TMI Blog2022 (12) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... ARGHESE VERSUS INCOME-TAX OFFICER, ERNAKULAM, AND ANOTHER [ 1981 (9) TMI 1 - SUPREME COURT] are binding precedents for the proposition that Circulars in the nature of Ext.P8 are binding on the Department and no officer can take a view contrary to stipulations contained in such Circulars. The fact that the Circular was issued only after the issuance of Ext.P1 order of the first appellate authority is no reason to hold that the petitioner is not entitled to the benefits of the Circular. The contention raised by the learned counsel for the respondent Department that the petitioner has an effective alternative remedy before the GST Appellate Tribunal does not appeal to this Court for the simple reason that the GST Appellate Tribunal is yet to be constituted. The fact that the period of limitation will start to run only from the date of the constitution of the Appellate Tribunal is no solace to the petitioner. The petitioner is, therefore, entitled to exercise the jurisdiction of this Court under Article 226 of the Constitution of India to challenge the orders impugned in this writ petition. Petition allowed. - WP(C) NO. 27373 OF 2022 - - - Dated:- 7-12-2022 - HONOURABLE M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees from taking up employment and to discourage and deter such a situation. Further, the employee does not get anything in return from the employer against payment of such amounts. Therefore, such amounts recovered by the employer are not taxable as consideration for the service of agreeing to tolerate an act or a situation. It is submitted that with the issuance of the aforesaid Circular, it is now clear that the petitioner is clearly not required to pay any GST on notice pay received from employees. It is submitted that though the Circular (Ext.P8) was issued only on 3.8.2022, the said Circular should be treated as applying to all past transactions as well, as it is settled law that the beneficial Circular must be applied retrospectively. Reference is made in this regard relying on the judgment of the Supreme Court in Suchitra Components Ltd. v. Commissioner of Central Excise; (2006) 12 SCC 452. The learned senior counsel also referred to the judgments in Navnit Lal C. Javeri v. K.K. Sen ; 1965 (56) ITR 198, K.P. Varghese v. Income Tax Officer,Ernakulam and another; (1981) 4 SCC 173, Madhu Silica Pvt. Ltd v. Commissioner of Income Tax and another; (1997) 227 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of money received by the petitioner as notice pay from erstwhile employees is not a taxable transaction for the purposes of the GST laws. As rightly contended by the learned senior counsel, the decisions of the Supreme Court in Navnit Lal (supra) which was applied and followed in K.P. Varghese (supra) are binding precedents for the proposition that Circulars in the nature of Ext.P8 are binding on the Department and no officer can take a view contrary to stipulations contained in such Circulars. The Supreme Court in K.P. Varghese (supra) held as follows:- 11. There is also one other circumstance which strongly reinforces the view we are taking in regard to the construction of sub-section (2). Soon after the introduction of sub-section (2), the Central Board of Direct Taxes, in exercise of the power conferred under S.119 of the Act, issued a circular dated 7th July,1964 explaining the scope and object of subsection (2) in the following words : S.13 of the Finance Act has introduced a new sub-section (2) in S.52 of the Income Tax Act with a view to countering evasion of tax on capital gains through the device of an understatement of the full value of the considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvited to the decision of the Supreme Court in Navnit Lal C. Jhaveri v. K. K. Sen (1965 (56) ITR 198 : AIR 1965 SC 1375) and Ellerman Lines Ltd. v. Commr. of Income Tax, West Bengal (1971 (82) ITR 913 :AIR 1972 SC 524) wherein it was held that the circular issued by the Board would be binding on all officers and persons employed in the execution of the Income Tax Act. Thus the Income Tax officers are bound to follow the instructions issued by the Board. and instructed the Income Tax officers that while completing the assessments they should keep in mind the assurance given by the Minister of Finance and the provisions of S.52(2) of the Income Tax Act may not be invoked in cases of bona fide transactions . These two circulars of the Central Board of Direct Taxes are, as we shall presently point out, binding on the Tax Department in administering or executing the provision enacted in sub-section (2), but quite apart from their binding character, they are clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of sub-section (2). The rule of construction by reference to contemporanea expositio is a well established rule for int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ITR 913 : AIR 1972 SC 524) that circulars issued by the Central Board of Direct Taxes under S.119 of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provision of the Act. The question which arose in Navnitlal C. Jhaveri's case (supra) was in regard to the constitutional validity of S.2(6A) (e) and 12(1B) which were introduced in the Indian Income Tax Act 1922 by the Finance Act 1955 with effect from 1st April, 1955. These two sections provided that any payment made by a closely held company to its shareholder by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under the Act and this would include any loan or advance made in any previous year relevant to any assessment year prior to the assessment year 1955-56, if such loan or advance remained outstanding on the first day of the previous year relevant to the assessment year 1955-56. The constitutional validity of these two sections was assailed on the ground that they imposed unreasonable restrictions on the fundamental right of the assessee under Art.19(1)(f) and (g) of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue in the administration or implementation of sub-section (2) and this sub-section must be read as applicable only to cases where there is understatement of the consideration in respect of the transfer. The fact that the Circular was issued only after the issuance of Ext.P1 order of the first appellate authority is no reason to hold that the petitioner is not entitled to the benefits of the Circular. I am inclined to hold so since the Circular only clarifies the existing law. In that view of the matter, the question as to whether the Circular has any retrospective effect need not be considered. Even otherwise, in the light of the law laid down in Suchitra Components Ltd (supra), the provisions of a Circular in the nature of Ext.P8 will have to be deemed to apply retrospectively. 6. The contention raised by the learned counsel for the respondent Department that the petitioner has an effective alternative remedy before the GST Appellate Tribunal does not appeal to this Court for the simple reason that the GST Appellate Tribunal is yet to be constituted. The fact that the period of limitation will start to run only from the date of the constitution of the Appellate Trib ..... 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