2002 (4) TMI 926 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and validity of the circular issued by the Commissioner of Sales Tax dated March 8, 2000.
2. Classification of masterbatches as plastic raw material or unspecified goods.
3. Authority of the Commissioner of Sales Tax to issue circulars affecting judicial powers of quasi-judicial officers.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Circular:
The core issue was the legality and validity of a circular issued by the Commissioner of Sales Tax on March 8, 2000. The petitioner argued that the circular, which reclassified masterbatches from plastic raw material to unspecified goods taxable at 8%, was ultra vires. The court held that the Commissioner of Sales Tax does not have the power to issue such circulars that interfere with the judicial functions of assessing officers. The judgment emphasized that administrative circulars cannot impede the judicial discretion of tax authorities. The court referenced the case of Sita Juneja & Associates, stating that such circulars are without jurisdiction if they interfere with judicial powers.

2. Classification of Masterbatches:
The petitioner contended that masterbatches, used as a colouring agent in the plastic industry, should be classified as plastic raw material, subject to a 3% tax as per the notification dated April 1, 1998. The Commissioner's circular, however, reclassified masterbatches as unspecified goods taxable at 8%. The court noted that the classification of an item is a matter for the assessing authority to decide, and such decisions should not be influenced by administrative circulars. The court held that the Commissioner's circular, which directed assessing officers to reclassify masterbatches, was beyond his jurisdiction.

3. Authority of the Commissioner of Sales Tax to Issue Circulars:
The court examined whether the Commissioner of Sales Tax had the authority to issue the circular in question. It was established that unlike section 37B of the Central Excise and Salt Act, 1944 or section 119 of the Income-tax Act, 1961, the Delhi Sales Tax Act, 1975 does not empower the Commissioner to issue binding circulars. The court cited the Supreme Court's decision in Laxman Dundappa Dhamanekar, which held that administrative instructions cannot supplement statutory rules unless explicitly authorized by the statute. Consequently, the court declared the circular ultra vires the Delhi Sales Tax Act, 1975.

Conclusion:
The court concluded that the circular issued by the Commissioner of Sales Tax on March 8, 2000, was ultra vires and invalid. The re-assessment notice issued pursuant to the circular was also deemed without authority and set aside. The writ petition was allowed, and the circular and subsequent actions based on it were nullified. The court reinforced the principle that administrative authorities cannot issue directives that interfere with the judicial functions of assessing officers.