Karnataka High Court
Binani Industries Limited vs Assistant Commissioner Of Commercial ... on 6 October, 2005
Equivalent citations: [2006]145STC24(KAR), 2005 AIR - KANT. H. C. R. 2922, (2005) 59 KANTLJ(TRIB) 637 (2006) 2 KCCR 708, (2006) 2 KCCR 708
Author: H.L. Dattu
Bench: H.L. Dattu, H.N. Nagamohan Das
JUDGMENT H.L. Dattu, J.
1. The appellants in these appeals are dealers registered under the provisions of the Karnataka Sales Tax Act, 1957 (hereinafter for the sake of brevity referred to as "the Act, 1957"). Apart from other business activities, they are also in the business of leasing machinery, equipment and motor vehicles. In the writ petitions filed, they had called in question the legality or otherwise of Section 5-C of the Act and the circular instructions issued by the Commissioner of Commercial Taxes No. 5 of 1996-1997 dated April 12, 1996 and the subsequent circular No. 31 of 1999-2000, dated October 23, 1999, clarifying the effect of Section 5-C of the Act and the consequential orders of assessments, proposition notices/show cause notices issued by the assessing authorities and the revisional authorities. Since common questions of law had been involved in all the writ petitions filed before the court, the learned single Judge had raised three primary issues for determination. They were :
I. Whether Section 5-C of the Act is unconstitutional and void on account of failure to obtain previous sanction of the President under Article 304(b) of the Constitution ?
II. If Section 5-C of the Act is valid, what is the true effect and whether it is correctly interpreted in the circular dated April 12, 1996 or in the circular dated October 23, 1999 ?
III. What is the effect of Commissioner's circular No. 5 of 1996-1997, dated April 12, 1996 and the subsequent circular No. 31 of 1999-2000, dated October 23, 1999 ?
2. The learned single Judge after an elaborate discussion of the issues framed, has granted partial reliefs to the petitioners by his order dated August 2, 2001*. The operative portion of the order is as under :
43, In view of the above, this petitions are allowed in part as follows :
(a) The validity of Section 5-C of the Karnataka Sales Tax Act, 1957 is upheld. Section 5-C does not however apply to deemed sales (leasing transactions) : (i) outside the State ; (ii) in the course of import or export ; and (iii) inter-State.
(b) It is declared that the Commissioner's circular No. 31 of 1999-2000, dated October 23, 1999 correctly interprets Section 5-C of the Karnataka Sales Tax Act (as it stood prior to April 1, 2000) and that the interpretation of Section 5-C in the earlier circular No. 5 of 1996-1997, dated April 12, 1996 is erroneous.
(c) The instructions in the Commissioner's circular dated April 12, 1996 will, however, be binding on the assessing authorities in regard to the assessment periods April 1, 1996 to March 31, 1997, April 1, 1997 to March 31, 1998, April 1, 1998 to March 31, 1999 and April 1, 1999 to March 31, 2000.
(d) As a consequence, the respondents shall do or redo the assessments as detailed below :
(i) In regard to period April 1, 1986 to March 31, 1996, if any assessments, reassessments, revisions, rectifications are pending and are not barred by limitation, they will have to be concluded with reference to Section 5-C as rightly interpreted in the circular dated October 23, 1999.
(ii) All assessments relating to the period April 1, 1996 to March 31, 2000, even pending, will be governed by the circular dated April 12, 1996.
(iii) As far as the assessment year April 1, 2000 to March 31, 2001 onwards, the circular dated October 23, 1999 will not apply in view of the insertion of the following proviso to Section 5-C with effect from April 1, 2000 : 'Provided that no tax shall be levied under this Section if the goods in respect of which the right to use is transferred, have been subjected to tax under Section 5'.
(e) The question whether a particular transaction amounts to transfer of right to use goods is left open to be decided by the authorities with reference to the facts and circumstances of the respective cases and this decision is restricted only to declaring the correct interpretation of Section 5-C and the effect of the two circulars dated April 12, 1996 and October 23, 1999.
(f) As the correctness of the orders of assessment/reassessment or revisional orders, is not examined in this order, it is open to such of the petitioners who are aggrieved by any order to file appeals before the appropriate authority as per law, and if such appeals are filed within 30 days from the date of receipt of this order, they shall not be rejected on the ground of limitation.
(g) In cases where notices are challenged, petitioners are given four weeks time from the date of receipt of this order to file objections. The concerned authority shall consider the same and pass appropriate orders in the light of this judgment.
(h) The circular dated October 23, 1999 will not however enable the assessing authority to reopen the assessments which have attained finality in accordance with law.
3. Both the assessees as well as the Revenue have preferred these appeals, inter alia, questioning the correctness or otherwise of the findings and the conclusion reached by the learned single Judge only on issue No. III.
4. The third issue which was considered by the learned single Judge pertains to the effect of Commissioner's circular No. 5 of 1996-1997 dated April 12, 1996 and the subsequent circular No. 31 of 1999-2000 dated October 23, 1999. In so far as the findings in regard to the effect of second circular, neither the assessees nor the Revenue have any grievance whatsoever.
5. Section 5-C of the Act is the independent charging provision. It was inserted in the Act, by Act No. 27 of 1985 with effect from April 1, 1986. The levy of tax is on the transfer of the right to use any goods mentioned in column (2) of the Seventh Schedule to the Act for any purpose, at the rates specified in the corresponding entries in column (3) of the said Schedule. The levy under the Section was on the "taxable turnover" of the dealer for each year relating to the transfer of the right to use any goods.
