ratan Melting & Wire Industries v. CCE 2008 (231) E.L.T. 22 (S.C.) has held that circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. A circular which is contrary to the statutory provisions has really no existence in law.

In the light of the aforesaid judgment, CBEC, vide Circular No. 1006/13/2015-CX dated 21.09.2015, has clarified that Board Circulars contrary to the judgements of Hon’ble Supreme Court and High Court judgments where Board has decided not to file an appeal on merit, become non-est in law and should not be followed.

All pending cases decided after the date of the judgement should, conform to the law laid by the Hon’ble Supreme Court or High Court, as the case may be, irrespective of whether the circular has been rescinded or not.

The Gujarat High Court has held in Raymon Glues and Chemicals v. UOI 2000 (117) E.L.T. 29 (Guj.) that the Board is not empowered to issue circulars contrary to Tribunal decisions and instead has to take up the matter in appeal.