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2015 (10) TMI 290 - UTTARAKHAND HIGH COURT

2015 (10) TMI 290 - UTTARAKHAND HIGH COURT - [2016] 91 VST 298 (Utk) - Benefit of input tax credit (ITC) on Packing material - finished goods were stock transferred - Held that:- Appellant cannot impugn the provisions contained in Section 6(3)(d) of the Act along with the proviso, as falling foul of Article 301 and Article 304. It may be an unwise move on the part of the State, which is also a criticism, which is levelled by Mr. C.S. Lodha that the States should encourage products from its own s .....

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ion which he would face on account of higher prices, which it would have to demand on account of denial of ITC, it would suffer. Mr. C.S. Lodha would, in fact, submit that the complaint of the State would appear to have been that, when packing material is procured and the finished goods are stock transferred and sold in another part of the country, insofar as there is no inter-State sale, the State is not getting any revenue in the absence of an inter-State sale and the State, therefore, cannot .....

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hed goods, which are stock transferred. We cannot deny the right of the State with its plenary powers of legislation within the field of legislation, which is admittedly and legitimately exercised by it otherwise, the right to raise taxes. The Court must strike a balance between the right of the State to raise taxes, which forms the major source of revenue for it for carrying out various public purposes, no doubt, while it stands ever vigilant against any move to treat goods manufactured from or .....

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. We have set out the effect of Section 6. Appellant is not entitled to the benefit of ITC in respect of packing materials used for its finished goods, which were stock transferred. Even the Circular of 2008, in our view, does not as such clearly provide for the grant of such benefit. Lack of clarity and place for doubt in a stray sentence in a Circular cannot be seized upon by the appellant to claim that, contrary to the clear mandate of the Legislature, it should be given the benefit of ITC fo .....

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posing of the same by this common judgment. 2. Special Appeal No. 159 of 2015 arises from the judgment passed in Writ Petition (MS) No. 532 of 2013. It relates to Assessment Year 2008-2009. Special Appeal No. 160 of 2015 arises from the judgment passed in Writ Petition (MS) No. 1526 of 2014. It relates to Assessment Year 2009-2010. Special Appeal No. 161 of 2015 arises from the judgment passed in Writ Petition (MS) No. 2282 of 2014. It pertains to Assessment Year 2010-2011. The appellant is the .....

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ed to as the "Act") provides for Input Tax Credit (hereinafter referred to as "ITC"). The complaint in the writ petitions relate, essentially, to refusal to grant ITC in respect of packing materials purchased from within the State of Uttarakhand used in the manufacture of the products of the appellant, which products are, thereafter, transferred by way of stock transfer to outside the State of Uttarakhand. It is the case of the appellant that, after the Act came into force in .....

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s available in respect of packing materials used for finished products, which are stock transferred and, accordingly, it arranged its affairs. It is, while so, that in relation to Assessment Year 2008-2009, which assessment proceedings took place in the year 2012, the officer purported to disallow the claim for ITC on packing materials. Thereafter, another Circular dated 23.01.2013 was issued. The said Circular, which is impugned in the writ petitions, inter alia, provides that ITC is not availa .....

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er 2012, (received by the Petitioner on 17th January 2013) passed by the third Respondent and to set aside the said order and the demand pursuant thereto. (b) to issue a declaration that circular no. 46 dated 28th June 2008 issued by Commissioner of Commercial Taxes is binding on all subordinate authorities and that there is no power or jurisdiction vested in any authority to pass any order ignoring the said circular issued by the 2nd Respondent or contrary thereto. (c) to issue a writ of certio .....

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spect of packing material beyond the CST rate when finished goods are removed by way of depot transfer and thus effectively makes the packing material manufactured in Uttarakhand suffer higher rate of tax as compared to other States be declared unconstitutional being violative of Article 301 and 304 of the Constitution. (d) to restrain the Respondents from recovering the differential tax on the basis that no input tax credit is available on packing materials used in the manufacture of final prod .....

