Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4233 OF 2007
STATE OF TAMIL NADU & ANR. — APPELLANTS
VERSUS
INDIA CEMENTS LTD. & ANR. — RESPONDENTS
J U D G M E N T
D.K. JAIN, J.:
nd
1.
This appeal is directed against the final judgment and order dated 22
December, 2006 rendered by the High Court of Judicature at Madras in
W.P.Nos.13697 and 13698 of 2002. By the impugned judgment, while
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setting aside the order dated 19 April, 2002 passed by the Taxation
Special Tribunal (for short “the Tribunal”) in O.P. Nos. 322 and 351 of
2002, the High Court has held that the first respondent viz. M/s India
Cements Ltd. is entitled to the benefit of deferral of sales tax as claimed
by them under the interest free sales tax deferral scheme, introduced by
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the State of Tamil Nadu under G.O.Ms.No.119 dated 13 April, 1994
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issued by the Commercial Taxes & Religious Endowments Department
of the State.
2. Before we traverse the facts, which have given rise to the present appeal,
in order to appreciate the issue involved, it would be expedient to refer to
the relevant State Government orders/memorandum notified from time to
time, in exercise of powers conferred under Section 17A of the Tamil
Nadu General Sales Tax Act, 1959 (for short “the TNGST Act”) and
Section 9(2) of the Central Sales Tax Act, 1956 (for short “the CST
Act”).
2.1 With a view to promote industrialisation, the Government of Tamil
Nadu had declared 105 taluks of the State as industrially backward for the
purpose of grant of interest free sales tax loan, interest free sales tax deferral,
state capital subsidy etc. In furtherance thereof and to correct regional
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imbalances in industrialisation, vide G.O.Ms. No.500 dated 14 May, 1990,
the Government declared 30 taluks from amongst the 105 industrially
backward taluks to be industrially most backward taluks, offering them
further incentives. It was directed that the new industries to be set up in
these 30 most backward taluks as also in the three industrial complexes of
State Industries Promotion Corporation of Tamil Nadu (for short “the
SIPCOT”) at three named places, in addition to the existing concessions,
would be entitled to full waiver of sales-tax dues for a period of five years
2
upto a ceiling of the total investment made in the fixed assets. It was also
stipulated that existing units in these areas/complexes undertaking
expansion/diversification shall also be entitled to deferral of sales tax for
nine years, limited to 80% of the additional investment made in fixed assets.
However, the benefit of sales tax deferral to the new units was to the full
extent of the total investment made in the fixed assets. The scheme was
subject to the sales tax payable on products manufactured by the capacity
created by expansion/diversification units only.
2.2 Subsequently, certain clarifications were issued vide G.O.P.No.92 CT
nd th
dated 22 February, 1991 and G.O.P.No.396 dated 10 September, 1991
whereby benefit of deferral of payment of sales-tax payable was extended to
all industries to be set up anywhere in Tamil Nadu having an investment of
` 100 crores and above on sale of the products manufactured by the industry
for a period of twelve years from the date of commencement of production
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on or after 18 July, 1991 upto a ceiling of 100% of the value of fixed assets,
after deducting the quantum of tax under the CST Act for the same period
and subject to production of eligibility certificate to be issued by SIPCOT.
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By G.O.Ms.No.376, dated 27 October, 1992, in exercise of powers
conferred by clause (a) of sub-section 5 of Section 8 and sub-section 2 of
Section 9 of the CST Act, the Government extended the benefit of
remission/deferral of tax payable under the CST Act, as similar to
3
nd
G.O.P.No.92 dated 22 February 1991, to the new industries as well as to
the existing industries, on the same conditions prescribed under
G.O.P.No.92. These government orders were followed by another
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G.O.M.No.43, Industries (MIG-II) Department, dated 13 December, 1992
whereby special incentives were introduced for mega industries, subject to
fulfilment of the prescribed conditions.
