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TMI Blog2008 (2) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... rubber is sold by the assessee either locally in Kerala or inter-State. 2. In respect of its sales turnover, the respondent is an assessee under the Kerala General Sales Tax Act, 1963 ("1963 Act") as well as under the Central Sales Tax Act, 1956 ("1956 Act"). 3. For the assessment year 1997-98, with respect to centrifuged latex sold locally, the assessee furnished Form No. 25 declaration from the concerned buyers, and claimed exemption from payment of tax on the purchase turn-over of field latex (raw rubber). With respect to inter-State sale of centrifuged latex, the assessee paid the tax under the 1963 Act on the purchase of field latex and claimed exemption in respect of Central sales tax ("CST") under Notification S. R. O. No. 1731/93 read with S. R. O. No. 215/97. The returns filed by the assessee were accepted by the Assessing Officer vide order dated May 14, 2001, under the 1963 Act and vide assessment order dated May 31, 2001, under the 1956 Act. Similar returns were filed by the assessee for 1998-99 onwards. 4. At this stage, it may be stated that the returns filed by the assessee were accepted by the Department on the basis of Circular No. 16/98 dated May 28, 1998 (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to sales tax on the sales turnover of centrifuged latex under entry 110(a)(ii) on the ground that the assessee had sold centrifuged latex brought from outside the State of Kerala. In other words, the assessee was sought to be reassessed both for purchase turnover of field latex and for sales turnover of centrifuged latex, both under the 1963 Act and under this stage, it may the 1956 Act. At be noted that, till today the said Circular No. 16/98 issued by the Board of Revenue has remained in force. It has not been withdrawn till today. 8. Aggrieved by the reopening of the assessments, the respondent-assessee herein moved the High Court under article 226 of the Constitution for quashing the orders of reassessment, inter alia, on the ground that they were contrary to the said Circular No. 16/98 issued by the Board of Revenue (Taxes). By the impugned judgment, the writ petition filed by the assessee stood allowed. Hence, these civil appeals are filed by the Department. 9. We quote section 3(1A) of the Kerala General Sales Tax Act, 1963, which reads as follows : "3. Sales tax authorities.-(1A) The Board of Revenue shall have superintendence over all officers and persons em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular No. 16/98 dated May 28, 1998, issued by the Board of Revenue reads as follows : "Circular No. 16/98 Dated : 28-5-1998 Sub : KGST Act 1963-Conversion of field latex into centrifuged latex-Impact of the decision of the honourable High Court in Padinjarekkara Agencies Ltd. v. Asst. Commissioner-clarification issued. A doubt has been raised as to the rate of tax and point of levy to be adopted in respect of centrifuged latex in view of the judgment of the Kerala High Court in Padinjarekkara Agencies Ltd. v. Asst. Commissioner [O. P. No. 2016 of 1987-M]. 2. In Padinjarekkara Agencies Ltd. v. Assistant Commissioner (Assessment), Kottayam (judgment dated July 24, 1995 in O. P. No. 2016/87/M) [1997] 5 KTR 26) the honourable High Court had held that a unit engaged in the processing of centrifuged latex is eligible for the concessional rate contemplated under section 5(7) of the KGST Act, as it stood at the relevant time in respect of the purchase of drum and is eligible to issue declaration in Form 18 as 'centrifuged latex' would come under the term 'finished product' used in section 5(7) of the KGST Act. In the original petition therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 was substituted as follows : '161. Rubber, that is to say : (a) raw rubber latex, dry rubber sheet of all R, M, A, grades, tree lace earth scrap, ammoniated latex, preserved latex concentrate, centrifuged latex, .and all other qualities and grades of latex except ran rubber latex, dry crape rubber, dry block rubber, crumb rubber, skimmed rubber ; and, at the point of sale within the at the point of last purchase in the State by a dealer also is liable to tax under section 5 (b) reclaimed rubber, all grades and qualities. at the point of first sale within the State by a dealer, a dealer who is liable to tax under section 5.' So rubber latex and centrifuged latex are treated as one and the same commodity for the purpose of taxation. So with effect from April 1, 1988, the judgment in Padinjarekkara Agencies' case mentioned earlier (5 KTR 26) cannot have any application for deciding whether centrifuged latex is a commodity commercially different from latex, both being treated as a single commodity for the purpose of taxation. So with effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h industrial units will not therefore be eligible for exemption under S. R. O. No. 1003/91 and R. O. No. 1727/93 in respect of the S. purchase of field latex for conversion on centrifuged latex." 13. Notification S. R. O. No. 946/2007 dated November 13, 2007 reads as follows : "S. R. O. No. 946/2007.