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TMI Blog1990 (7) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Government in G.O. (R) No. 60/86 TD dated 19th April, 1986, came to the conclusion that tarpaulin will come under entry 100 of the First Schedule to the Kerala General Sales Tax Act and it is taxable at 10 per cent with effect from 16th September, 1980. He accordingly passed an order directing the assessing authority to revise assessment. In compliance with the order of the Deputy Commissioner dated 2nd November, 1987, the assessing authority revised the assessment for the year 1982-83 by order dated 22nd January, 1988. He subjected the turnover regarding tarpaulin to taxation at 10 per cent and raised an additional demand for Rs. 35,503 towards sales tax and Rs. 2,552 towards surcharge. The assessee, revision-petitioner, filed an appeal against the revised assessment order dated 22nd January, 1988, and the same is pending before the Deputy Commissioner (Appeals) as S.T.A. No. 204 of 1988. The revision-petitioner also filed an appeal before the Sales Tax Appellate Tribunal against the order of the Deputy Commissioner, dated 2nd November, 1987. The Tribunal refused to interfere with the Deputy Commissioner's order on the ground that the Tribunal being a creature of the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous authorities under the Act, as well as the general public. Unless the clarification is challenged separately in appropriate proceedings, it cannot be challenged in this revision. 4.. On the basis of the facts of this case, and in view of the various contentions raised by both the parties, the three crucial questions that arise for consideration in this revision are: (1) What is the scope of the power of the Government under section 59-A of the Act? How is that power to be exercised? (2) Whether quasi-judicial authorities including the Sales Tax Appellate Tribunal functioning under the statute, Kerala General Sales Tax Act, are bound by the clarifications issued by the Government under section 59-A. (3) Whether, in exercise of its power under section 59-A, the Government is entitled to give retrospective effect, especially so as to increase the tax burden of, or adversely affect an assessee. 5.. Point Nos. (1). to (3): As can be seen from the reading of the Act, section 59-A was introduced in the Kerala General Sales Tax Act by section 21 of Act 21 of 1978, which came into force on 1st April, 1978. During the course of arguments, it has been submitted by learned advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he section under which the State Government has the power to remove difficulties. The section contemplates that if any difficulty arises in giving effect to the provisions of this Act, the Government may by order do anything which appears to them necessary for the purpose of removing the difficulty. Under sub-section (2) of section 60 orders made under section 60(1) should be laid before the Legislative Assembly. 7. Section 59-A which comes in between sections 58 and section 60 has to be understood in the context in which it is placed in the statute. Section 59-A reads as follows: "59A. Power of Government to determine rate of tax.-If any question arises as to the rate of tax leviable under this Act on the sale or purchase of any goods, such question shall be referred to the Government for decision and the decision of the Government thereon shall, notwithstanding any other provision in this Act, be final." It is interesting to see that the sub-title to the section reads as "Power of Government to determine rate of tax". The section nowhere states that the Government is entitled, or authorised, to issue clarifications. When any question arises as to the rate of tax leviable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rule is that if a law is vague or appears to be so, the Court must try to construe it, as far as may be, and language permitting, the construction sought to be placed on it, must be in accordance with the intention of the Legislature. Thus if the law is open to diverse construction, that construction which accords best with the intention of the Legislature and advances the purpose of legislation, is to be preferred. Where, however, the law admits of no such construction and the persons applying it are in a boundless sea of uncertainty, and the law prima facie takes away a guaranteed freedom, the law must be held to offend the Constitution as was done in the case of the Goonda Act. This is not application of the doctrine of due process. The invalidity arises from the probability of the misuse of the law to the detriment of the individual. If possible, the Court instead of striking down the law may itself draw the line of demarcation where possible but this effort should be sparingly made and only in the clearest of cases." 9.. The court should always prefer the construction which will lead to the position that the Legislature is presumed not to have intended to exceed the limits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en once it is mooted? If one party moots it, and the other party is not willing to have it referred to Government for decision, what should be done? (e) While exercising powers under section 59-A, does the Government act administratively or quasi-judicially? (f) What is the scope and content of the determination or decision under section 59-A? (g) Who are all persons who are bound by such decision? (h) Is the decision binding for all time to come? Is it binding on all persons who are similarly situated, though the reference was not at their instance, nor were they heard? 