2.3 It appears that with a view to protect the revenue and also to increase
the production level of industries which were interested in availing
concessions of deferral of sales tax, the State Government vide
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G.O.Ms.No.119, dated 13 April, 1994, imposed certain conditions and
issued directions that were required to be complied with by the
expansion/diversification units for availing sales tax benefits. For the sake
of ready reference, the relevant portion of the said G.O. is extracted below:
“3. The Government after careful examination, have decided
to accept the suggestions of the special Commissioner and
Commissioner of Commercial Taxes as they protect the Revenue
and also help to increase the production level of the industries
availing the concession. Accordingly, the Government direct
that –
i) The industry will be eligible for sales tax deferral only if
in a financial year production exceeds the base
production volume which is the highest annual
production in the 3 years prior to expansion.
ii) When the actual production in the industry in any
financial year exceeds the base production volume, the
industry would be eligible for deferral of sales tax for
sales made in that year in excess of the base sales volume
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under Tamil Nadu General Sales Tax, which is the
highest of the actual annual sales in the last 3 years prior
to expansion.
iii) The above conditions are applicable in cases where
expansion unit is a separate unit located elsewhere or a
part of the existing plant.
iv) The specifications of base production/sales volumes are
applicable even in the case of allegedly new unit having
been started by the same management or ownership or
where the substantial controlling capital is put in by the
same group of companies.
v) The base production volume and the base sales volume
will have to be worked out and incorporated in the
eligibility certificates at the time of issue by SIPCOT and
District Industries Centres.”
3. The first respondent, engaged in the manufacture and marketing of
cement in the States of Tamil Nadu and Andhra Pradesh was having
manufacturing units at Sankari and Sankar Nagar. By their letters dated
th th th
13 March, 1996, 4 March, 1997 and 24 September, 1997 they
proposed to set up an expanded unit at Dalavoi village, Sendurai taluk to
avail the benefit of sales tax deferral scheme under G.O.Ms.No.119,
th th
dated 13 April 1994. On being approached, on 13 February, 1998,
SIPCOT issued the requisite eligibility certificate to the first respondent,
inter-alia, mentioning that: (i) the first respondent will be eligible for
deferral of sales tax not exceeding ` 205.13 crores (later on revised to
` 270.21 crores ) , interest free for a period of twelve years from the month
in which the first respondent’s unit commenced its commercial
st st
production i.e. from 1 July, 1997 to 31 May, 2009 (cl.3); (ii) deferral of
5
sales tax will only be on the increased volume of production/sales; (iii)
for the purpose of determining the increased volume of production, the
base figure would be the highest of the volume of production/sale in the
company in any one of the year during the last three years; (iv) till
reaching the volume of production/sale specified earlier, the company
would continue to pay tax and any liability in excess of the
production/sale specified therein alone will be eligible for deferment
(cl.5.3); (v) the deferral scheme will be applicable to the unit/company
only as long as it manufactures products for which the essentiality
certificate had been issued (cl.6) and (vi) violation of any of the
conditions as stipulated in the eligibility certificate and the connected
government orders will result in withdrawal of deferral facility in entirety
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(cl.7). In compliance of clause 5.2 of the eligibility certificate, on 12
April, 2000, the first respondent entered into an agreement with the Zonal
Assistant Commissioner, Commercial Taxes, undertaking to comply
with the Base Production Volume and Base Sales Volume (hereinafter
referred to as “BPV” and “BSV” respectively) as indicated in the
essentiality certificate.
4. The first respondent continued to remit the sales tax until they reached
the level of BSV, viz. the highest of the actual annual sales in the last
three years prior to the expansion, stating that they had also reached, in
6
the financial year, BPV, viz. the highest production in the last three years
prior to the expansion and submitted its return claiming the deferral of
tax on the sale in excess of BSV.
