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2016 (9) TMI 356 - HC - VAT and Sales TaxDeclared goods - roasted groundnuts - rate of tax - validity of 1979 circular and withdrawn on 2004 - Whether roasted groundnuts are declared goods under Section 14 (vi) (i) of the Central Sales Tax, 1956? - scope of the term that is to say - Held that - It is trite to note that in Gopuram 1994 (8) TMI 233 - SUPREME COURT OF INDIA , three learned Judges of the Supreme Court have noticed and held that the usage of the phrase that is to say indicates the intent of the legislature to make clear or fix the meaning of what is sought to be explained or defined. Their Lordships held that the phrase that is to say indicates an exhaustive enumeration and therefore consequently the benefit of Section 14 must be limited to the goods expressly mentioned therein. Therefore it would be safe to say that there is no authoritative pronouncement on the issue as to whether roasted groundnut would stand covered under clause (vi) (i) of section 14. The 1979 circular in unequivocal terms held out that roasted groundnuts would be liable to be considered as falling within the ambit of clause (vi) (i). The 2004 circular represented an authoritative yet paradigm shift from what was permitted to hold the field for decades namely, the 1979 circular. The 2004 circular, it may be noted, did not rest itself upon a declaration of the law that roasted groundnut would not be covered. The 1979 circular was issued by the Commissioner of Trade Tax U.P. who was duly empowered in terms of rule 4 of the U.P. Trade Tax Rules, 1948. This circular was clearly binding upon the other subordinate authorities working under and administering the 1948 Act. That then takes us to the issue of whether the 2004 circular had the effect of impacting transactions which had already been subjected to tax prior thereto. To this the answer must obviously be in the negative. The 2004 circular can be rightly described as an outcome of a revisit and a reconsideration of the vexed issue of taxability of roasted groundnut and whether it was liable to be treated as an unclassified item. However the moment one arrives at the conclusion that the 2004 circular was merely an outcome of an exercise of revisit and reconsideration and not an expression of opinion based upon an authoritative pronouncement of law by a competent court, it must be treated as having prospective operation. Prior to the promulgation of the 2004 circular the 1979 circular held the field and all transactions in roasted groundnuts as entered into by the assessee be subjected to tax in accordance therewith - Decided in favor of assessee.
Issues Involved:
1. Whether roasted groundnuts are declared goods under Section 14 (vi) (i) of the Central Sales Tax, 1956. 2. Whether groundnuts could be taxed as an unclassified commodity prior to 23.05.2004 in view of the circular dated 20.07.1979 issued by the Commissioner of Trade Tax, U.P Lucknow. Detailed Analysis: Issue 1: Taxability of Roasted Groundnuts under Section 14 (vi) (i) of the 1956 Act The primary issue revolves around whether roasted groundnuts fall under the entry "groundnut" as used in clause (vi) (i) of Section 14 of the Central Sales Tax Act, 1956. The 1979 Circular by the Commissioner, Trade Tax U.P., clarified that roasted groundnuts were to be treated as groundnuts under this clause. However, a subsequent 2004 Circular annulled this position based on the opinion of the Law Department, which relied on the Supreme Court judgment in *Gopuram Gram Mill Company vs. State of Andhra Pradesh* [1994 (95) STC 358]. The Law Department opined that roasted groundnuts do not fall under the specified entry "groundnut" in Section 14 (vi) (i). Issue 2: Validity and Retrospective Effect of the 2004 Circular The revisions pertain to Assessment Years 1998-99 and 1999-2000, with assessment orders passed before the issuance of the 2004 Circular. The 1979 Circular was in effect during these years, and the revisionist-assessee structured its business dealings based on this circular. The 2004 Circular, which annulled the 1979 Circular, cannot retroactively affect transactions that occurred before its issuance. Arguments by the Revisionist: - The 1979 Circular was valid until overridden in 2004, and thus, the assessee was entitled to its benefits. - The assessee's business dealings were structured based on the 1979 Circular, and the 2004 Circular cannot retroactively negate these benefits. - Tax liabilities passed on to purchasers during the relevant assessment years were based on the 1979 Circular, and no retrospective liability should be imposed. - The issue of whether roasted groundnuts fall under "groundnut" is contentious and open to debate, as indicated by the Supreme Court's decision in *Milak Brothers vs. Union of India* [1991 Supp (1) SCC 71]. Arguments by the Respondent: - The 2004 Circular annulled the 1979 Circular, implying the latter never existed. - Doubts about the taxability of roasted groundnuts existed even before the 2004 Circular. - The Supreme Court's judgment in *Gopuram* should be treated as declaratory, making the 1979 Circular invalid. - The Court should prioritize the Supreme Court's decision over the 1979 Circular. Court's Findings: 1. Interpretation of "Groundnut" in Section 14 (vi) (i): - The Supreme Court in *Gopuram* emphasized the phrase "that is to say" as indicating an exhaustive enumeration, limiting the benefit of Section 14 to expressly mentioned goods. - No authoritative pronouncement directly addresses whether roasted groundnuts fall under "groundnut" in Section 14 (vi) (i). The 1979 Circular unequivocally included roasted groundnuts under this entry, while the 2004 Circular represented a shift based on the Law Department's opinion. 2. Effect of Departmental Circulars: - Circulars issued under taxing statutes are binding on the department but not on courts or tribunals. They remain in effect until overridden by a judicial pronouncement. - The revisionist was justified in arranging its affairs according to the 1979 Circular, which was binding on subordinate authorities until the issuance of the 2004 Circular. - Transactions prior to 24 May 2004 should be governed by the 1979 Circular, and the 2004 Circular should not have retrospective effect. 3. Retrospective Application of the 2004 Circular: - The 2004 Circular represented a reconsideration of the taxability issue and should be treated as having prospective operation. - The 1979 Circular continued to hold the field for decades, and transactions based on it should not be retrospectively affected by the 2004 Circular. 4. Binding Nature of Circulars: - The Commissioner of Trade Tax U.P. does not have the authority to declare a circular as void or a nullity. Only a court can declare the law, and the 2004 Circular cannot retrospectively nullify the 1979 Circular. Conclusion: The Court held that the 1979 Circular was valid and binding until overridden by the 2004 Circular. Therefore, transactions involving roasted groundnuts prior to 24 May 2004 should be taxed according to the 1979 Circular. The 2004 Circular does not have retrospective effect, and the revisionist is entitled to the benefits of the 1979 Circular for the relevant assessment years.
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