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e Petitioners to take benefit of input tax credit on packing materials used in the manufacture of depot transferred goods, pending disposal of the present petition." 4. The learned Single Judge, however, took the view that there is no merit in the writ petitions and declined relief. Accordingly, feeling aggrieved, the appellant is before us. 5. We have heard Mr. C.S. Lodha, learned counsel appearing for the appellant and Mr. A.S. Rawat, learned Addl. Advocate General appearing for the State .....

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t ITC in respect of tax paid in excess of 2 per cent; but, there was no such restriction in respect of packing materials. He enlists the White Paper, which is issued by the Empowered Committee, as well as the provisions, which have been made by the other States in their respective laws. According to him, in all the other States, the position obtaining is that ITC is available in respect of packing materials in excess of the CST rate even for stock transfer outside the State. He would further sub .....

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State to deny a level playing field to all in view of the mandate of Article 301, 303, read with Article 304, of the Constitution of India. He would further submit that, in fact, if Section 6 of the Act is properly appreciated, there would be no denial of the ITC in respect of the transactions involved in the cases. He would reiterate that the Circular issued in the year 2008 binds the officers and, hence, the writ petitions should have been allowed. 7. Per contra, Mr. A.S. Rawat, the learned Ad .....

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of stock transferred materials by confining the benefit to the raw materials involved in the production of such goods, as is clear from the proviso. He also drew our attention to Section 6(8) (f) & (g), to which we shall make reference later. He would further submit that a reading of the Circular issued in the year 2008, relied on by the appellant, would not yield the result, which the appellant is canvassing for. He would also submit that the later Circular issued in the year 2013 was issue .....

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g the net tax payable by a registered dealer for any tax period after being registered, an input tax credit as determined under the provisions of this Act shall be allowed to such registered dealer for the tax paid or payable in respect of all taxable sales other than sale of goods specified in Schedule III or any other sales as may be prescribed: Provided that no input tax credit shall be allowed in respect of the taxable purchases on which the tax is paid or payable under sub-section (10) of S .....

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roducts from fowls or animals kept by him, and such persons are, in respect of such goods, not treated as a dealer under the provisions of sub-section (11) of Section 2 of this Act; or (b) purchase of any goods as may be notified by the State Government for this purpose, subject to such conditions and restrictions as may be specified in said notification. (2) The input tax credit to which the registered dealer is entitled shall be the amount of tax paid by the registered dealer to the seller, on .....

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rce; or (c) sale in the course of export out of the territory of India; or (d) use as raw material and consumables in manufacturing or processing of goods (other than those specified in Schedule I or Schedule III) and containers or other packing materials used for packing of such manufactured goods, for sale or resale within the State or in the course of inter-State trade or commerce; (e) use as raw material and consumables in manufacturing or processing of any goods (other than those specified .....

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Provided further that partial input tax credit shall be allowed in respect of tax paid in excess of 2 percent on petroleum products used as fuel (other than Petrol Aviation Turbine Fuel, Natural Gas and Diesel) and other fuels used in production of taxable goods or captive power, but excluding fuel when used as fuel in motor vehicles. (4)(a) Where during a tax period a registered person purchasing goods (other than capital goods) on which an input tax credit is admissible under the provisions of .....

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ng used in the course of business and inputs being used for any other purposes; (b) Amount of input tax credit in respect of purchases of a particular commodity during the tax period shall be the aggregate of all amounts of input tax credit computed in respect of each purpose the commodity purchased is utilized. The total amount of input tax credit shall be the aggregate of input tax credit for all commodities; (c) The method that is used by a person to determine the extent to which goods are so .....

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ules." 9. There are other restrictions, which do not appear to be put in issue before us. 10. It is also necessary to refer to Rule 4 of the Rules, which provides as follows: "RULE 4: Commercial Tax Authorities and their powers- (1) The Commissioner shall have jurisdiction over whole of the State and shall exercise all the powers conferred, and perform all the duties imposed upon him by or under the Act or these Rules; (2) Consistent with the provisions of the Act and these rules, the .....

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missioner (Appeals) in the exercise of his appellate functions. (3) The Commissioner shall have all the powers exercisable by his subordinate authorities other than the Appellate Authorities under Section 51." 11. It is the case of Mr. C.S. Lodha, learned counsel for the appellant, that, if the proviso to Section 6(3)(d) is, for a moment, treated as not having been inserted, the Court may contemplate the effect. It is his case that, all that the Legislature intended, was that, in respect of .....