12.. These are all vital aspects which are germane to our enquiry, but the statute is not clear or definite on these vital aspects. This Court has to understand the section in a meaningful and practical way consistent with the guaranteed rights and normal norms of interpretation. 13.. We shall now consider the important words or limbs of the section, in the light of the abovementioned facts and principles. We find that the key words or the important words in the section are the following: 1.. "any question arises" 2. "referred" 3. "for decision" 4. "the decision of the Government thereon shall, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the Kerala General Sales Tax Act only. 16.. As the decision is being rendered in relation to an assessment, it is axiomatic that the decision of the Government is binding and conclusive only for the particular assessment year. Each year is an independent unit under the sales tax law and the findings and conclusions arrived at in proceedings for one year are not binding or conclusive for any other assessment year. It should be remembered that the principles of res judicata are inapplicable in taxation matters. When a question is decided or adjudicated between parties, and if the identical question arises for consideration in a subsequent assessment year, the findings arrived at in the earlier year will be cogent and relevant material, which will be taken into consideration for deciding the matter for the subsequent year. It is also open to the parties to displace the findings of the previous year by placing reliance on new aspects or by adducing new material. This proposition is well-established by numerous decisions. Annamalai Reddiar v. Commissioner of Income-tax [1964] 53 ITR 601 (Ker), clearly lays down that the assessment in each year is a separate proceeding under the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 2490 observed as follows: "................the benefit of such a circular has to be extended to an assessee even though there is a decision of the High Court of the same State to the contrary tendered without noticing the contents of such circular (see Pankaj Oil Mills v. Commissioner of Income-tax [1978] 115 ITR 824 (Guj) [FB]." At page 2487, the authors point out that: "Section 119(1) provides in unmistakable terms, that every officer and person employed in the execution of the Act shall observe and follow the orders, instructions and directions of the Board. Circulars issued by the Board are generally binding on officers and persons employed in the execution of the Act (see Navnitlal C. Javeri v. K.K Sen [1965] 56 ITR 198 (SC)." 18.. In a recent decision in Keshavji Ravji and Co. v. Commissioner of Income-tax [1990] 183 ITR 1 (SC); [1990] 2 SCC 231, the Supreme Court observed in paragraphs 31 and 32 (page 17 of ITR) that circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have universal application. If the Government feels that if any decision taken by it, while exercising powers under section 59-A, requires either a change in the Rules or an amendment of the Act or amendment of the Schedules, then it can take appropriate action relying upon section 57 which authorises the Government to make rules and section 58 which gives power to amend the Schedules, subject to certain limitations, and the, Government can also initiate action to amend the law, if it is so required. Under any circumstances, the State Government cannot take unilateral decisions which are to be deemed as applicable universally and that they would be operative notwithstanding the provisions to the contrary in the Act. We are of the view that the power exercised under section 59-A is something analogous to the statutory adjudication by the Government, in addition to the various authorities, who are competent under the Act to decide the matters quasi-judicially. This power of statutory adjudication has to be done conforming to the normal principles of quasi-judicial adjudication. We also make it clear that this power under section 59-A is confined to deciding questions as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) No. 70/74/TD dated 1st June, 1974. During the period from 1st June, 1974 to 31st March, 1984, tarpaulins are liable for sales tax as unclassified general items and they are liable to tax at 4 per cent. By virtue of the amendment of the First Schedule and by introduction of entry 100C with effect from 1st April, 1984, and by virtue of the amendment made by the Kerala Finance Act, tarpaulin is liable for sales tax at 8 per cent. At no point of time, are tarpaulins exigible to sales tax at 10 per cent under entry 100 of the First Schedule. That entry only deals with "bonded fibre fabrics other than those made out of coir". It is not liable for taxation at the rate of 10 per cent. In the present case, the assessing authority was dealing with an assessment for the year 1982-83. Hence the original assessment made by the assessing authority on 28th January, 1984, is perfectly correct. The Deputy Commissioner, acting under section 35 committed a mistake in relying upon a clarification issued by the Government in G.O. (P) No. 60/86/TD dated 19th April, 1986, and directing the assessing officer to revise the assessment taxing the turnover relating to tarpaulins under entry 100 with the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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