5. The Assistant Commissioner of Commercial Taxes, issued a notice dated
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19 March, 2002, inter alia, informing the first respondent that once the
BSV is reached, then the eligibility for availment of deferral under the
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eligibility certificate dated 13 February, 1998 would be available only
for the unit at Dalavoi and the deferral could not be stretched to include
the production of other units and accordingly, directed the respondent to
pay a sum of ` 5322.14 lakhs which had been availed, in excess, as
deferral of sales tax. The respondent was also informed that they could
avail of deferral of sales tax after reaching the BSV/BPV for all the units
whichever is earlier and then they could avail deferral for expansion unit
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at Dalavoi only. On 21 March, 2002 the Assistant Commissioner issued
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an erratum to the earlier notice dated 19 March, 2002 to the effect that
the words ‘units whichever is earlier and then they can avail deferral for
expansion unit’ should be read as ‘units whichever is later and then they
can avail deferral for expansion unit’.
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6. In its reply to the notice dated 19 March, 2002, as quoted in the
impugned judgment, the first respondent submitted that:- (i)
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G.O.Ms.No.119 dated 13 April, 1994 cannot be read as completely
7
nd
nullifying the purpose, purport and effect of G.O.P.No.92 dated 22
February, 1991; (ii) the aim of G.O.Ms.No.119 was to ensure that the
entrepreneur maintains the tax payment obligation prior to the new
industry so that only incremental sale volume is entitled to deferral and
(iii) the new industry which is a separate industrial undertaking, with the
sole investment infrastructure utilities, management and work force
already determined, had suffered by treating this as an expansion and
even if it were an expansion, logically tax can only be collected on the
base sale volume and further sale volume beyond the base volume should
be treated as a result of the expansion investment.
st
7. In the meanwhile, consequent to the erratum issued in notice dated 21
March, 2002, the Assistant Commissioner issued a revised notice dated
nd
22 March, 2002, informing the first respondent that they had availed
deferral before they had reached the BPV, which is violative of the
conditions laid down in the eligibility certificate. The respondent was
thus, informed that they were liable to pay an amount of ` 5873.51 lakhs
as excess availment of deferral of sales tax for the period from 1998-1999
to 2001-2002.
8. Aggrieved by the said demand notice, the first respondent filed O.P.
No.322 of 2002 before the Tribunal seeking quashing of the said notice.
Subsequently, they filed another O.P.No.351 of 2002 to declare clause
8
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5.3 of the eligibility certificate dated 13 February, 1998 as
ultra vires the Notification No.II(1)/CTRE/158/91 in G.O.P.No.396 dated
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10 September 1991 and Notification No.II(1)/CTRE/213/92 in
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G.O.Ms.No.376 dated 27 October, 1992. In both the said petitions, it
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was contended that clauses 3(i) and (ii) of G.O.Ms.No.119 dated 13
April, 1994 as well as the consequential qualification prescribed in the
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eligibility certificate dated 13 February, 1998 in paragraph 5.3 would
offend the spirit and object of the sales-tax deferral scheme, if the
th
conditions in agreement dated 12 April, 2000 are construed to mean that
the holder of the eligibility certificate would be eligible for the benefit of
deferral scheme only when they achieve both the BPV/BSV levels
together and not otherwise.
th
9. Relying on an earlier decision of the High Court dated 5 December,
2001, in the case of Madras Cement Limited, wherein it was held that the
Government Order makes it clear that even if the sales of the unit had
reached the BSV, they would be eligible for deferral of sales tax on sales
made in that year only when they reached the BPV, the Tribunal
dismissed both the original petitions. Thus, the Tribunal held that before
the first respondent could claim deferral of sales tax, both the BPV and
BSV shall have to be reached. In other words, if the BSV had been
9
reached earlier but BPV had not been reached, the said respondent will
not be entitled to get the deferral facility, till they achieve BPV.
10. Being aggrieved, the first respondent preferred Writ Petitions No.13697
and 13698 of 2002 before the High Court. As afore-stated, the High
Court has allowed the writ petitions. Reversing the decision of the
Tribunal, the High Court observed thus:
“21.5 A combined reading of clauses 3(i) and (ii) of
G.O.Ms.No.119, Commercial Taxes and Religious
Endowments Department, dated 13-4-1994 and paragraph 5.3
of Eligibility Certificate dated 13-2-1998 in the case of M/s.
