Karnataka High Court
Subhash Marketing vs Commissioner Of Commercial Taxes And ... on 17 November, 1999
Equivalent citations: [2000]118STC136(KAR)
JUDGMENT
1. Petitioner has been subjected to tax at 12 per cent under entry 4, Part E to the Second Schedule which pertains to electronic goods and parts and accessories thereof other than those falling under any other entry of this Schedule. Entry 10B of Part T is in respect of toys of all kinds including electronic and electrically operated toys which are liable to tax at 8 per cent. A request was made by the petitioner to the Commissioner of Commercial Taxes to clarify the rate of tax. The Commissioner vide letter dated March 25, 1994 (annexure B) clarified that the rate of tax on Samurai TV games is 8 per cent at first sale point. The dispute in the present matter is for assessment year 1995-1996. According to the assessing authority TV game is an electronic item falling under entry 4 of Part E to Second Schedule and liable to tax at 12 per cent. The assessee submitted monthly return in form 3 and paid the tax at 6 per cent. The annual return was also submitted wherein the tax at TV games was shown at 6 per cent. There was an inspection by the intelligence wing on July 8, 1996. In response to the notice issued reply was submitted by the assessee wherein placing reliance on the circular of the Commissioner he has paid the difference of 2 per cent of tax which was not paid along with the return. According to the submission of the learned counsel for the assessee, the circular issued in favour of the assessee cannot be ignored. It is submitted that in the case of Sree Jagadish Colour Company v. Commissioner of Commercial Taxes, Karnataka . The dispute was with regard to the clarifications which have been issued against the assessee. So far as the clarification in favour of the assessee are concerned it is submitted that the matter stand concluded by the decisions of the apex Court in UCO Bank v. Commissioner of Income-tax [1999] 237 ITR 889, K.P. Varghese v. Income-tax Officer, Ernakulam [1981] 131 ITR 597, Collector of Central Excise, Patna v. Usha Martin Industries [1998] 111 STC 254 and number of other cases.
2. On behalf of the respondent it is stated that the assessee has not acted on the clarification since he has declared the tax liability at the rate of 6 per cent. Learned counsel for the petitioner submitted that the tax was collected at the rate of 6 per cent and it was the clerical mistake that the calculation was made at the rate of 6 per cent and it was so paid to the department. However immediately when this fact came to the notice of the assessee on the notice being issued by the intelligence wing, the difference of 2 per cent tax was paid.
3. Argument of both the learned counsel for the parties heard.
4. In Collector of Central Excise, Patna v. Usha Martin Industries it was observed by the apex Court as under :
"21. Through a catena of decisions this Court has pronounced that Revenue cannot be permitted to take a stand contrary to the instructions issued by the Board. It is a different matter that an assessee can contest the validity or legality of a departmental instruction. But that right cannot be conceded to the department, more so when others have acted according to such instructions [vide Collector of Central Excise, Bombay v. Jayant Dalai Private Ltd. , Ranadey Micronutrients v. Collector of Central Excise , Poulose and Mathen v. Collector of Central Excise , British Machinery Supplies Co. v. Union of India ]. Of course the appellate authority is also not bound by the interpretation given by the Board but the assessing officer cannot take a view contrary to the Board's interpretation."
5. In UCO Bank v. Commissioner of Income-tax it was considered that the circular is in the nature of concession and could always be prospectively withdrawn. Referring to the various decisions of the apex Court it was observed as under :
"The benefit of such circulars is admissible to the assessee even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. This Court, however, clarified that the Board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the Act. Also a circular cannot impose on the taxpayer a burden higher than what the Act itself, on a true interpretation, envisages. The task of interpretation of the laws is the exclusive domain of the courts. However, the Board has the statutory power Under Section 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute and such circulars would be binding on the authorities administering the Act."
6. The contention of the learned Government Advocate that all the circulars have been withdrawn on February 26, 1997 cannot help the department because in view of the law laid down by the apex Court the beneficial circulars can be withdrawn only prospectively. It may be possible that before the withdrawal of the circular benefit may have been given to number of other assessees. Therefore, it is for the consistency in the administration of law also that the benefit of the circular has to be given to all the assessees uniformly till the said circular is withdrawn. Under Section 3-A(1) of the Karnataka Sales Tax Act, 1957, State Government and Commissioner may from time to time issue such orders, instructions and directions to all officers and persons employed in the execution of this Act as they may deem fit for the administration of this Act, and all such officers and persons shall observe and follow such orders, instructions and directions of the State Government and the Commissioner. Under Section 3-A(2) power has been given for clarification regarding rate of tax.
7. Contemporanea expositio theory is made applicable to the circulars by the apex Court. It was observed that the circulars are useful for interpretation of the laws and are considered binding on the tax authorities.
The Supreme Court in Malwa Bus Service (Pvt.) Ltd. v. State of Punjab held that Legislature in order to tax some, need not tax all. It can adopt reasonable classification of persons and things in imposing tax liability. A circular cannot bring about inequities amongst subjects or things. In this connection, it would be relevant to judicially note the observations in Middleton v. Texas Power and Light Company (1918) 249 US 152 where the US Supreme Court held that it be presumed that the legislator understands and appreciates the need of its people that its laws are directed to problems made manifest by experience and its discretion based upon adequate grounds.
8. The observations made in the case of Sree Jagadish Colour Company referred to above can only be applicable in a case where the circular is against the assessee, but if the circular is in favour of the assessee then those instructions have to be followed in terms of Section 3-A(1).
9. In the light of the observations made above, it is held that the petitioner is liable to tax at 8 per cent as clarified by the Commissioner. The assessing authority shall recompute the tax accordingly.
10. Petition stands disposed of.