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TMI Blog2022 (12) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... e 226 of the Constitution of India. 2. Sri. V. Raghuraman, the learned senior counsel appearing for the petitioner on the instructions of Adv. K.S. Bharathan would contend that the question as to whether the petitioner is liable to pay GST on notice pay received from erstwhile employees has been considered by the Central Board of Indirect Taxes and Customs vide Circular bearing No.178/10/2022-GST dated 3.8.2022 where in paragraphs 7.5, it has been clearly stipulated as follows:- "Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period. 7.5 An employer carries out an elaborate selection process and incurs expenditure in recurring an employee, invests in his training and makes him a part of the organization, privy to its processes and business secrets in the expectation that the recruited employee would work for the organization for a certain minimum period. Premature leaving of the employment results in disruption of work and an undesirable situation. The provisions for forfeiture of salary or recovery of bond amount in the event of the employee leaving the employment before the minimum agreed period ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from the date of the constitution of the tribunal. It is contended that Ext.P1 order, which is impugned in the present writ petition, is an order upholding the decision of the original authority to reject the claim for refund and therefore, the petitioner can very well wait for the constitution of the appellate tribunal for adjudication of its grievances, as there is no demand against the petitioner. It is submitted that the question as to whether the provisions of Ext.P8 Circular will apply retrospectively is a matter to be considered and decided by the Tribunal, having regard to the facts of the case and terms of the Circular, and it is not open to the petitioner to now contend before this Court, in a writ petition under Article 226 of the Constitution of India, that the benefits of the Circular should be extended to the petitioner. It is pointed out that the Circular was issued only about 2 ½ months after the issuance of Ext.P1 order, and therefore, the issuance of a Circular does not advance the case of the petitioner in any manner. 5. Having heard the learned senior counsel appearing for the petitioner and the learned standing counsel appearing for the respondent Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with each other, is sought to be avoided or reduced by an understatement of the consideration paid for the transfer of the asset." The circular also drew the attention of the Income Tax Authorities to the assurance given by the Finance Minister in his speech that sub-section (2) was not aimed at perfectly honest and bona fide transactions where the consideration in respect of the transfer was correctly disclosed or declared by the assessee, but was intended to deal only with cases where the consideration for the transfer was understated by the assessee and was shown at a lesser figure than that actually received by him. It appears that despite this circular, the Income Tax Authorities in several cases levied tax by invoking the provision in sub-section (2) even in cases where the transaction was perfectly, honest and bona fide and there was no understatement of the consideration. This was quite contrary to the instructions issued in the circular which was binding on the Tax Department and the Central Board of Direct Taxes was, therefore, construed to issue another circular on 14th January, 1974 whereby the Central Board, after reiterating the assurance given by the Finance Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it." and this statement of the rule was quoted with approval by this Court in Deshbandhu Gupta and Co. v. Delhi Stock Exchange Association Ltd., (1979 (4)SCC 565 : AIR 1979 SC 1049). It is clear from these two circulars that the Central Board of Direct Taxes, which is the highest authority entrusted with the execution of the provisions of the Act, understood sub-section (2) as limited to cases where the consideration for the transfer has been understated by the assessee and this must be regarded as a strong circumstance supporting the construction which we are placing on, that sub-section. 12. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the companies they would not be taken into account under S.12 (1B)," S.2(6A)(e) and 12(1B) did not suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines' case (AIR 1972 SC 524) (supra) where referring to another circular issued by the Central Board of Revenue under S.5(8) of the I.T. Act 1922 on which reliance was placed on behalf of the assessee, this Court observed (at p. 528): "Now, coming to the question as to the effect of instructions issued under S.5(8)of the Act, this Court observed in Navnit Lal C. Jhaveri v. K. K. Sen, Appellate Assistant Commissioner, Bombay; "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under S.5 (8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision." The directions given in that circular clearly deviated from the provisions of the Act, yet th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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