India Cements Ltd., and para 10 of the Eligibility Certificate
dated 22-12-1998 in the case of M/s. Hindustan Motors Limited
and the terms and conditions incorporated in the consequential
agreements in both the cases, would go to show that the word
“when” mentioned in clause 3(ii) of G.O.Ms.No.119,
Commercial Taxes and Religious Endowments Department
dated 13-4-1994, if read as “if” or “after” whatever the case
may be, the BPV which is the highest production of the last
three years prior to the expansion should be achieved by the
holder of the eligibility certificate for every assessment year of
the total number of years, viz., 12 years in the case of deferral
and 5 years in the case of waiver, besides reaching BSV in that
particular year. By insisting that the BSV should also be
reached, the Revenue of the State gets protected in every
assessment year during the entire period of deferral or waiver.
21.6 To determine the date from which such benefit of
deferral or waiver would follow, viz., from the date of reaching
BPV or from the date of reaching BSV, or whichever is earlier
or whichever is later, in the light of the intention behind the
schemes, clause 3(ii) of G.O.Ms.No.119, Commercial Taxes
and Religious Endowments Department, dated 13-4-1994
cannot be construed to mean that the benefit would flow only
from the date of reaching the BPV, not from the date of
reaching the BSV, as the object of the schemes is to increase
10
the productivity, but without compromising with the revenue of
the State.
21.7 As per the rules of interpretation applicable to the case of
fiscal laws, the words must say what they mean and nothing
should be presumed or implied. Applying the said plain
interpretation and reading the word “when” even plainly as
“when”, the blending of two clauses 3(i) and 3(ii) as suggested
by us above, by way of harmonized and reasonable
construction, is inevitable, as the same cannot be ruled out
keeping in mind the intention behind the schemes and the goal
to achieve the same in the public interest, viz. to improve the
production in the most Backward and backward Areas,
certainly without compromising with the revenue of the State,
in whatever manner, the word “when” found in clause 3(ii) is
read whether as “when” of “if” or “after” as the case may be.
The above interpretation is, in our considered opinion,
unavoidable because any other construction would lead to
absurdity frustrating the object behind the scheme.”
11. Hence the instant appeal by the State of Tamil Nadu, in which SIPCOT
has been arrayed as proforma respondent No.2.
12. Mr. Rajiv Dutta, learned senior counsel appearing for the State
strenuously urged that the only interpretation that could be given to
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clause 3(ii) of G.O.Ms.No.119 dated 13 April, 1994, which is also
reflected in the eligibility certificate and the agreement entered into by
the first respondent, is that both the base production volume (BPV) and
base sales volume (BSV) had to be reached before the first respondent
could claim deferral of sales tax. According to the learned counsel, it
was only after the BPV was reached that the right of deferral accrued and
therefore, if the BSV had been reached earlier, even then the first
11
respondent was not entitled to get the deferral facility till the BPV had
been reached. In other words, whichever condition is reached later it is at
that stage that industry concerned will get the right to defer the payment
of sales tax, pleaded the learned counsel. Referring to para 5.3 of the
Eligibility Certificate, which provides that “the company is eligible for
deferral of sales tax only on the increased volume of production/sale”,
learned counsel submitted that the SLASH in between the words
production and sale shows that till both the BPV and BSV were achieved,
the first respondent could not claim the benefit of deferral of sales tax
scheme. It was submitted that the word “when” employed in clause 3(ii)
of G.O.Ms.119 also shows that only in the year where the industry
reaches both the BPV and BSV, that it would be eligible for the benefit
of sales tax deferral.
