TMI Blog2005 (12) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... t purchase point in the State. Several cases were decided on the basis of the above decision of the apex Court. Certain cases were however pending before the appellate authorities and Appellate Tribunals and in those cases assessees took up a new contention that even if those items are taxable under section 5A they are entitled to get exemption as per S.R.O. No. 403/94 and also on the basis of letter No. 20896/B1/2002/TD dated June 8, 2002 issued by the Secretary to Government, Taxes (B) Department to the Commissioner of Commercial Taxes, Thiruvananthapuram followed by communication No. 30780/01/CT dated June 29, 2002 from the Commissioner of Commercial Taxes, Thiruvananthapuram to Deputy Commissioner, Kannur. Contention was raised by the assessees before the Tribunals and various other forums that the abovementioned two letters are clarificatory in nature. Consequently, benefit of S.R.O. No. 403/94 would be available to the assessees who are using soft wood for the manufacture of block boards. On the above plea conflicting views have been expressed by some of the Benches of the Sales Tax Tribunals; so also Appellate Assistant Commissioners placing reliance on the letter of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended to achieve these objects." Contention was raised that the purchase tax payable under section 5A on the purchase turnover of soft wood used for the manufacture of block boards and block board frames is liable to be exempted as per S.R.O. No. 403/94 read with Government letter followed by the clarificatory note of the Commissioner, Commercial Taxes. We may extract the Government letter as well as the clarificatory letter sent by the Commissioner of Commercial Taxes to the Deputy Commissioners for easy reference: Copy of the letter No. 20896/B1/2002/TD dated June 8, 2002 from the Secretary to Government, Taxes (B) Department, Thiruvananthapuram addressed to the Commissioner of Commercial Taxes, Thiruvananthapuram. Sir, Sub: Purchase tax under section 5A exemption granted to industrial units and clarification reg. Ref: Your Lr. No. 62-30750/01/01 dated January 21, 2002 and May 22, 2002. I am directed to invite your attention to the letter cited as to inform that if the raw materials come under the purview of the soft wood, the SSI Unit qualifies for tax exemption provided the other requirements are satisfied under the notification concerned. Yours faithfully, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government Pleader took up the stand that the abovementioned letter issued by the Commissioner cannot override the statutory provisions. Learned Government Pleader submitted that block board and block board frames and other plywoods are commercially distinct and different commodities. Block board and block board frames have not been included in S.R.O. No. 403/94 and therefore they are not entitled to get exemption from the tax payable under section 5A. Learned Government Pleader also submitted that the Government issued S.R.O. No. 593/04 in exercise of the powers conferred under section 10 of the KGST Act granting exemption for the manufacture of block board and block board frames from payment of tax on the turnover of purchase of soft wood used for the manufacture of those items on condition that the manufactured goods shall be liable to tax either under the KGST Act or under the CST Act, 1956. Counsel submitted that the above notification came into effect only from the January 1, 2000 and assessees are entitled to get exemption only from the said date. Apex Court in Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47, held that clarifications/circulars issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Revenue. Later the apex Court noticed that the abovementioned dictum laid down in Dhiren Chemical Industries' case [2002] 126 STC 122; [2002] 2 SCC 127, was misunderstood and misinterpreted. Consequently in Kalyani Packaging Industry v. Union of India [2005] 141 STC 116 (SC); [2004] 6 SCC 719, the apex Court reminded that the law laid down by the court is the law of the land. Law laid down by the apex Court is binding on all courts, Tribunals and bodies. It was also made clear that circulars of the Board cannot prevail over the law laid down by the apex Court. The circumstances under which such an observation was made in Dhiren Chemical Industries' case [2002] 126 STC 122 (SC); [2002] 2 SCC 127 , has been explained by the apex Court in the above decision and held that to hold otherwise and to interpret in the manner suggested would mean that courts/Tribunals have to ignore the judgment of the court and follow circulars of the Board which was not what was meant by the court in Dhiren Chemical Industries' case [2002] 126 STC 122 (SC); [2002] 2 SCC 127. The apex Court therefore categorically held that circulars, notifications, instructions, etc., issued by the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y specified area or areas therein, (b) may be subject to such restrictions and conditions as may be specified in the notification. (3) The Government may by notification in the Gazette, cancel or vary any notification issued under sub-section (1)." Government can issue such a notification only in public interest. If exemption is not granted, evidently as per the Act assessee has to pay tax. Sub-section (3) of section 10 also enables the Government to cancel or vary any notification issued under sub-section (1) by notification in the Gazette. Expression "notification" has been defined in the Act in section 2(xva) to mean a notification issued by the Government under the provisions of the Act and published in the Gazette. The question is when the statutory power to grant exemption has been specifically conferred on the Government under section 10 of the Act, can that power be exercised by some other authority not authorised by the statute. Dr. Mohammed Kutty, counsel appearing for some of the assessees, submitted that power could be traced under section 3 of the Act and he placed considerable reliance on the decision of the Full Bench of this Court in Kurian Abraham Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 STC 233; (1995) 1 KLT 809, which was not brought to the notice of the Full Bench when it decided Kurian Abraham's case [2004] 137 STC 237. Full Bench in MRF Ltd.'s case [1995] 98 STC 233 (Ker); (1995) 1 KLT 809, considered the scope of a circular issued by the Board of Revenue which empowered officers and authorities to invoke the provisions of section 29A of the Act to demand and collect advance tax on the turnover of goods transported if they have reason to believe that tax payable on the consignment is not paid or dealer has defaulted payment of tax. Circular further details the instructions to be strictly followed by the officers in implementation of the provisions contained in section 29A(2B) of the Act. Contention was raised that circular is beyond the powers of the Board of Revenue under section 3(1A) inasmuch as clause 5 of the circular authorises collection of advance tax for which there is no provision in the Act. Repelling the contention the Full Bench held as follows: "The circular in the circumstances can only be considered as one issued for the effective implementation of the authorisation given as per the sub-section and is fully within the powers of the Board un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such other officers as they think fit for the purpose of performing the functions respectively assigned to them by or under this Act. Such officers shall perform the said functions within such local limits as the Government or any authority or officer empowered by them in this behalf may assign to them. (3) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the officers superior to them: Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions. (4) The Board of Revenue or the Deputy Commissioner may, by order in writing, (a) transfer any case or cases relating to any assessee or class of assessees pending before an assessing authority to another assessing authority having jurisdiction to deal with such case or cases; or (b) specify one of the assessing authorities having jurisdiction over an area, which shall deal with any case or cases relating to any assessee or class of assessees. (5) Where any case is transferred to an assessing authority under cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred on them under section 3 of the Act. Under the guise of section 3, in our view, Commissioner of Commercial Taxes cannot exercise power conferred on the Government under section 10(1) of the Act. So also Government exercising powers under section 3 cannot bypass statutory procedure prescribed under section 10(1) of the Act by issuing letters or circulars. In our view, letter or circular issued by the Commissioner has no legal sanctity and those letters or clarificatory orders would not fall within the scope of section 3 of the Act. At best it must be their understanding of the statutory provisions which is not binding upon the courts and would not prevent the taxing authorities from recovering the tax if such tax is leviable according to law. The purpose of section 3 is only to see that sales tax authorities would function effectively and efficiently for the proper administration of the Act. Of course to maintain discipline taxing authorities would follow Government's or Commissioner's instructions which may be binding on them; otherwise there will be total indiscipline in the administration. It is to avoid such a contingency apex Court in several decisions, which we have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X
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