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TC is to be determined as per the provisions of the Act in respect of taxable sales and it provides, inter alia, that it shall be allowed to the registered dealer for the tax paid or payable in respect of all taxable sales other than the sale of goods specified in Schedule III or any other sales as may be prescribed. He would, therefore, submit that the Court must proceed on the basis in the first place that the position is as obtaining in sub-section (1). Therefore, a proper construction of the .....

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mong different purposes would show that the Legislature clearly contemplated that, when goods are sent by way of stock transfer to other States, there cannot be a denial of ITC on the packing materials. 12. Mr. C.S. Lodha would submit that the Circular, which is issued in the year 2008, is in keeping with the aforesaid construction of the provisions. The English version of the relevant portions of the Circular dated 28.06.2008, which he relies on, is as follows: "5. The extent of ITC claime .....

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s will be available as per provisions of Section 6, beyond the CST rate effective from 1st April, 2008. No ITC will be available on goods used for exempt goods. If the dealer, in addition to the sale of finished goods also stock transfers the goods or makes consignment sale or sells taxable goods as well as tax exempt goods then the benefit of ITC will be available under Section 6(4). Provisions relating to ITC are contained in Section 6." 13. He reminds that the assessments were completed .....

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he years in question. He relied on the following judgments: i. State of Kerala & others vs. Kurian Abraham (P) Ltd. & another, reported in (2008) 3 SCC 582 ii. Commissioner of Customs, Calcutta vs. Indian Oil Corporation Ltd., reported in 2004 (165) ELT 257 (SC) iii. Union of India vs. Arviva Industries (I) Ltd., reported in 2007 (209) ELT 5 (SC) iv. Poulose and Mathen vs. Collector of Central Excise & another, reported in (1997) 3 SCC 50. v. Collector of Central Excise, Patna vs. Us .....

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ndra Industries, reported in (2000) 9 SCC 66. xi. Collector of Central Excise, Vadodra vs. Dhiren Chemical Industries, reported in (2002) 2 SCC 127 xii. State of Tamil Nadu & another vs. India Cements Limited & another, reported in (2011) 13 SCC 247 xiii. UCO Bank, Calcutta vs. Commissioner of Income Tax, W.B., reported in (1999) 4 SCC 599 xiv. Fenner India Ltd. vs. Collector of Central Excise, reported in (2004) 10 SCC 554 xv. Collector of Central Excise, Meerut vs. Maruti Foam (P) Ltd. .....

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cular, which is issued in the year 2013, as far as the assessment years involved in these cases, namely, 2008-2009, 2009-2010 and 2010-2011 are concerned, appellant must be given the treatment vouchsafed on an understanding of the law as done in the Circular of 2008. 15. Mr. C.S. Lodha would next contend that it is impermissible to discriminate between goods manufactured locally and those manufactured outside, as it would violate the mandate of Article 301 of the Constitution of India. He takes .....

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er Mart & others, reported in 1997 (2) SCC 697. vi. Shree Mahavir Oil Mills & another vs. State of J&K & others, reported in 1996 (11) SCC 39. vii. State of Uttar Pradesh & others vs. Jaiprakash Associates Limited, reported in 2014 (4) SCC 720. 16. He would submit that the Hon'ble Apex Court has held that differential treatment, be it by the grant of an exemption or a tax rebate, besides of course the actual differential treatment in taxation, is frowned upon having regar .....

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adopted a uniform practice of giving ITC in excess of 2 per cent in respect of stock transferred goods. Even that would be impermissible, he contends. Equally, he would submit, afflicted with the vice of unconstitutionality as it would fall foul of Article 301 would be the Act if it were not read down to mean that ITC is also available to a manufacturer within the State of Uttarakhand, who purchases packing materials from the State of Uttarakhand and utilizes the packing materials for dispatch o .....