6. Section 5-C of the Act was amended by Act No. 4 of 1992 with effect from April 1, 1986 substituting the words "total turnover" in the place of "taxable turnover". The validity or otherwise of Section 5-C of the Act, as amended by Act No. 4 of 1992 was questioned before this Court by dealers registered under the Act. This Court in the case of Shetty Leasing (India) Ltd, v. Union of India [1996] 100 STC 533 had declared that the amended provision which is given effect from April 1, 1986 as unconstitutional and invalid. Thereafter, the State Legislature by the Karnataka Taxation Laws (Amendment) Act, 1996 (Act No. 5 of 1996), has again substituted Section 5-C of the Act with retrospective effect from April 1, 1986. Immediately thereafter, the Commissioner of Commercial Taxes, has issued a circular dated April 12, 1996, clarifying the position in regard to the newly substituted Section 5-C of the Act. The effect of the clarification by the aforesaid circular was, that, if the goods in respect of which the right to use is transferred have been subjected to tax under Section 5(3)(a) of the Act, then no tax need be paid under Section 5-C of the Act. The assessing authorities, following the circular instruction issued by the Commissioner of Commercial Taxes, had. completed pending assessments and had not levied tax under Section 5-C of the Act, if the goods in respect of which the right to use is transferred have been subjected to tax under Section 5(3)(a) of the Act.
7. Subsequently, the Commissioner of Commercial Taxes had issued another circular dated October 23, 1999, replacing the earlier circular dated April 12, 1996 and the effect of this circular is, that, even if the goods in respect of which the right to use any goods mentioned in Seventh Schedule to the Act is subjected to tax under Sub-section (1) or Sub-section (3) of Section 5 of the Act ; but subject to Sub-sections (5) and (6) of that section, the tax under Section 5-C of the Act shall be levied on taxable turnover in respect of transfer of right to use any goods specified in the Schedule to the Act. The authorities under the Act have taken effective steps, to give effect to the instructions contained in the second circular issued by the Commissioner of Commercial Taxes by taking recourse to provisions which provide for revision, reassessment, rectification, etc. It is at that stage, the dealers had approached this Court, inter alia, seeking the reliefs noticed by us in the beginning of our order.
8. The learned single Judge, while considering the effect of the first circular issued by the Commissioner of Commercial Taxes dated April 12, 1996 in his order has observed :
35. The circular dated April 12, 1996 mixes up Section 5(3)(a) and Section 5-C though they are two different charging sections dealing with two different types of transfers intended to operate in two different sets of circumstances. It erroneously assumed that what could be deducted with reference to Section 5(3)(a) could also be deducted with reference to Section 5-C for arriving at the taxable turnover. It failed to notice that Section 5(3)(a) only exempted payment of tax by subsequent dealers selling the KST suffered goods and it had no bearing on the independent charging Section 5-C. There is nothing in Section 5-C to exempt payment of tax under that section, in respect of KST suffered goods. When these aspects were noticed, the Commissioner has issued the second circular dated October 23, 1999. The Commissioner in the second circular has rightly pointed out that there is nothing in Section 5-C to indicate that the goods which are subject to tax on their transfer of right to use (lease) cannot be subjected to tax under Section 5-C when the right to use such goods is again transferred after the expiry of the specified period for which it was hired/leased earlier and therefore, the levy under the provisions is multi-point in nature. He has also rightly pointed out that goods which have suffered tax under Section 5(3)(a) are not excluded from the purview of Section 5-C nor exempted from tax when subjected to a transfer covered by Section 5-C. The multi-point nature of levy under Section 5-C applies even when the same goods are leased repeatedly by the same dealer to the same lessee or to different lessees for different periods and each consideration received in regard to such leases will form part of the taxable turnover of the lessor. On the other hand, under Section 5(3)(a) or 5(1) a dealer does not receive consideration more than once in regard to the same goods nor does he transfer the same goods again and again as it can happen under Section 5-C. The first part of Section 5-C, therefore, in no way helps the petitioners to contend that no tax could be levied under Section 5-C in regard to transfer of the right to use goods which have already suffered tax in the hands of first or earlier successive dealers under Section 5(3)(a). This answers the second question. The circular dated October 23, 1999 correctly interprets Section 5-C. The interpretation of Section 5-C and Rule 6(4)(i) in the circular dated April 12, 1996 is erroneous.
9. The learned single Judge after referring to the nature of the circulars issued by the Commissioner of Commercial Taxes in exercise of his powers under Section 3-A of the Act has observed :
38. The legal position as explained in all these decisions with reference to the circulars is that when a circular is issued under Section 119 of the Income-tax Act, 1961 or under Section 3-A of the Karnataka Sales Tax Act, 1957 containing an interpretation or clarification favouring the assessee, the circular is binding on the department, in particular, the assessing authorities. The assessing authority cannot ignore the circular or refuse to follow the circular on the ground that circular is not in accordance with the provisions of the Act. The provisions of the Act, as interpreted or clarified in the circular should be the basis for the assessing authority to complete the assessment. The circulars issued by the Commissioner are binding only on the assessing authority, but not on the appellate authority or the courts. As the assessing authority is required to follow the circular and if he followed the circular, the department cannot challenge the order of the assessing authority on the ground that order of the assessing authority is contrary to law. If the department at any point of time, feels that circular is not valid or contrary to the provisions of law, the Commissioner will have to set right the matter by issuing a fresh circular setting out the correct position of law. Such subsequent circular when issued, will have a prospective and not a retrospective effect.
10. The learned single Judge has also noticed that any circular which beneficially affects the rights of the assessees as it stood at the beginning of the assessment year, will apply to the entire year and the modification/withdrawal of such circular will not be relevant for that current year but will only apply from the beginning of the next assessment year by relying on the observations made by the Full Bench of the Kerala High Court in the case of Commissioner of Income-tax v. B,M, Edward, India Sea Foods, Cochin and the decision of other High Courts. Therefore, it is of the view that the circulars dated April 12, 1996 will apply in regard to the assessment periods April 1, 1996 to March 31, 1997, April 1, 1997 to March 31, 1998, April 1, 1998 to March 31, 1999 and April 1, 1999 to March 31, 2000.
