Judgment:
1. The common issue raised in these appeals is whether Board's valuation Circular No.692/8/2003 dated 13.2.2003 on valuation of captively consumed goods is applicable to all pending cases or is applicable only to goods removed for captive consumption from the date of issue of that Circular.
2. The period of removal of the goods for captive consumption in all these cases is prior to the issue of the Circular. The Revenue's contention is that there were previous Circulars also on the subject (No.258/92/96-CX dated 30.10.96, Order No.24/12/93 dated 31.12.93, F.No.6/12/87-CX dated 31.3.98, F.No.6/702/88-CX dated 11.3.88 etc.) and that valuation should be made for a given period in terms of the Circular in force during that particular period. This contention is made on the ground that it is well settled that Circulars are prospective in their operation. Revenue has relied on the judgement of the Apex Court in the case of C.C.E. v. Eswaran & Sons Engineers Ltd. - 2005 (179) ELT 272 (SC) in support of this contention.
3. The contention on behalf of the assessees is that the latest Circular dated 13.2.2003 lays down the correct method of costing and it governed the valuation of all pending cases, irrespective of whether the goods in question were removed prior to the issue of that Circular or after its issue. It is being pointed out that the Circular specifically states that "general principles of costing" would be adopted for applying Rule 8 and that the costing standards circulated under the said Circular have been developed by the Institute of Cost & Works Accountants of India (ICWAI). It is also pointed out that para 3 specifically clarifies that cost of production of captively consumed goods will 'henceforth' be done strictly in accordance with CAS-4 (the standard developed by ICWAI). The Circular also states in para 4 that the Board Circular No.258/92/96-CX dated 30.10.96 "may be deemed to be modified accordingly so far it relates to determination of cost of production for captively consumed goods". It is the submission of the learned Counsel that in view of deemed modification of the earlier Circulars, those Circulars cannot be applied without the modifications brought about under the later Circular.
4. Learned Counsel has also submitted that it is well settled that a assessee can seek the benefit of a beneficial circular even with regard to a pending dispute and that a beneficial circular has to be applied retrospectively while oppressive circulars are to be applied prospectively. Learned Counsel also pointed out that it is well settled (1996 (88) ELT 638) that revenue cannot be heard to contend against its own circulars. It is well settled (1999 (112) ELT 765) that an assessee can contest the validity of instructions and that Tribunal and Courts are not bound by the circulars. Learned Counsel has further contended that the judgment of the Apex Court in the case of C.C.E. v. Eswaran & Sons Engineers Ltd (supra) is not contrary to these principles inasmuch as that judgment has also approved the proposition that an assessee has a right to claim and a Court may compel compliance with such instructions as are for the benefit of the assessee.
5. A perusal of the Circular dated 13.2.2003 makes it clear that what is being advised under that circular is to follow "the general principles of costing". The Circular also makes it clear that "ICWAI has since developed the costing standards.....". About the applicability of the circular and the effect of the new costing instructions on the previous instructions, the Circular states as under: "3. It is therefore, clarified that cost of production of captively consumed goods will henceforth be done strictly in accordance with CAS-4....
4. Board's Circular No.258/92/96-CX dt. 30.10.96, may be deemed to be modified accordingly in so far as it relates to determination of cast of production for captively consumed goods." The above paras make it clear that the cost of production of captively consumed goods will "henceforth" be done strictly in accordance with CAS-4. Even in the absence of such a statement, it would be correct to follow the Circular inasmuch as 'general principles' are of guidance without regard to time and an assessee would be well within his rights to demand that a dispute involving him may be decided according to "the general principles" applicable to the issue in dispute, irrespective of what a circular of the Government may say. In the present case such a situation does not arise since the Circular has taken care to specifically clarify that "existing instructions may be deemed to be modified". Since the earlier instruction is to be deemed to be modified, it would not be permissible to apply them without the said modification. The appellant assesses are also right in their contention that Revenue is bound by the Circular; while assesses are at liberty to contest the circulars. Therefore, in pending matters, the assessee can seek determination of his case under a later beneficial circular by pointing out that instructions contained in the earlier circulars are incorrect and the matter should be settled according to "general principles" developed by an authority competent to lay down standards.
Tribunal and Courts are duty bound to consider such a contention. This position enunciated in the judgment of the High Court of Calcutta in the case of Birla Jute and Industries Ltd. v. Assistant Collector - 1992 (57) ELT 674 has been approved by the Apex Court in the case of Eswaran & Sons Engineers Ltd. 6. We may also note that the Judgement of the Apex Court in the case of Eswaran & Sons Engineers Ltd. does not support the revenue's contention that assessments for each period should be decided in terms of the Circular of the relevant period, without considering the modifications subsequently made in them. The issue considered in the Eswaran & Sons Engineers Ltd. Judgment was altogether different. It was as to what was the effect of a subsequent circular on a demand which had been raised prior to the issue of a circular. The Court observed as under: "13. Under Section 37B of the Act, the Board is empowered to issue instructions to Central Excise Officers, for the purpose of uniformity in the classification of excisable goods, which instructions, are required to be followed by such officers. However, under proviso (a) to Section 37B an exception is made. The said proviso states that the said Instructions, orders or directions cannot make any central Excise Officer to dispose of a particular case in a particular manner. Similarly under proviso (b) such Instructions, shall not bind the discretion of Commissioner of central Excise (Appeals), discharging appellate functions. In view of the proviso to Section 37B, the said Circular dated 14.7.94 issued by the Board was not applicable to the facts of the present case. As stated above, in the present case, the Assistant Collector had taken a prima facie view for purposes of reclassification as far back as 17.12.93. Therefore, the Circular dated 14.7.94 had no application to the facts of the present case. The judgment of the Supreme Court in the case of H.M. Bags Manufacturer (supra) did not deal with the case where the department had issued show cause notice purporting to reclassify the product prior to the issuance of Instructions by the Board. Therefore, the said judgment has no application to the facts of the present case.
The ratio of this judgment is that a legally sustainable claim, which had been raised by the Revenue prior to and independently of a circular, cannot be extinguished on a plea that a subsequently issued circular is prospective in operation. That is not the case in the present appeals. The revenue seeks to finalise pending valuations applying different costing principles on the plea that different criteria had been circulated from time to time. The assesses are contesting the correctness of that approach by contending that the instructions contained in the earlier circulars were not in conformity with the general principles of cost accounting, and that the latest circular which incorporated correct principles should be followed in all pending cases. It is also to be noticed that the latest circular of 2003 specifically states that the earlier instructions have to be "deemed to be modified" by the later circular. Thus, Revenue had no independently sustainable claim. Its claim is based entirely on circulars issued from to time. That too, on incorrect costing principles. It would be wholly incorrect to apply old circulars without considering the modifications brought about by the latest circular, particularly when, as noted already, it is well settled that assesses are not bound by any circular, though at liberty to seek the benefit of circulars and a Court has to allow such a claim while Revenue is bound by its own circulars.
7. In view of what is stated above, all the appeals are allowed by way of remand with the direction to the original authorities to decide valuation in terms of the Circular No.692/8/2003 dated 13.2.2003.