CUS CIR NO.85/2002 DATE 11/12/2002

Supreme Court's decision in the case of GMMCO [2001 (127) ELT 508] in the context of Related Party Transaction-regarding

I. am directed to refer to the Tribunal's decision against Revenue in the case of Collector of Customs, Madras Vs. General Marketing and Manufacturing Co. Ltd. (GMMCO), reported in [2001 (127) ELT 508], dated 25th, August 2000. An appeal No. 2772-73/2001]; filed in the Hon’ble 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 Hon'ble Supreme Court in a case. reported, in 1991 JT Vol. III, State of U.P. Vs. 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 arm occasion is not ratio decidendi.”

The Hon’ble Apex Court in a matter reported in AIR 1967 SC Shama Rao vs. State of Pondicherry p. 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 precedent. Restraint in dissenting or over-ruling is for sake of stability and over-ruling 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 judgements in M/s. Synthetic’s case (Supra) and Shama Rao’s case (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.

Sd/-
(N.J. Kumaresh)
Under Secretary to the Government of India

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

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