11. In so far as the aforesaid findings and the conclusions reached by the learned single Judge, the appellants before us have no grievance whatsoever. The grievance of the appellants before the learned single Judge and even before this Court at the time of hearing of the appeals is that the circular dated April 12, 1996 should be made applicable even for the earlier assessment years, viz., April 1, 1986 to March 31, 1996. The contention canvassed in this regard is rejected by the learned single Judge, on the premise that, circular for the first time explaining Section 5-C of the Act was issued only on April 12, 1996 and therefore, it cannot be said that the assessees had regulated their business or affairs with reference to the terms of the circular dated April 12, 1996 prior to that date and secondly, when the provisions of Section 5-C of the Act is clear and when there was no circular specifying a different interpretation, it is not possible for the assessees to contend that even with regard to the period prior to April 1, 1986, Section 5-C of the Act should be interpreted with reference to the circular dated April 12, 1996.
12. The learned Senior Counsel Sri Sarangan, Sri K.P. Kumar, Sri E.R. Indrakumar, Sri Shivaram, Sri Atul K. Alur, Smt. Vidya, Sri GKV Murthy and Sri Thirumalesh, have made their submissions in support of the relief sought in their appeals. In fact, except Sri Thirumalesh, learned Counsel, all the learned Counsel have adopted the submissions made by the learned Senior Counsel Sri Sarangan. Sri Sarangan, learned Senior Counsel would contend that circular instructions issued by the Commissioner of Commercial Taxes in exercise of his powers under Section 3-A of the Act is binding on all the authorities under the Act and therefore, for the assessment periods even prior to issuance of the circular dated April 12, 1996, the assessees are entitled for the benefit of the circular. Alternatively, it is contended, that since the circular issued by the Commissioner is to give effect to the amendment introduced by the Karnataka Taxation Laws (Amendment) Act, 1996 retrospectively with effect from April 1, 1986, the circular dated April 12, 1996 is to be applied and intended to apply with effect from April 1, 1986. In sum and substance, the submission of the learned Senior Counsel is that, since the amendment of Section 5-C of the Act is retrospective, the circular issued by the Commissioner of Commercial Taxes should be declared so to apply for the entire retrospective period for which the substituted Section 5-C of the Act will have application, till it was actually withdrawn. Therefore, it is submitted that the assessments which had been originally completed did not erroneously levy tax under Section 5-C of the Act in respect of lease consideration received under the agreements for the lease of equipment where the goods are tax suffered goods. Accordingly, the assessing authority or the revising authority could not have either initiated proceedings to reassess or revise the completed assessments following the circular instructions dated April 12, 1996. The other contention canvassed by the learned Senior Counsel is that, the learned single Judge was not justified in not accepting the request of the appellants to apply the circular dated April 12, 1996 even in regard to assessments between the period April 1, 1986 to March 31, 1996 though Section 5-C of the Act which was substituted by Karnataka Taxation Laws (Amendment) Act, 1996, with effect from April 1, 1986 is held to be valid piece of legislation by the court. In aid of his submissions, the learned Senior Counsel relies upon the following decisions :
13. Collector of Central Excise v. Dhiren Chemical Industries . That was a case which had been referred by a Bench of three learned Judges to the Constitution Bench, since in their view, there was a conflict between the view taken in Collector of Central Excise v. Usha Martin Industries and the view taken in Motiram Tolaram v. Union of India , both being judgments rendered by three learned Judges. The issue before the Constitution Bench was the correct interpretation of the phrase "on which the appropriate amount of duty of excise has already been paid". The court after a detailed consideration of the meaning of the expression "has already been paid" has observed :
An exemption notification that uses the said phrase applies to goods which have been made from duty-paid material. In the said phrase, due emphasis must be given to the words 'has already been paid'. For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, been paid, and has been paid at the 'appropriate' or correct rate. Unless the manufacturer has paid the correct amount of excise duty, he is not entitled to the benefit of the exemption notification.
Where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material the notification will not apply.
The notification is intended to give relief against the cascading of excise duty-on the raw material and again on the goods made therefrom. There is no cascading effect when no excise duty is payable upon the raw material and the hardship that the notification seeks to alleviate does not arise.
We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue.
(emphasis supplied by us)
14. Collector of Central Excise, Vadodara v. Dhiren Chemical Industries .
The issue involved in these appeals is covered by the decision of a Constitution Bench in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries . The Constitution Bench interpreted the phrase 'on which the appropriate amount of duty of excise has already been paid' in favour of the Revenue. However, it held that, regardless of the interpretation placed by it on that phrase, if there were circulars, which had been issued by the Central Board of Excise and Customs, which placed a different interpretation upon that phrase, that interpretation would be binding on the Revenue. It is not disputed that there are circulars issued by the Central Board of Excise and Customs which place a different interpretation upon that phrase and which apply to the facts of these two appeals. For that reason, these appeals are dismissed. No order as to costs.
15. Collector of Central Excise, Meerut v. Maruti Foam P. Ltd. .
7. It is not in dispute that during the period in question in all these appeals, there were circulars in operation issued by the Central Board of Excise and Customs (CBEC) which had specifically construed the phrase "already been paid", as occurring in condition (1) against SI. No. 3, to include cases where nil rate of duty had been prescribed. No doubt, this was done on the basis of the decision of this Court in Usha Martin . It is also true that the decision in Usha Martin was overruled by this Court in the decision of Dhiren Chemical Industries . However, in para 9 of Dhiren Chemical Industries the Constitution Bench of this Court has made it clear that regardless of the interpretation placed on the aforesaid phrase by the court, if there were circulars which had been issued by the CBEC which placed a different interpretation upon the phrase, that interpretation would be binding on the Revenue. This view has been reaffirmed in Collector of Central Excise v. Dhiren Chemical Industries . Therefore, the circulars in question issued by the CBEC construing the phrase 'duty already paid' must be held to bind the Revenue as long as they were not withdrawn which they were but only in 2002. For the period in question the circulars were operative, The appeals are, accordingly, dismissed albeit for reasons which are different from those expressed by the Tribunal. We make it clear that this decision will not operate to reopen any assessment order nor will any duty already paid become refundable by reason of this judgment, There will be no order as to costs.