13. Per contra , Mr. M. Chandrasekharan, learned senior counsel appearing
for the first respondent submitted that clause 3(i) of G.O.Ms.No.119
prescribes the qualification for availing the sales tax deferral and clause
3(ii) of the said G.O. enables the expansion/diversified unit, of the
existing industry to avail the benefit of sales tax deferral either from the
date of achieving the BSV or BPV, whichever is earlier, in that financial
year. It was contended that if BSV is achieved earlier and BPV is
reached later in the financial year, the benefit of sales tax deferral should
12
date back to the earlier date of achieving BSV and similarly if the BPV is
achieved earlier and BSV is achieved later, it should date back to the
earlier date of achieving BPV and only then the object of deferral scheme
can be achieved. According to the learned counsel, any other
interpretation would frustrate the object of the scheme. Learned counsel
also urged that even if the word “when” as appearing in clause 3(ii) is
read as “after” even then the first respondent would be eligible for
deferral of sales tax on the sales in excess of BSV after the actual
production of the unit in the financial year exceeds the BPV and the
benefit should date back to the date of reaching the BSV. Learned
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counsel also argued that in light of the Circular dated 1 May, 2000
issued under Section 28A of the TNGST Act, clarifying the position as to
when the benefit of deferral of sales tax scheme would follow, the
revenue cannot be permitted to contend that in order to avail of the
benefit of sales tax deferral the industry must reach both BPV and BSV
and not when either of the two is reached earlier, as contemplated in the
circular. In support of the proposition that a beneficial and promotional
exemption should be liberally construed, reliance was placed on a
decision of this Court in Commissioner of Customs (Preventive),
1
Mumbai Vs. M. Ambalal & Company .
1
(2011) 2 SCC 74
13
14. Thus, the short question which falls for consideration is whether the first
respondent would be eligible for sales tax deferral in any financial year
for the sales made in that year in excess of the base sales volume (BSV)
as soon as they exceed the BSV or only when their production also
exceeds the base production volume (BPV) in that year?
15.
The source of the sales tax deferral scheme is traceable to Section 17A of
the TNGST Act which enables the Government to notify deferred
payment of tax for new industries, etc. subject to such restrictions and
conditions as may be deemed fit. Therefore, the scheme in question has a
nd
statutory flavour. From a comparative reading of G.O.P.No.92 dated 22
th
February, 1991 and G.O.Ms.No.376 dated 27 October, 1992 on the one
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hand and G.O.Ms.No.119 dated 13 April, 1994, the eligibility certificate
issued thereunder as also the consequential agreement entered between
the parties on the other hand, it is evident that G.O.P.No.92 and
G.O.Ms.No.376 is the source of power to grant exemption and
G.O.Ms.No.119 lays down the methodology and the machinery to
implement the scheme. These are complementary to each other.
Therefore, the terms and conditions stipulated in the schemes; the
eligibility certificate as also the consequential agreement, between the
first respondent and the revenue, having the statutory force, undoubtedly
violation of any one of the terms and conditions thereof would disentitle
14
the beneficiary of the benefit of the sales tax deferral scheme. With this
background, we may now advert to the core issue viz. the interpretation
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of clauses 3(i) and 3(ii) of G.O.Ms.No.119 dated 13 April, 1994,
extracted above. At this juncture, it will also be expedient to refer to
paragraph 5.3 of the eligibility certificate issued to the first respondent, to
which reference was made by learned counsel for the State. It reads as
follows :
“5.3. The company is eligible for deferral of sales tax
only on the increased volume of production/sale. For the
purpose of determining the increased volume of
production, the base figure would be the highest of the
volume of production/sale in the company in any one of
the year during the last 3 years. Till reaching the volume
of production/sale specified earlier the company would
continue to pay tax and any liability in excess of the
production/sale specified above alone will be eligible for
deferment.”
