2011 (4) TMI 1080 - SC - VAT and Sales Tax

Benefit of the sales tax deferral scheme - whether circulars issued by the Revenue are binding on the departmental authorities Held that - clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive, it is not the case of the Revenue that circular dated May 1, 2000 is in conflict with either any statutory provision or the deferral schemes announced under the aforementioned Government orders, circular is binding in law on the adjudicating authority under the TNGST Act, no merit in this appeal and the same is dismissed accordingly

Issues Involved:
1. Eligibility for sales tax deferral under the interest-free sales tax deferral scheme.
2. Interpretation of clauses 3(i) and 3(ii) of G.O. Ms. No. 119 dated April 13, 1994.
3. Compliance with base production volume (BPV) and base sales volume (BSV) conditions.
4. Binding nature of circulars issued by the Revenue authorities.

Detailed Analysis:

1. Eligibility for Sales Tax Deferral:
The core issue was whether the first respondent (a cement manufacturer) was entitled to the benefit of sales tax deferral under the interest-free sales tax deferral scheme introduced by the State of Tamil Nadu. The High Court had previously ruled in favor of the respondent, holding that they were entitled to the deferral benefit as claimed under G.O. Ms. No. 119 dated April 13, 1994.

2. Interpretation of Clauses 3(i) and 3(ii) of G.O. Ms. No. 119:
The interpretation of clauses 3(i) and 3(ii) was crucial. Clause 3(i) prescribes the qualification for availing of the sales tax deferral, while clause 3(ii) enables the expansion/diversified unit of the existing industry to avail of the benefit either from the date of achieving the BSV or BPV, whichever is earlier. The High Court interpreted these clauses to mean that the benefit would flow from the date of reaching either BPV or BSV, whichever is earlier, to ensure the object of the schemes is achieved without compromising state revenue.

3. Compliance with BPV and BSV Conditions:
The eligibility certificate issued to the first respondent stipulated that the company would be eligible for deferral of sales tax only on the increased volume of production/sale, with the base figure being the highest of the volume of production/sale in any one of the last three years. The Assistant Commissioner of Commercial Taxes argued that both BPV and BSV had to be reached before claiming the deferral. However, the High Court ruled that achieving either BPV or BSV earlier in the financial year would suffice for availing the deferral benefit.

4. Binding Nature of Circulars Issued by Revenue Authorities:
The High Court's decision was also influenced by a circular dated May 1, 2000, issued by the Principal Commissioner and Commissioner of Commercial Taxes, which clarified that the benefit of the sales tax deferral scheme would be available from the date of reaching BPV or BSV, whichever is earlier. The Supreme Court upheld that circulars issued by the Revenue are binding on the departmental authorities and cannot be repudiated even if they mitigate the rigour of the law. This principle was supported by precedents such as Paper Products Ltd. v. Commissioner of Central Excise and Collector of Central Excise, Vadodara v. Dhiren Chemical Industries.

Conclusion:
The Supreme Court dismissed the appeal by the State of Tamil Nadu, affirming the High Court's decision that the first respondent was entitled to the sales tax deferral benefit from the date of achieving either BPV or BSV, whichever is earlier. The Court emphasized that the interpretation of the clauses should align with the scheme's objective to increase productivity without compromising state revenue. The binding nature of the circular dated May 1, 2000, was also upheld, reinforcing the principle that departmental authorities must adhere to such circulars.

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