16. Commissioner of Customs v. Indian Oil Corporation Ltd. .
In this decision, the court has reiterated the principles laid down in Dhiren Chemical Industries' case and has further noticed that the view expressed by two learned Judges in Hindustan Aeronautics Ltd. v. Commissioner of Income-tax , does not lay down correct law. In this decision, the court has stated :
Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Collector of Central Excise v. Dhiren Chemical Industries , where the view of the Constitution Bench regarding the binding nature of the circulars issued under Section 37-B of the Central Excise Act, 1944, was reiterated after it was drawn to the attention of the court by the Revenue that there were, in fact, the circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd, v. Commissioner of Customs .
The principles laid down by all these decisions are :
(1) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute.
(2) Despite the decision of this Court, the department cannot be permitted to take a stand contrary to the instructions issued by the Board.
(3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad.
(4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars.
As we have noted the provisions of Section 151A are in pari materia with the provisions of Section 119 of the Income-tax Act, 1961 and Section 37B of the Central Excise Act. Parliament introduced Section 151A by an amendment to the Customs Act, 1962, in 1985 but with effect from December 27, 1985 (Act 80 of 1985), when this Court had already construed identical language in the manner indicated. It may be assumed that Parliament had legislatively approved the construction by using the exact words so construed again in the Customs Act. There is, therefore, no reason why the principles enunciated by this Court under the two earlier Acts should not also be determinative of the construction put on the later in respect of a materially similar statutory provision. This was also not argued by the appellant."
17. Kalyani Packaging Industry v. Union of India [2005] 141 STC 116.
In this decision, the Supreme Court has explained certain observations made by the Constitution Bench in the case of Dhiren Chemical Industries and finally has concluded that the law laid down by the Supreme Court is binding on all courts, Tribunals and bodies. Circulars of the Board cannot prevail over the law laid down by the Supreme Court. While saying so, the court has stated :
6. We have noticed that para 9 of Dhiren Chemical's case is being misunderstood. It, therefore, becomes necessary to clarify para 9 of Dhiren Chemical's case . One of us (Variava, J.) was a party to the judgment of the Dhiren Chemical's case and knows what was the intention in incorporating para 9. It must be remembered that law laid down by this Court is law of the land. The law so laid down is binding on all courts/Tribunals and bodies. It is clear that the circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of Dhiren Chemical's case because of the circulars of the Board in many cases the department had granted benefits of exemption notifications. It was submitted that on the interpretation now given by this Court in Dhiren Chemical's case , the Revenue was likely to reopen cases. Thus para 9 was incorporated to ensure that cases where benefits of exemption notification had already been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopened. However, this did not mean that even in cases where the Revenue Department had already contended that the benefit of an exemption notification was not available, and the matter was sub judice before a court or a Tribunal, the court or Tribunal would also give effect to the circulars of the Board in preference to a decision of the Constitution Bench of this Court. Where as a result of dispute the matter is sub judice a court/Tribunal is, after Dhiren Chemical's case , bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that courts/Tribunals have to ignore a judgment of this Court and follow the circulars of the Board. That was not what was meant by para 9 of Dhiren Chemical's case .
18. Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries, Calcutta .
The apex Court while reiterating the observations made in Kalyani's case [2005] 141 STC 116, however, has referred the matter to the Constitution Bench, since the earlier judgment in Dhiren Chemical's case [2002] 126 STC 122 was rendered by the Constitution Bench. In the said decision, the court has observed :
3. A disparate view has been taken in Collector of Central Excise v. Maruti Foam P. Ltd. , para 7 and Commissioner of Customs v. Indian Oil Corporation Ltd. . It appears to us that the law declared by this Court is binding on the Revenue/Department and once the position in law is declared by this Court, the contrary view expressed in the circular should perforce lose its validity and becomes non est.
4. Though the view expressed in Kalyani's case and our view about invalidation might clarify the observations in para 11 of Dhiren Chemical's case , we feel that the earlier judgment in Dhiren Chemical's case being by a Bench of five Judges, it would be appropriate for a Bench of similar strength to clarify the position. In the circumstances, we refer the matter to a larger Bench of five honourable Judges. Let the papers be placed before honourable the Chief Justice of India for constituting an appropriate Bench.
19. The learned Senior Counsel while suggesting that the circular instruction issued by the Commissioner of Commercial Taxes will have retrospective effect, has relied on the observations made by a division Bench of this Court, which has been overruled by the apex Court in Civil Appeal Nos. 7574 and 7573 of 2004 (arising out of S.L.P. Nos. 11251 of 2003 and 8382 of 2004) in the case of Gem Granites v. Commissioner of Income-tax and the decision of the apex Court in the case of UCO Bank v. Commissioner of Income-tax , which in our view, does not even remotely suggest the contention canvassed by the learned Senior Counsel.
20. Reference is also made to the observations made by the apex Court in the case of Ranadey Micronutrients v. Collector of Central Excise . In the said decision, the court has stated :
12. The first question, now, is whether the earlier and later circulars are orders, instructions or directions to Central Excise Officers within the meaning of Section 37B which the Central Excise Officers are bound to observe and follow. Both circulars are addressed to all Principal Collectors of Central Excise and Customs, all Collectors of Central Excise and Customs, all Collectors of Central Excise, all Collectors of Customs and all Collectors of Central Excise and Customs (Appeals). Both circulars require that their contents 'be brought to the notice of the lower field formations and the trade interests may also be suitably advised'. Both circulars require, 'All pending assessments may be finalised on the above basis'. The later circular refers to the contents of the earlier circular as 'instructions'. Both circulars have been issued in the context of doubts having arisen and representations having been received by the Board. Both circulars have been issued by the Board in consultation with the Chief and Deputy Chief Chemist and, in the later case, the Ministry of Agriculture.