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16. A conjoint reading of clauses 3(i) and (ii) of G.O.Ms.No.119 dated 13
th
April, 1994, and paragraph 5.3 of eligibility certificate dated 13
February, 1998 would show that the object of the conditions with
reference to reaching of BPV is to ensure that the concerned unit
achieves the highest production and sale of the existing unit in the last
three years prior to the commencement of the commercial production in
the expansion unit, resulting in higher revenue on higher sales. The
benchmark for availing the benefit of the sales tax deferral scheme
15
having been fixed both with reference to the production as also to the
sales, in our opinion, it is immaterial whether the unit concerned reaches
BPV or the BSV earlier. In our view, the word “when” employed in
clause 3(ii) of G.O.Ms.No.119, whether read as “if” or “after” only
signifies that in order to avail of the benefit of sales tax deferral for sales
made in the year in excess of the BSV, the industry must achieve in that
year the BPV, which is the highest production of the last three years prior
to the expansion, for every assessment year of the total number of years,
viz., 12 years, besides reaching BSV in that particular year. It is obvious
that by insisting that the BSV should also be reached, the revenue of the
State gets protected in every assessment year during the entire period of
deferral and, in fact, the industry gets the benefit of deferral only on sales
which are in excess of the BSV. It is pertinent to note that if for any
reason the beneficiary ultimately fails to achieve the BPV during the
financial year, the benefit of deferral of sales tax availed of by it on
achieving BSV becomes refundable forthwith along with interest thereon.
In our opinion, in light of the intention behind the schemes, clause 3(ii)
of the G.O.Ms.No.119 cannot be construed to mean that the benefit
would flow only from the date of reaching the BPV and not from the date
of reaching the BSV, particularly when the main object of the schemes is
to increase the productivity without compromising with the revenue of
the State. Any other interpretation of the said GOM would frustrate the
16
object of the scheme. It is now well established principle of law that if a
plain meaning given to the provision for the purpose of considering as to
whether the applicant had fulfilled the eligibility criteria as laid down in
the notification or not is found to be clear, purpose and object the
notification seeks to achieve must be given effect to. (See: G.P.
Ceramics Private Limited Vs. Commissioner, Trade Tax, Uttar
2
Pradesh .)
17. In any event, we feel that the decision of the High Court cannot be
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flawed with in light of the circular dated 1 May, 2000 issued by the
office of the Principal Commissioner and Commissioner of Commercial
Taxes, Chennai, in exercise of power conferred on him under Section
28A of the TNGST Act. For the sake of ready reference, the relevant
portion of the circular is extracted below:
“As per GOMs No.119, CT & RE/13.4.1994 as regards
expansion cases it was decided that the past revenue shall be
protected obtained prior to expansion. The BPV/BSV is fixed
on the basis of highest annual production/sales in the 3 years
prior to expansion. Thus the industries will have to pay the
taxes due upon the turnover and until the Base Production
Volume/Base Sales volume mentioned in the Eligibility
Certificate is achieved. The BPV/BSV shall have to be worked
out and incorporated in the Eligibility Certificate by SIPCOT
and other district centres as per above Government order.
Hence if the details are not available the particulars of
production/sales for prior three years shall be ascertained from
the books of the dealers and Eligibility Certificate got amended
to incorporate the particulars to avoid any dispute. As per
decision of Tamil Nadu Taxation Special Tribunal in
2
(2009) 2 SCC 90
17
O.P.1229/1230/1231/98 dated 23.11.1998. Mercury Fittings
(P) Ltd. It was held that GOM No.119/CTRE/13.4.1994 (sic)
contemplate the liability to pay tax with reference to Base
Production Volume or Base Sales Volume whichever is reached
earlier and the liability for deferral is only with reference to
volume of Sales and not with reference to taxes paid on sales
for the base year. Thus all Deputy Commissioners and
Assistant Commissioners shall thoroughly verify all expansion
cases and satisfy themselves that taxes have been paid until the
BPV/BSV has been achieved.”