-In exercise of the powers conferred by section 10 of the Kerala General Sales Tax Act, 1963 (Act 15 of 1963), read with sub-section (5) of section 98 of the Kerala Value Added Tax Act, 2003 (30 of 2004), the Government of Kerala, having considered it necessary in the public interest so to do hereby, rescind the notification issued as per G. O. (P) No. 43/2005/TD, dated March 31, 2005 and published as S. R. O. No. 316/2005 in the Kerala Gazette, Extraordinary No. 676, dated March 31, 2005, and exempt manufacturers and subsequent sellers of centrifuged latex and crumb rubber from payment of tax payable under the Kerala General Sales Tax Act, 1963, on the sales or purchase turnover of centrifuged latex and crumb rubber on condition that purchase tax has been levied and collected on the purchase turnover of field latex, used for the manufacture of centrifuged latex and crumb rubber, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. According to learned counsel, by equating field latex with centrifuged latex, the former escapes duty. According to learned counsel, the power to grant exemption from payment of duty was not conferred on the Board. The power to grant exemption was a matter of policy. It was for the State to grant or not to grant such exemption. In the circumstances, it was urged that the power of the Board was executive in nature. According to learned counsel, section 3(1A) did not confer on the Board the power to issue orders/notifications which may partake of the character of legislative exercise. According to learned counsel, the said section did not empower the Board to encroach upon the domain reserved for the Government under the Act. Further, according to learned counsel, the Board had no power to construe/interpret entries or to lay down the scope and extent of each entry. According to learned counsel, the scope of section 3(1A) cannot be equated to section 37B of the Central Excise Act, 1944, as the words used in section 3(1A) are distinct and separate from the words used in section 37B of the Central Excise Act, learned counsel submitted that circulars such as the one herein do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undoubtedly, is a matter of policy. Interpretation of an entry is undoubtedly a quasi-judicial function under the tax laws. Imposition of taxes consists of liability, quantification of liability 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, instructions and directions to the officers under it. In the present case, we are not concerned with deciding the scope and extent of each item in entry 110. We are essentially concerned in this case with the nature of the powers exercised by the Board/Commissioners under section 3(1A). Take the case of centrifuged latex, it is a product made from field latex (raw rubber). Even for the sake of argument and even assuming that centrifuged latex and field latex are two different items of taxation under the 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it cannot be said that the Board had acted beyond its authority in issuing the said circular. One more reason needs to be stated. Whenever such binding circulars are issued by the Board granting administrative relief(s) business arranges its affairs relying on such circulars. Therefore, as long as the circular remains in force, it is not open to the subordinate officers to contend that the circular is erroneous and not binding on them. 20. In the case of Union of India v. Azadi Bachao Andolan reported in [2004] 10 SCC 11, a circular was issued by the CBDT under section 119 of the Income-tax Act, 1961. It was challenged, inter alia, on the ground that it was ultra vires the provisions of section 119(1). The argument was rejected by this court in the following words (page 32) : "47. It was contended successfully before the High Court that the circular is ultra vires the provisions of section 119. Sub-section (1) of section 119 is deliberately worded in a general manner so that CBDT is enabled to issue appropriate orders, instructions or directions to the subordinate authorities 'as it may deem fit for the proper administration of the Act'. As long as the circular emana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an approach is unsustainable in the eyes of law. If the State Government was of the view that such circulars are illegal or that they are ultra vires section 3(1A), which it is not, it was open to the State to nullify/withdraw the said circular under section 60 of the 1963 Act. Till today, the circular continues to remain in force. Till today, it has not been withdrawn. In the circumstances, it is not open to the officers administering the law working under the Board of Revenue to say that the said circular is not binding on them. If such a contention was to be accepted, it would lead to chaos and indiscipline in the administration of tax laws. 22. In the case of Steel Authority of India v. Collector of Customs reported in [2000] 115 ELT 42 (SC), a similar situation arose. It was submitted on behalf of the Revenue in that case that the trade notice had been issued only by Bombay Customs and, therefore, it was not binding on other customs. This argument was repelled by the Division Bench of this court by stating that the trade notice issued by one Customs House must bind all customs authorities and, if it is erroneous, it should be first withdrawn or amended. In the present case al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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