Proceeding further, the court has observed :
15. The argument that the later circular has only prospective operation and that it cannot apply to these appeals because the Tribunal had already decided them must also be rejected. It is not open to the Revenue to raise a contention that is contrary to a binding circular issued by the Board. It cannot but urge the point of view made binding by the later circular.
21. Sri Indra Kumar, learned Counsel, while adopting the submissions made by Sri Sarangan, learned Senior Counsel, would contend, that when two views are possible on the interpretation of circular, the assessees should be given the benefit of doubt and that opinion which is in their favour should be given effect to. In aid of this submission, the learned Counsel relies on the observations made by the apex Court in the case of Poulose and Mathen v. Collector of Central Excise . In the said decision, the court hass observed :
15. One aspect deserves to be noticed in this context. The earlier tariff advice No. 83/81 on the basis of which trade notice No. 220/81 was issued by the Collector of Central Excise and Customs is binding on the department. It should be given effect to. There is no material on record to show that this has been rescinded or departed from, and even so, to what extent. Even assuming that the later tariff advice No. 6/85 has taken a different view-about which there is no positive material-the facts point out that the concerned department itself was having considerable doubts about the matter. The position was not free from doubt. It was far from clear. In such a case, where two opinions are possible, the assessee should be given the benefit of doubt and that opinion which is in its favour should be given effect to. In the light of the above, it is unnecessary to adjudicate the other points involved in the appeal on the merits.
22. We have taken note of every decision brought to our notice by the learned Senior Counsel out of sheer deference to his standing in the bar. Otherwise, in our view, such an elaborate reference to each one of the case law relied on by the learned Senior Counsel is wholly unnecessary to answer a simple issue raised in these appeals.
23. Smt Vidya, learned Counsel appearing for the appellant, in Writ Appeal No. 6180 of 2002, would submit, that the assessee in the present case has questioned the reassessment proceedings which have been concluded by the assessing authority after the orders passed by the learned single Judge and therefore, the orders passed by the first appellate authority requires to be modified and suitable directions may be issued to the assessing officer to re-compute the tax liability in accordance with law keeping in view the directions that may be issued by this Court.
24. Sri Thirumalesh, learned Counsel appearing for the appellant in Writ Appeal No. 5355 of 2002, would contend that the understanding of the law at the earliest point of time (contemporaneous expositio) placed by the administrative authorities requires to be taken note of by this Court, while answering the legal issue canvassed by the appellants and if understood and interpreted in that manner, the appellants would be entitled to the benefit of the circular dated April 12, 1996 even for the assessment years April 1, 1986 to March 31, 1996. Our attention is invited to the observations made by this Court in the case of Bangalore Wood Industries v. Asst. Commissioner of Commercial Taxes (Assessment), Hassan [1994] 92 STC 603. The court in the said decision, has noticed :
The understanding of the law at the earliest point of time of its enactment cannot be ignored. The Finance Act, 1964, amended Section 52(2) of the Income-tax Act, 1961 : this was understood in a particular manner by the Central Board of Direct Taxes, in a circular issued on July 7, 1964. In Varghese v. Income-tax Officer , the principle of contemporanea expositio was applied to the circular which understood the amendment in a particular manner. At page 612 of ITR (1932 of AIR), the court observed :
...The rule of construction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction, 1940 Edn., where it is stated in para 219 that "Administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned : such a construction, commonly, referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive .
Since the circular was issued by the highest authority entrusted with the execution of the provisions of the Act, the circular was accepted as conveying the true import of the provisions of the Act. Thereafter, the Supreme Court pointed out that the circular issued by the Central Board was administratively binding on the Revenue under the Income-tax Act, Situation is not different under the Karnataka Sales Tax Act : here as per Section 3-A of the Act instruction issued by the Commissioner binds all subordinate authorities in the enforcement of the provisions of the Act. The relevancy of the circular issued on October 30, 1985 on the interpretation of the provisions of the Act, cannot be brushed aside. The Commissioner has changed his view while issuing the subsequent circular. This would affect a large number of assessments or transactions already concluded. In the absence of any substantial new material forthcoming shedding a different light on the language employed by the Legislature (such as an amendment to the Act affecting its scheme, or some interpretation of the provisions of the Act by the High Court or Supreme Court), the Commissioner should not normally issue a different circular : he should realise the inconvenience and hardship that may be caused, by the changed instruction. The Commissioner has a responsibility not only to safeguard the interest of the Revenue, but also a duty to consider the well being of the trading class, who contribute to the Revenue.
25. The learned Counsel has also brought to our notice certain observations made by the Andhra Pradesh High Court in the case of I.T.C. Classic Finance and Services v. Commissioner of Commercial Taxes [1995] 97 STC 330. In the said decision, the court has stated, that it is well-settled, that, when power is conferred by the legislative enactment to make rules or issue orders, that power shall be construed as including a power exercisable in the like manner to rescind, revoke, amend or vary the rules or orders. The principle of promissory estoppel had no application in a case of this nature. The decision taken by the Government to withdraw the exemption could not be characterised as arbitrary or unreasonable or not in the public interest, in which event alone, a legitimate expectation of the appellant could be said to have been breached. The claim to exemption for the currency of lease transactions already concluded was not sustainable.
26. Lastly, the learned Counsel would contend that in view of validation of Clause 7, which is inserted in the Karnataka Taxation Laws (Second Amendment) Act, 1996 (Karnataka Act No. 5 of 1996), the authorities under the Act cannot be permitted either to reassess or revise the order passed under the earlier provision. If that is permitted, the statute which has validated the earlier assessment order would be reopened by the assessing authority, which is contrary to the legislative intention expressed under Clause 7 of Karnataka Act No. 5 of 1996.