(Emphasis supplied by us)
18. It is manifest from the highlighted portion of the circular that as per the
clarification issued by the Commissioner of Commercial Taxes, in
exercise of the power conferred on him under Section 28A of the TNGST
Act, the benefit of sales tax deferral scheme would be available to a
dealer from the date of reaching of BPV or BSV, whichever is earlier, as
is pleaded on behalf of the first respondent. It is trite law that circulars
issued by the revenue are binding on the departmental authorities and
they cannot be permitted to repudiate the same on the plea that it is
inconsistent with the statutory provisions or it mitigates the rigour of the
law.
3
19.
In Paper Products Ltd. Vs. Commissioner of Central Excise , while
interpreting Section 37-B of the Central Excise Act, 1944, which is in
pari materia with Section 28A of the TNGST Act, this Court had held
that the circulars issued by the Central Board of Excise & Customs are
3
(1999) 7 SCC 84
18
binding on the department and the department is precluded from
challenging the correctness of the said circulars, even on the ground of
the same being inconsistent with the statutory provision. It was further
held that the department is precluded from the right to file an appeal
against the correctness of the binding nature of the circulars and the
department’s action has to be consistent with the circular which is in
force at the relevant point of time.
20. In Collector of Central Excise, Vadodara Vs. Dhiren Chemical
4
Industries , a Constitution Bench of this Court had held that if there are
circulars issued by the Central Board of Excise & Customs which place a
different interpretation upon a phrase in the statute, the interpretation
suggested in the circular would be binding upon the revenue even
regardless of the interpretation placed by this Court.
21. Similarly, in Commissioner of Customs, Calcutta & Ors. Vs. Indian Oil
5
Corpn. Ltd. & Anr. , dealing with the circular issued by the Board under
Section 151-A of the Customs Act, 1962, which is again in pari materia
with Section 28A of the TNGST Act, Ruma Pal, J., had opined that the
circular will be binding primarily on the basis of the language of the
statutory provisions buttressed by the need of the adjudicating officers to
maintain uniformity in the levy of tax/duty throughout the country.
4
(2002) 2 SCC 127
5
(2004) 3 SCC 488
19
Although in the same judgement, while concurring with the view
expressed by Ruma Pal, J., on the facts of that case, P. Venkatarama
Reddi, J., entertaining certain doubts as to the correctness of the
proposition laid down by the Constitution Bench in Dhiren Chemical
Industries (supra), had observed that there was a need to redefine
succinctly the extent and parameters of the binding character of the
circulars of the Central Board of Direct Taxes or Central Excise etc., by
another Constitution Bench, yet the learned Judge did not disagree with
the proposition that it is not open to the revenue to file an appeal against
the order passed by an appellate authority which is in conformity with a
departmental circular. In fact, His Lordship went on to observe that
when there is a statutory mandate to observe and follow the orders and
instructions of CBEC in regard to specified matters, that mandate has to
be complied with. It is not open to the adjudicating authority to deviate
from those orders or instructions which the statute enjoins that it should
follow. If any order is passed contrary to those instructions, the order is
liable to be struck down on that very ground.
22. In Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wire
6
Industries , a Constitution Bench of this Court has clarified the confusion
created on account of the view expressed in para 11 of Dhiren Chemical
6
(2008) 13 SCC 1
20
Industries (supra), on the question of binding effect of judgment of this
Court vis-a-vis State and Central Government circulars thus:
“ 7. 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. Looked at from another
angle, a circular which is contrary to the statutory provisions
has really no existence in law.”
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23. In the present case, it is not the case of the revenue that circular dated 1
May, 2000 is in conflict with either any statutory provision or the deferral
schemes announced under the afore-mentioned government orders. We,
therefore, hold that the said circular is binding in law on the adjudicating
authority under the TNGST Act.
24. For the reasons afore-mentioned, we do not find any merit in this appeal
and the same is dismissed accordingly.
25. However, in the facts and circumstances of the case, the parties are left to
bear their own costs.
.……………………………………
(D.K. JAIN, J.)
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.…………………………………….
(H.L. DATTU, J.)
NEW DELHI;
APRIL 21, 2011.
(RS)
22