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ract from the duty of the court to construe the provisions and to interpret the law. Section 6(1), undoubtedly, provides that ITC is available only to a registered dealer. It further provides that ITC is to be determined under the provisions of the Act to the registered dealer and for the tax paid or payable in respect of taxable sales other than sales specified in Schedule III or any other sales as may be prescribed. There are certain exclusions from the ambit of sub-section (1) of Section 6, a .....

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iod, which are intended for the purposes, the Legislature took care in providing in sub-section (3) of Section 6 the purposes, which will entitle a registered dealer for ITC. Under clause (a), if goods are purchased for sale in Uttarakhand, they qualify for the benefit of ITC. Likewise, if goods are purchased for sale in the course of inter-State trade and commerce, it is a recognised purpose. Likewise, if it is intended for sale in the course of export out of the territory of India, the dealer .....

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anufactured goods. However, the last limb of clause (d) puts the matter beyond the pale of doubt that it is not the mere use of the goods as raw materials or consumables or containers or packing materials that alone is required. The purpose is further explained; in that, the manufactured goods must be for sale or for re-sale within the State, or, sale or re-sale in the course of inter-State trade or commerce. It is also to be noted that the goods specified by the manufactured goods must be other .....

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able to Section 4(2)(b)(ii) of the Act. Therefore, it is clear that ITC cannot be claimed in respect of either the raw material or packing material in regard to manufacture of exempted goods within the meaning of Schedule I. The purport of the proviso to Section 6(3)(d) 18. Now, if we turn to the proviso relevant to clause (d) of Section 6(3), it purports to state that with reference to clause (d) above, which, in our view, only means that the Legislature intended not to waste words and to ident .....

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id in excess of 2 per cent on the raw materials, which are directly used in the manufacture of the finished products. 19. At this juncture, it is to be noted that the function of a proviso is normally to carve out an exception to the main provision. However, it could also in cases, which leave the court in no doubt, have the effect of being an independent enactment. It is apposite to refer to the following commentary in the book Principles of Statutory Interpretation by Justice G.P. Singh: " .....

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alification is ordinarily foreign to the proper function of a proviso. However, this is only true of a real proviso. The insertion of a proviso by the draftsman is not always strictly adhered to its legitimate use and at times a section worded as a proviso may wholly or partly be in substance a fresh enactment adding to and not merely excepting something out of or qualifying what goes before." 20. We would think, therefore, that the proper construction to be placed of Section 6(3)(d) in the .....

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an inter-State sale. The Legislature has clearly not intended to given benefit of ITC in regard to packing materials used for packing of manufactured goods when they are dispatched outside the State by way of stock transfer. This effect is undeniable and flows clearly from the language used in Section 6(3)(d) of the Act. On the other hand, only if there is a intra-State sale or inter-State sale of the finished goods, will ITC be available on the tax paid on the packing materials used for packin .....

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clude purchase of goods to be used as raw materials' alone for the manufacture of finished products, which are covered otherwise by clause (d); in that, it does not fall under Schedule I or Schedule III, when they are dispatched outside the State which takes in dispatch by way of stock transfer in the proviso. The Legislature has used the words raw materials, consumables, containers or other packing materials in clause (d) in the context of an intra-State sale or inter-State sale; whereas, i .....

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ilable in respect of stock transfer of finished goods; in that, it is, in the first place, limited to the raw materials and, secondly, it is limited as regards the quantum, namely, the tax paid in excess of 2 per cent on the purchase of raw materials, which apparently is the CST (Central Sales Tax) rate, is allowed. Section 6(4)(a) and its impact 21. Though the learned counsel for the appellant Mr. Lodha tried to draw considerable substance from Section 6(4)(a), we are of the view that there is .....

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goods) on which he is entitled to ITC under the provisions of this Section and the purchases are used partially for various purposes as provided in sub-section (3) and he also uses it for other purposes [meaning the purposes which are not provided in Section 6(3)], then ITC is not to be denied totally. On the other hand, the Legislature intended that the dealer would be entitled to ITC in proportion to the extent that the goods are used for the purposes which are covered by Section 6(3) and, the .....