27. In reply to the contentions canvassed by the learned Counsel for the appellants, Smt Sujatha, learned Additional Government Advocate, would submit, that, once a declaration of law is made by this Court, it would be binding on all the authorities under the Act and also other authorities, who are empowered to scrutinise the assessments passed by the assessing authorities. Secondly, it is contended that the learned single Judge having held that the circular instructions issued by the Commissioner of Commercial Taxes dated April 12, 1996 is by misunderstanding the scope and true nature of Section 5-C of the Act, and therefore erroneous, could not have declared in his order that the said circular is still be binding on the assessing authorities in regard to assessment period April 1, 1996 to March 31, 2000 and further could not have directed the assessing authorities to redo assessments and lastly, could not have declared that all the assessments relating to the period April 1, 1996 to March 31, 2000, even pending will be governed by the circular dated April 12, 1996. Nextly, it is contended that the learned single Judge was not justified in holding that any circular which beneficially affects the rights of the assessees as it stood at the beginning of the assessment year, will apply to the entire year and the modification would not be relevant for the current year, but would apply only from the beginning of the next assessment year by following the principle of provisions of the Income-tax Act. In support of her submissions, the learned Additional Government Advocate has relied on the observations made by the apex Court in the case of Hindustan Aeronautics Ltd. v. Commissioner of Income-tax, Karnataka , may be without realising that the view taken in this decision is specifically overruled by the Supreme Court in its subsequent decision in the case of Commissioner of Customs v. Indian Oil Corporation Ltd. , wherein the court has observed that "the somewhat different approach in Hindustan Aeronautics Limited's case by two learned Judges of this Court, apart from being contrary to the stream of authority cannot be taken to have laid down good law in view of the subsequent decision of the Constitution Bench in Collector of Central Excise v. Dhiren Chemical Industries ". Therefore, the reliance placed by the learned Additional Government Advocate on the observations made by the Supreme Court in Hindustan Aeronautics Limited's case would not assist the Revenue.
28. The learned Additional Government Advocate by placing reliance on the observations made by the apex Court in the case of Income-tax Officer v. M.C. Ponnoose , contended that the courts by interpretation would not ascribe retrospectivity to a circular issued by the Commissioner of Commercial Taxes, dated April 12, 1996, when no such language is either expressly, impliedly, or remotely suggested in the circular itself. Reliance is also placed on the observations made by the apex Court in the case of Fomentc Industrial Pvt. Ltd. v. Mormugao Dock Labour Board 1995 Supp (1) SCC 534, wherein the court has stated, that administrative orders and/or circulars cannot have any retrospective effect.
29. The next contention of the learned Additional Government Advocate is that the "doctrine of prospective overruling" is available only to the Supreme Court by virtue of Article 142 of the Constitution and therefore, the learned single Judge having given a finding that the circular instruction issued by the Commissioner dated April 12, 1996 is contrary to the charging provision namely, Section 5-C of the Act, could not have still directed the assessing authorities to complete the assessments, reassessments, rectification, etc., for the assessment years April 1, 1996 till March 31, 2000, if they are still pending by applying the circular dated April 12, 1996. In support of this contention, reliance is placed on the Constitution Bench decision of the apex Court in the case of Somaiya Organics (India) Ltd. v. State of U.P, , wherein the court has declared that "in the ultimate analysis, prospective overruling, despite the terminology, is only recognition of the principle that the court moulds the relief claimed to meet the justice of the case-justice not in its logical but in its equitable sense". As far as this country is concerned, the power has been expressly conferred by Article 142 of the Constitution which allows this Court to "pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it". In exercise of this power, this Court has often denied the relief claimed despite holding in the claimant's favour in order to do complete justice.
30. Our attention was also drawn to the observations made by the apex Court in the case of Kailash Chand Sharma v. State of Rajasthan , wherein the Supreme Court has stated:
41. Law reports are replete with cases where past actions and transactions including appointments and promotions, though made contrary to the law authoritatively laid down by the court were allowed to remain either on the principle of prospective overruling or in exercise of the inherent power of the court under Article 142. The learned Senior Counsel Mr. P.P. Rao reminds us that this power is only available to the Supreme Court by virtue of Article 142 and it is not open to the High Court to neutralise the effect of unconstitutional law by having resort to the principle of prospective overruling or analogous principle. The argument of the learned Counsel, though not without force, need not detain us for the simple reason that as this Court is now seized of the matter, can grant or mould the relief, without in any way being fettered by the limitations which the High Court may have had. We are of the view that there is sufficient justification for the prospective application of the law declared in the instant cases for more than one reason and if so, the declaration of the High Court to that extent need not be disturbed.
31. We have two sets of appeals. One filed by the assessees and the other by the Revenue. Having considered the rival contentions advanced by the learned Counsel for the appellants/assessees and the learned Additional Government Advocate for the Revenue, we are of the view, that insofar as the appeals filed by the assessees are concerned, the primary grievance of theirs appears to be, that the learned single Judge was not justified in not extending the benefit of the circular issued by the Commissioner of Commercial Taxes dated April 12, 1996 while clarifying the effect of the amendment introduced by the Karnataka Taxation Laws (Amendment) Act, 1996, introducing Section 5-C of the Act retrospectively with effect from April 1, 1986 for the assessment years April 1, 1986 till March 31, 1999. The grievance of the Revenue appears to be that the learned single Judge having held that the circular dated April 12, 1996 is contrary to the provisions of the Act and erroneous, could not have still declared that the said circular is binding on all the assessing authorities in regard to assessment period April 1, 1996 to March 31, 2000 and as a consequence, the assessing authorities shall redo assessments.
32. The issues that we are required to consider in these two sets of appeals are :
I. Whether the assessees are entitled to the benefit of the circular dated April 12, 1996 even for the assessment years prior to its issue by the Commissioner of Commercial Taxes ?
II. Whether the learned single Judge was justified in extending the benefit of the circular for the period April 12, 1996 till it was withdrawn by a circular dated October 23, 1999, having held that the circular issued by the Commissioner is not in accordance with the statutory provision namely, Section 5-C of the Act?
