2005 (5) TMI 642 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exemption of sales to Canteen Stores Department under the Central Sales Tax Act.
2. Authority of circulars issued by the Commissioner of Trade Tax vs. statutory provisions.
3. Applicability of Section 22 of the U.P. Trade Tax Act for rectification of assessment orders.

Issue-wise Detailed Analysis:

1. Exemption of Sales to Canteen Stores Department:
The applicant sold products worth Rs. 82,88,645.36 to Canteen Stores/Military Canteens as inter-State sales and claimed exemption based on Notification No. 7037 dated 31st January 1985. The Assessing Authority initially denied the exemption due to the absence of requisite certificates. Upon appeal, the Appellate Authority remanded the case back to the Assessing Authority to verify the certificates, which were subsequently accepted, and exemption was granted. However, the Assessing Authority later issued a notice under Section 22 of the Act to levy tax, arguing that the exemption was conditional and not generally exempt under Section 8 (2-A) of the Central Sales Tax Act, referencing the Supreme Court decision in Commissioner of Sales Tax, Jammu and Kashmir v. Fine Chemicals Ltd.

2. Authority of Circulars Issued by the Commissioner of Trade Tax:
The applicant argued that, according to Circular No. 2-10-(1)-(97-98) dated 23rd July 1987, sales to Military Canteens/Canteen Stores Department were to be treated as generally exempt under Section 8 (2-A) of the Central Sales Tax Act. The applicant cited multiple Supreme Court decisions (Collector of Central Excise, Vadodra v. Dhiren Chemical Industries; Simplex Castings Ltd. v. Commissioner of Customs; Paper Products Ltd. v. Commissioner of Central Excise; Commissioner of Sales Tax, A.P. v. M/s. Indra Industries) to argue that circulars are binding on the Revenue Authority, even if contrary to statutory provisions.

3. Applicability of Section 22 of the U.P. Trade Tax Act:
The applicant contended that the assessment order could not be rectified under Section 22 of the Act as it was not a mistake apparent on the face of the record. The applicant argued that the exemption was granted based on the circular, which was binding on the Revenue Authority, and thus, the rectification under Section 22 was not justified. The Revenue Authority, however, maintained that the exemption was conditional and not generally exempt under the U.P. Trade Tax Act, and thus, the rectification was in accordance with the law.

Judgment:
The court held that the Assessing Authority could rectify the subsequent assessment order under Section 22 of the Act as it was a fresh independent order. However, the court agreed with the applicant that the circular issued by the Commissioner of Trade Tax, based on the Government's opinion, was binding on the Revenue Authority. The court referenced multiple Supreme Court decisions to affirm that circulars, even if contrary to statutory provisions, are binding on the Revenue Authority. Thus, the alleged mistake could not be considered a mistake apparent on the face of the record, and rectification under Section 22 was not justified. The revision was allowed, and the order of the Tribunal was set aside.