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ITC is to be confined to the extent that they are used for those purposes, which are mentioned in Section 6(3) only and it is, thereafter, that Section 6(4)(a) provides that such different purposes include the various categories of transactions mentioned in clauses (i), (ii) & (iii). Therefore, the words "different purposes" are intended to differentiate between purposes, which are sanctioned under Section 6(3) as purposes, which will entitle the registered dealer to the benefit of .....

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may also notice Section 6(8)(a), (f) & (g), which read as follows: "6(8) No input tax credit shall be allowed on purchase of goods, other than the Capital Goods, when- (a) goods not connected with the business of the dealer; or (f) goods transferred outside the State, otherwise than by way of sale; or (g) in respect of raw material used in manufacture or processing of goods where the finished products are dispatched outside the State other than by way of sales;" 22. At any rate, we .....

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th which ITC could be claimed as against the purposes which are not sanctioned under Section 6(3) when it used the expression "different purposes". It is also noteworthy that the Legislature has used the word "include", which is before referring to clauses (i), (ii) & (iii). The Circulars of 2008 and 2013 23. In the context of the above interpretation, let us now examine the Circular of the year 2008, which is relied on by the appellant. The two portions of the Circular, .....

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goods or makes consignment sale or sells taxable goods as well as tax exempt goods, then the benefit of ITC will be available under Section 6(4)." 25. Taking the last sentence first, we are of the clear view that all that flows from the aforesaid portion of the circular is in keeping with the interpretation which we have placed. The author of the Circular intended to clarify that if different' or hybrid transactions falling under Section 6(3) and outside of Section 6(3) take place, the .....

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then ITC will be available in respect of raw materials and packing materials as per the provisions of Section 6 beyond the CST rate effective from 1st April, 2008. The author has clearly referred to the entitlement of ITC for packing materials in terms of provisions of Section 6. Undoubtedly, ITC is available under Section 6(3)(d) in respect of packing materials; but confined only to cases, where the manufactured goods are sold by way of intra-State sale or inter-State sale. As far as ITC for ra .....

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te otherwise than by way of sale which would take in a stock transfer, the transaction would entitle the dealer to ITC in respect of tax paid in excess of 2 per cent. It is to be noted that the words "in excess of the rate beyond CST rate" are in keeping with "in excess of the rate prescribed under sub-section (1) of Section 8 of the Central Sales Tax Act", which were the words in the proviso to clause (d) till it was substituted vide Notification No. 22 dated 07.01.2010. 27. .....

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hat, even in respect of packing materials, it will be available as per the provisions of Section 6 having regard to the words "beyond the CST rate effective from 1st April, 2008". "Beyond the CST rate effective from 1st April, 2008" is relevant and discernible only with reference to the proviso. There is no such restriction in Section 6(3)(d). But, we should also notice that, in the very same Circular, it is also provided in clause (11) as follows: "11. After the purchas .....

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rue that it may give an impression that ITC is available even in respect of packing materials in regard to stock transferred goods. To our minds, the provision of Section 6(3)(d) and the cognate provisions contained in the proviso thereto, leave us in no doubt that the Legislature never intended to give the benefit of ITC in regard packing materials' in connection with stock transfer of finished products. As we have noted, the Circular also cannot be clearly understood in the manner as it is .....

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hradun : 23rd January, 2013 All Deputy Commissioner, Commercial Tax, Uttarakhand All Assistant Commissioner, Commercial Tax & Commercial Tax Officer, Uttarakhand It came into cognizance that in the self manufactured goods sent out of the state through Stock transfer/consignment, with regard to province purchase of used packing material, the Tax Assessment Officers are giving tax benefit in the form of I.T.C on the payment made more than the rate of C.S.T. Since on the goods sent through stoc .....

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, with regard to the tax paid more than the prescribed rate the benefit of partial input will be applicable. From the above provision it is clear that:- 1. With regard to the packing material used in the manufactured goods under Stock Transfer/Consignment the provision of giving I.T.C benefit is not mentioned in first restriction part of above section 6(3). 2. The above restriction is only mentioned for raw materials on which according to the above mentioned section the trader shall be entitled .....