33. To answer these issues, in our opinion, it would be useful firstly, to refer to the opinion expressed by the Supreme Court in regard to binding nature of the circulars/clarification issued by the State or the Central Government in the case of Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47. In the said decision, the court has noticed that the clarifications/circulars issued by the Central or the State Government represent merely their understanding of the statutory provisions. They are not binding on the courts. Proceeding further, the court has observed :
Law is what is declared by the Supreme Court and the High Court-to wit, it is for the Supreme Court and the High Court to declare what does a particular provision of statute say, and not for the executive.
34. Now coming to the controversy involved in these appeals, at the outset, a reference to the provisions of Section 3-A of the Act requires to be made.
Under Section 3(1) of the Act, the Legislature has authorised the State Government and the Commissioner for the purpose of administration of the Act, to issue from time to time orders, instructions and directions to all officers and persons employed in the execution of Karnataka Sales Tax Act. The key word under Section 3(1) of the Act is "Administration of the Act". That only means the instructions by way of circulars can be issued either by the State Government or the Commissioner only in regard to administrative aspects and cannot extend to the judicial aspects of the administration of the Act. The circulars cannot control the quasi-judicial functions of the officers and persons employed in the execution of the Act, and cannot direct the assessing authority to complete the assessments, reassessments proceedings in a particular manner. The Legislature mandates, that all such officers, and persons shall observe and follow such orders, instructions, and directions of the State Government and Commissioner. The Legislature again puts restriction both on the State Government and the Commissioner by incorporating the proviso immediately after Sub-section (1) of Section 3 of the Act, that they shall not issue such orders, directions or instructions which would interfere with the discretion of the appellate authority in exercise of its appellate functions. It is now settled position in law, that, even such directions or instructions issued would not be binding on the appellate authority while exercising its appellate functions. The Legislature again has not specifically authorised either the State Government or the Commissioner to issue orders or directions or instructions retrospectively. It only means, that, while exercising the power under Section 3(1) of the Act, the State Government or the Commissioner may issue instructions, directions or orders prospec-tively. Alternatively, it can be stated, that in the absence of specific authorisation by the Legislature neither the State Government nor the Commissioner is empowered to issue circular/clarification/direc-tions retrospectively.
Sub-section (2) of Section 3 of the Act, apart from the power's provided under Sub-section (1) of Section 3 of the Act, provides that the Commissioner may on his own or on an application filed by a registered dealer liable to pay tax under the Act, for the purpose of maintaining the uniformity in the work of assessments and collection of tax, clarify the rate of tax payable under the Act in respect of goods liable to tax under the Act. The clarification so issued is binding on all officers and persons employed in the execution of the Act. The clarification that may be issued cannot have retrospective effect, to affect the past transactions.
35. The learned Senior Counsel Sri Sarangan would contend that since Section 5-C of the Act was amended retrospectively with effect from April 1, 1986 by the Karnataka Taxation Laws (Amendment) Act, 1996, the circular/clarification issued by the Commissioner of Commercial Taxes dated April 12, 1996 was intended to be applied with effect from April 1, 1986. In our view, this submission of the learned Senior Counsel is unacceptable to us. The reason being simple. A law can be made retrospective if it is expressly provided in the statute, but not administrative orders or circulars. The Commissioner explaining the effect of Section 5-C of the Act, for the first time, has issued the first circular dated April 12, 1996 and this will have effect and be binding on the authorities for the assessment year 1996 and onwards till it is withdrawn, cancelled or modified or till it is declared ultra vires of the statutory provisions by a competent court. In our view, a circular, which cannot be issued retrospectively, by a judicial interpretation, cannot be given retrospective effect and if it is done, the same would be opposed not only to the statutory provisions but also to the settled legal principles. Therefore, in our view, rightly the learned single Judge has not acceded to the request made by the learned Counsels for the appellants/petitioners at the time of hearing of the writ petitions.
36. Now the next issue which requires our consideration is, whether the learned single Judge having held that the circular dated April 12, 1996 issued by the Commissioner of Commercial Taxes as invalid, and erroneous, since it is contrary to the provisions of Section 5-C of the Act, was right in law in directing the invalid circular declared as such by the court still be applied for the assessment years April 1, 1996 to March 31, 1997 till April 1, 1999 to March 31, 2000, solely on the ground, that the circulars issued by the Commissioner is binding on all the officers and persons employed in the execution of the Act. The learned Senior Counsel Sri Sarangan while justifying the directions issued by the learned single Judge would place heavy reliance on the decision of the apex Court in Dhiren Chemical Industries' case [2002] 126 STC 122, where the court in spite of holding that the phrase "on which the appropriate amount of duty of excise has already been paid" in favour of the Revenue, regardless of that interpretation, if there were circulars which had been issued by the Central Board of Excise and Customs which placed a different interpretation upon that phrase, that interpretation would be binding on the Revenue. This observation of the Constitution Bench of the Supreme Court is considered subsequently in several decisions by the apex Court including three-Judge Bench of the apex Court in the case of Ratan, Melting and Wire Industries case , where the court has declared that the law declared by the apex Court is binding on the Revenue/department and that once the position in law is declared by the apex Court, the contrary view expressed in the circular shouid perforce lose its validity and becomes non est. In our opinion, the law declared by the apex Court in Dhiren Chemical Industries' case [2002] 126 STC 122 was under the peculiar facts and circumstances of that case and in fact the apex Court in Kalyani Packaging Industry's case [2005] 141 STC 116, has explained under what circumstances the Supreme Court had to declare to give effect to the Board's circular in preference to a decision of the Constitution Bench of the apex Court. Therefore, in our view, the learned Senior Counsel is not justified in contending that the Board's circular or the circulars issued by the Commissioner of Commercial Taxes would prevail over the declaration of law made by the apex Court or this Court.
