2003 (12) TMI 595 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the circular dated May 28, 1998, clarifying that "field latex and centrifuged latex are one and the same commodity," is binding on the Revenue.
2. Whether the assessments for the years 1997-98 and 1998-99 were correctly reopened.
3. The legality and binding nature of the circular issued by the Board of Revenue.
4. The interpretation of taxing statutes and entries therein.

Issue-wise Detailed Analysis:

1. Binding Nature of the Circular:
The primary question was whether the circular dated May 28, 1998, issued by the Department of Revenue (Taxes), which clarified that "field latex and centrifuged latex are one and the same commodity," is binding on the Revenue. The court observed that the circular was issued by the Board of Revenue in exercise of its power under section 3(1A) of the Kerala General Sales Tax Act, 1963. This power allows the Board to issue orders, instructions, and directions for the proper administration of the Act. The court held that the circular is binding on the authorities and cannot be disregarded by the Revenue.

2. Reopening of Assessments:
The assessments for the years 1997-98 and 1998-99 were reopened following the decision in Supersonic Industrial Complex v. Deputy Commissioner of Sales Tax (Law), Ernakulam, where it was held that raw rubber latex and centrifuged latex are different commodities. The petitioner argued that the circular of May 28, 1998, was still in force and binding on the department, making the reopening of assessments incorrect. The court agreed with the petitioner, stating that the circular was binding and that the authorities had no jurisdiction to act in contravention of it.

3. Legality and Binding Nature of the Circular:
The respondents contended that the circular was not legal and that the Board of Revenue did not have the power to grant exemptions, which is vested in the State Government under section 10. The court rejected this contention, stating that the circular was within the jurisdiction of the Board under section 3(1A) and was intended to provide uniform guidelines to all authorities in the department. The court emphasized that circulars issued by the Board are binding on the subordinate authorities, citing precedents from the Supreme Court, including Collector of Central Excise, Patna v. Usha Martin Industries and Collector of Central Excise v. Dhiren Chemical Industries.

4. Interpretation of Taxing Statutes:
The court reiterated that the provisions of a taxing statute must be construed strictly, and a person cannot be taxed unless the provision clearly provides for it. The court noted that entry 110 in the First Schedule to the Act, which includes various forms of rubber, uses the expression "that is to say," implying that all items enumerated are to be treated as rubber. The court held that latex and centrifuged latex, being part of the same genus "rubber," should not be treated as different commodities for tax purposes. The court also highlighted that even if two views are possible, the benefit should be given to the assessee.

Conclusion:
The court concluded that the circular dated May 28, 1998, is still in force and binding on the Revenue. It is not illegal or contrary to the provisions of the Act. The decision in Supersonic's case does not embody the correct enunciation of law. The impugned orders reopening the assessments were set aside, and the writ petitions were allowed. The parties were left to bear their own costs.