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enefit is given the trader. In addition to that in which cases the tax assessment is still to be taken, at the time of tax assessment the above points be taken into cognizance and according to direction the action be ensured. The most periodic statement was filed and in the aforesaid matter the packing material also 2% more benefit is given on stock transfer/consignment, its annual tax assessment/temporary tax assessment as the case may be, priority should be ensured. The above directions be str .....

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to the attainment of uniformity in classification of goods when the authorities themselves, on a conspectus of various entries, seek to guide the world by issuing Circulars indicating that a particular good would fall in a particular entry and the business world and those connected therewith, on scrupulously following the said Circulars, arrange their business affairs, it would be totally unfair to allow the interpretation to be supplanted at the hands of the officers, who are bound by such Circ .....

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ready been paid", as occurring in Condition (i) against Sl. No. 3, to include cases where nil rate of duty had been prescribed. No doubt, this was done on the basis of the decision of this Court in Usha Martin, (1997) 7 SCC 47. It is also true that the decision in Usha Martin was overruled by this Court in the decision of Dhiren Chemical Industries, (2002) 2 SCC 127. However, in para 9 of Dhiren Chemical Industries the Constitution Bench of this Court has made it clear that regardless of th .....

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e but only in 2002. For the period in question the circulars were operative. The appeals are, accordingly, dismissed albeit for reasons which are different from those expressed by the Tribunal. We make it clear that this decision will not operate to reopen any assessment order nor will any duty already paid become refundable by reason of this judgment. There will be no order as to costs." No doubt, this is a judgment rendered prior to the judgments in CCE vs. Ratan Melting & Wire Indust .....

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for fastening the revenue with binding force as regards the instructions issued, while constructing a notification which was not free from doubt, Learned judges in that decision have observed thus: (SCC p. 58, para 15) "15. One aspect deserves to be noticed in this context. The earlier tariff advice no. 83/81 on the basis of which trade notice No. 222/81 was issued by the Collector of Central Excise and Customs is binding on the department. It should be given effect to. There is no materia .....

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hich is in its favour should be given effect to. In the light of the above, it is unnecessary to adjudicate the other points involved in the appeal on the merits." (emphasis supplied)" 34. The Hon'ble Apex Court in Ranadey Micronutrients vs. Collector of Central Excise, reported in (1996) 10 SCC 387, has held as follows: "15. There can be no doubt whatsoever, in the circumstances, that the earlier and later circulars were issued by the Board under the provisions of Section 37- .....

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lead that it is not valid." 35. The Hon'ble Apex Court in the case of Paper Products Ltd. vs. Commissioner of Central Excise, reported in 1999 (112) ELT 765 (SC) has held as follows: "4. The question for our consideration in these appeals is: what is the true nature and effect of the Circulars issued by the Board in exercise of its power under Section 37-B of the Central Excise Act, 1944 ? This question is no more res integra in view of the various judgments of this Court. This Cou .....

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v. Usha Martin Industries (1997 7 SCC 47)]. In the case of Ranadey Micronutrients v. Collector of Central Excise (1996 (87) ELT 19), this Court held that the whole objective of such Circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. The Court also held that it does not lie in the mouth of the Revenue to repudiate a Circular issued by the Board on the basis that it is inconsistent with a statutory provis .....

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tor of Central Excise, Bombay v. Kores [India] Ltd. (1997 10 SCC 338)." 36. We may also notice that in State of Kerala & others vs. Kurian Abraham (P) Ltd. & another, reported in (2008) 3 SCC 582, the Court inter alia was dealing with the question arising out of a Circular issued by the Board of Revenue under Section 3 of the Kerala Sales Tax Act. The Hon'ble Apex Court inter alia held as follows: "23. Tax administration is a complex subject. It consists of several aspects. .....

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ty and collection of taxes. Policy decisions have to be taken by the Government. However, the Government has to work through its senior officers in the matter of difficulties which the business may face, particularly in matters of tax administration. That is where the role of the Board of Revenue comes into play. The said Board takes administrative decisions, which includes the authority to grant Administrative Reliefs. This is the underlying reason for empowering the Board to issue orders, inst .....

