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When a GST circular conflicts with a binding court ruling on the law, the court’s interpretation prevails. A circular may guide and bind departmental revenue authorities while it remains operative, but it cannot override the statute or the law declared by the Supreme Court or a High Court.
Which authority takes precedence?
The statute is the governing text. A CBIC circular is an administrative instruction: it can state the Board’s view and guide tax officials, but it cannot amend an Act or control a court’s interpretation of the law.
The Supreme Court set out this general principle in Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries (14 October 2008). The Court said circulars may bind departmental authorities, but do not bind courts. When a circular contradicts statutory provisions or the law declared by a court, the contrary circular cannot be given primacy. As the Court put it: “It is for the Court to declare what the particular provision of statute says and it is not for the Executive.” Read the judgment.
That does not mean circulars have no effect. A departmental officer may be constrained by an operative circular even when a court would interpret the statute differently. The question is which authority is deciding the dispute and whether the circular conflicts with the law that controls it.
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In BMG Informatics Pvt Ltd v. Union of India and others (Gauhati High Court, 2 September 2021), a refund rejection relied on paragraph 3.2 of Circular No. 135/05/2020-GST, dated 31 March 2020. The High Court found that paragraph conflicted with section 54(3)(ii) of the CGST Act and held the circular-based rejection unsustainable in that dispute. Read the judgment.
The ruling illustrates how a court can resolve a conflict between a circular and the Act. It does not automatically determine other refund claims or unrelated GST questions: the statutory provision, facts, procedural posture and applicable later law matter.
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How to check an apparent conflict
- Find the circular and confirm its status. Use the CBIC GST Circulars and Orders register to verify the circular number, date and exact paragraph. Check for amendments, withdrawal or supersession.
- Read the applicable law. Check the relevant provision in the CBIC-hosted CGST Act text, together with any relevant rules or notifications and the version applicable to the period in dispute. The Act page is a starting point; a live matter may require a later amended version.
- Read the judgment, not just a summary. Identify the court, issue and statutory provision decided, the operative holding, the facts and the procedural posture. Check whether a later decision or legislative change affects its application.
- Describe the conflict narrowly. Identify the specific circular paragraph that conflicts, the higher authority that controls and why the ruling applies to the facts. A conflict in one paragraph does not necessarily invalidate the whole circular.
What to compare when authorities differ
| Question | Why it matters |
|---|---|
| What kind of authority is it? | A statute, delegated legislation, administrative circular and judicial holding do not have the same legal status. A circular cannot amend the Act or override the law declared by a court. |
| Is it the same legal issue? | Compare the precise provision and question decided. A ruling about one provision does not necessarily resolve a different GST issue. |
| Which court decided it, and where does it apply? | Identify the court and the ruling’s precedential reach for the dispute at hand. |
| Has anything changed since? | Check for amendments, withdrawal, supersession, later decisions or other changes that may affect the authority’s current relevance. |
| Do the facts and procedure fit? | A judgment’s application can depend on the claim, facts and procedural posture, not just a phrase quoted from the decision. |
When you need an answer for your own GST dispute
A general hierarchy does not decide a specific assessment, refund claim, appeal or writ petition. Pin down the relevant jurisdiction, period, statutory text and procedural stage, then get case-specific legal advice where needed. Verify that the circular and judgment remain relevant before relying on them.
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