1990 (7) TMI 341 - HC - VAT and Sales Tax

Issues Involved:
1. Scope of the power of the Government under section 59-A of the Kerala General Sales Tax Act.
2. Whether quasi-judicial authorities, including the Sales Tax Appellate Tribunal, are bound by clarifications issued by the Government under section 59-A.
3. Whether the Government can give retrospective effect to its decisions under section 59-A, especially when it adversely affects an assessee.

Detailed Analysis:

Issue 1: Scope of the Power of the Government under Section 59-A
Section 59-A of the Kerala General Sales Tax Act was introduced by section 21 of Act 21 of 1978, effective from April 1, 1978. This section allows the Government to determine the rate of tax when any question arises regarding it. The Court emphasized that section 59-A does not confer the power to issue clarifications or executive instructions. Instead, it should be understood as a provision for statutory adjudication, implying that the Government must act in a quasi-judicial manner by hearing both parties involved in the dispute and making a decision based on the evidence presented.

The Court noted that section 59-A is placed between sections 58 and 60, which deal with the Government's power to amend schedules and remove difficulties, respectively. However, section 58 explicitly prohibits the Government from enhancing the rate of tax. Therefore, under section 59-A, the Government cannot issue clarifications that have the effect of increasing the tax rate or adversely affecting an assessee retrospectively.

Issue 2: Binding Nature of Government Clarifications on Quasi-Judicial Authorities
The Court held that quasi-judicial authorities, including the Sales Tax Appellate Tribunal, are not bound by clarifications issued by the Government under section 59-A. It is the responsibility of these authorities to interpret the statutory provisions independently. The Tribunal's observation that it was bound by the Government's clarification was incorrect. The Tribunal, being a quasi-judicial body, must decide issues based on the Act and the Rules, not on executive instructions or clarifications issued by the Government.

Issue 3: Retrospective Effect of Government Decisions under Section 59-A
The Court ruled that the Government is not empowered to give retrospective effect to its decisions under section 59-A. Any decision made by the Government under this section can only have prospective operation. Retrospective application, especially when it increases the tax burden or adversely affects an assessee, is not permissible. The Court emphasized that each assessment year is an independent unit, and findings from one year are not binding for another year.

Application to the Present Case:
The assessment year in question is 1982-83. The assessee, a dealer in allopathic drugs and tarpaulin, treated tarpaulin as an unclassified item taxable at 4%. The Deputy Commissioner, relying on a Government clarification issued in 1986, revised the assessment to tax tarpaulin at 10% under entry 100 of the First Schedule, which led to an additional tax demand. The Sales Tax Appellate Tribunal upheld this revision, stating it was bound by the Government's clarification.

The Court found that tarpaulins were taxable at 4% as unclassified items during the period from June 1, 1974, to March 31, 1984. The introduction of entry 100C in the First Schedule from April 1, 1984, which taxed tarpaulin at 8%, indicated that tarpaulins were not covered under entry 100. Therefore, the original assessment made on January 28, 1984, was correct, and the Deputy Commissioner erred in revising it based on the Government's clarification.

The Tribunal committed a significant error by abdicating its responsibility as a quasi-judicial authority and not examining the merits of the contentions raised by the assessee. The Court restored the original assessment order dated January 28, 1984, and directed the Deputy Commissioner to decide the pending appeal in light of this judgment.

Conclusion:
The revision petition was allowed, and the original assessment order was restored. The Tribunal's order was set aside, and the Deputy Commissioner was directed to reconsider the matter, adhering to the principles laid down in this judgment. The Court clarified that Government decisions under section 59-A are not binding on quasi-judicial authorities and cannot have retrospective effect.

← Previous Next →