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nder the 1963 Act, as contended on behalf of the State, double taxation avoidance comes within the domain of the Board of Revenue. It was open to the Board to grant administrative relief vide Circular No. 16/98 if the Board in its expertise was of the opinion that treatment of field latex and centrifuged latex as separate and distinct items could result in double taxation. Therefore, the Board was entitled to give administrative relief to the business. In fact, what we have stated is borne out b .....

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to grant exemption is certainly with the State Government. The point to be noted is that such exemption was not there during the assessment years 1997-98 and 1998-99. Therefore, the Board consisting of senior officers were aware about the propensity of double taxation. In such circumstances, it was not open to the State to contend before the High Court that the said circular No. 16/98 was not legal." Therein, the Circular issued traced the history of the litigation, relating to taxation of .....

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on account of the view expressed in para 11 of Dhiren Chemical 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 c .....

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o the statutory provisions has really no existence in law." 30. In the present case, it is not the case of the revenue that circular dated 1st 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." 38. This is not a case of classification of goods, which itself is a complex issue and capable .....

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The further remaining question relates to the effect of Articles 301 and 304 of the Constitution of India. We have already referred to the case law. They all related to cases, where the State made attempts to practice hostile discrimination against the goods, which were manufactured or procured from outside its boundaries. In other words, the State concerned sought to put the goods manufactured or brought from outside the State at a disadvantage. We may refer to the judgment in the case of Firm .....

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adkar, J., at p. 860 : "Thus considered we think it would be reasonable and proper to hold that restrictions freedom from which is guaranteed by Art. 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Art. 301......... We arc therefore satisfied that in determining the limits of the .....

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he free movement or the transport of goods from one part of the country to the other that is intended to be saved, and if any Act imposes any direct restrictions on the very movement of such goods it attracts the provisions of Art. 301, and its validity can be sustained only if it satisfies the requirements of Art. 302 or Art. 304 of Part XIII." In the majority judgment in the Automobile Transport Case it was said at p. 1424 : "The interpretation which was accepted by the majority in t .....

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1. They are excluded from the purview of the provisions of Part XIII of the Constitution for the simple reason that they do not hamper trade, commerce and intercourse but rather facilitate them." Subba Rao J., concurred in this view and said at p. 1436: "(1) Art. 301 declares a right of free movement of trade without any obstructions by way of barriers, inter-State or, intrastate, or other impediments operating as such barriers. (2) The said freedom is not impeded, but, on the other ha .....

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tion here, cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities. Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free flow of trade and it will then offend against Art. 301 and will be valid only if it comes within the terms of Art. 304(a)." It is relevant to note paragraphs 15 & 16 also. They read as follows: "15. The fact that the impugned rule was made .....

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he State and those manufactured or produced in the State." 41. This was sought to be done by taxing the outside goods' at a higher rate, which objective was achieved by many devices. The tax was levied expressly on a discriminatory basis. Subtle innovations at discrimination found expression in the form of concessional rates for locally manufactured goods as against higher rates on goods imported from outside the State [see (1988) 2 SCC 568, Weston Electroniks & another vs. State of .....

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ch were brought from outside the State, at a disadvantage. In that, it became priced at a higher level in comparison to the goods internally produced. This was clearly anathema to the constitutional value of freedom of trade and commerce throughout the territory of India. Trade barriers in such forms discriminating between goods from outside have been frowned upon by the courts. 42. But, in this case, we do not see how the appellant can impugn the provisions contained in Section 6(3)(d) of the A .....

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at it would not include right to ITC on packing materials, the result would be that the manufacturer would procure raw materials from other States. Likewise, when the manufacturer, after stock transfer, sells the product in the teeth of competition which he would face on account of higher prices, which it would have to demand on account of denial of ITC, it would suffer. Mr. C.S. Lodha would, in fact, submit that the complaint of the State would appear to have been that, when packing material is .....

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ect of raw materials, when the finished goods are stock transferred though there is no inter-State sale and there could be a complaint of loss of revenue, the Legislature has adopted the practice of retaining the tax to the extent of the rate under the Central Sales Tax Act. He poses a question as to how the State could not have the same policy / practice in respect of packing materials. 43. We are not impressed at all by the said arguments. We would think that to allege lack of wisdom is beyond .....

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