37. This Court while considering the effect of circular dated April 12, 1996 has clearly held, that the same is invalid, since it is contrary to the statutory provision, namely, Section 5-C of the Act and having come to the aforesaid conclusion, the moot question is, whether the learned single Judge could have still held that the circular is binding on the assessing authorities in regard to assessment period April 1, 1996 to March 31, 1997 till April 1, 1999 to March 31, 2000 ? Our answer is positively "no". The reason being, the circular instructions issued by the Commissioner of Commercial Taxes in exercise of his powers under Section 3-A of the Act is binding on all officers and persons employed in the execution of the Act, but the same is not binding on the courts. Once the position in law is declared by this Court, the contrary view expressed in the circular should perforce lose its validity and become non est in law. Judicial declaration will have effect of refusing to implement and enforce the circular instruction, which had undoubtedly was binding on the assessing authorities till such declaration. An erroneous and invalid circular cannot be asked to be applied while completing the assessment proceedings, if they are still pending and the authorities under the Act cannot be restrained not to initiate reassessment, revision proceedings, if they are not barred by limitation prescribed under the Act. The reliance placed by the learned Senior Counsel on several decisions of the apex Court would not assist the assessees in any manner whatsoever. In all most in all the decisions, the apex Court in order to do complete justice, has moulded the relief in exercise of its jurisdiction under Article 142 of the Constitution in such a way as to give effect to its declaration prospectively and that jurisdiction or the power is not available to this Court. Therefore, this portion of the direction issued by the learned single Judge in the orders passed in the writ petitions requires to be set aside.
38. The next minor issue canvassed by the learned Counsel for the Revenue is that the learned single Judge applying the principles in Income-tax law could not have declared that any circular which beneficially affects the rights of the assessees, as it stood at the beginning of the assessment year will apply to the entire year and the modification/withdrawal of such circular will not be relevant for that current year but will apply from the beginning by relying upon the decisions of the Kerala, Bombay and Andhra Pradesh High Courts rendered under the provisions of the Income-tax Act, 1961. These principles, in our view, would certainly apply in matters arising under the provisions of the Income-tax Act. The reason being, the Income-tax Act subjects to tax not the income of the assessee in the year of assessment, but of the previous year and the liability to tax arises not by reason of the provisions of the Income-tax Act but by reason of the fact that the Finance Act fixes the rate at which the assessee is liable to pay tax and it is by the reason of the Finance Act that the income of the previous year of the assessee becomes liable to tax. These principles of Income-tax Act cannot be applied to the assessments under the provisions of the Sales Tax Act. The taxable event under the Act, is either sale or purchase as the case may be. The scheme of the Act is that each transaction of sale or purchase by a dealer attracts tax at the point of time when the transaction takes place though for the purpose of convenience, the computation of turnover is made annually. The liability to tax arises on the happening of taxable event though collection of tax may be postponed till the total turnover is determined, the tax levied and the actual demand is under the Income-tax Act, the liability to pay tax accrues on the last date of the year of account on the taxable income of the previous year of a person at the rate or rates prescribed by the Finance Act of the year of assessment but the liability to pay sales tax arises the moment the transaction of sale or purchase is completed and at the rate specified under the charging provisions on the taxable turnover of the dealer in a year. This is the clear distinction between the principles of Income-tax Act and the Sales Tax Act. In the present case, there was a circular dated April 12, 1996 issued by the Commissioner of Commercial Taxes which clarified that if the goods in respect of which the right to use is transferred had been subjected to tax under Section 5(3)(a) of the Act, then no tax need be paid under Section 5-C of the Act in regard to such transaction relating to transfer of the right to use tax suffered goods. In view of this circular, the lease transaction of the dealer under Section 5-C of the Act was not taxable, if the goods in respect of which the right to use is transferred had been subjected to tax under Section 5(3)(a) of the Act. This circular is replaced by another circular dated October 23. 1999 during the middle of the assessment year and in that, it was clarified that if the goods in respect of which the right to use is transferred had been subjected to tax under Section 5(3)(a) of the Act, still the levy under Section 5-C of the Act is attracted. Since under the scheme of the Sales Tax Act, each transaction of sale or purchase by a dealer attracts tax at the point of time when the transactions take place, the liability of the dealer to pay tax under Section 5-C of the Act on and after October 23, 1999 would arise till the end of the assessment year or till the circular is withdrawn or cancelled, etc. Therefore, the reasoning of the learned single Judge that withdrawal of the circular during the pendency of the assessment proceedings cannot prejudicially affect the right of the assessee to have this assessments made in accordance with the circular as it stood prior to its amendment or withdrawal cannot be accepted,
39. Now coming to the submissions made by the learned Counsel Sri Thirumalesh, he firstly contends, that doctrine of "contemporanea expositio" requires to be applied while interpreting the provisions of Section 5-C of the Act by keeping in view the circular instructions issued by the Commissioner of Commercial Taxes dated April 12, 1996. To answer this issue, in our view, it is desirable to make reference to the Statutory Interpretation by Francis Bennion (Fourth Edition). The learned author says that "the doctrine of 'contemporanea expositio' whether an Act is an ongoing or a fixed time Act, it may be necessary to determine how its legal meaning was understood at the time it was originally passed. For this purpose, reference may be made to source of that time. This is known as 'contemporanea expositio'."
Maxwell says "the language of a statute must be understood in the sense in which it was understood when it was passed, and those who lived at or near the time when it was passed may reasonably be supposed to be better acquainted than their descendants with the circumstances to which it had relation, as well as with the sense then attached to legislative expressions".
Proceeding further, the learned author has observed, that "in some judgments, the doctrine of contemporaneous exposition is confused something quite different, namely the undesirability of disturbing a settled construction. The only connection is that, under the principle of presumed continuity, the practice of today is presumed continuity, the practice of today is presumed, unless the contrary is shown, to be the practice of yesterday too. For under-stable reasons, the courts dislike disturbing a long continuing practice. This even applies where the practice seems wrong in law, for communis error facit jus (common error makes the law). Enacting history is never of binding or competing authority. The court's ultimate task is itself to construe the text of the enactment, subject to binding judicial precedent. In the period immediately following its enactment, 'the history of how an enactment understood' forms part of the 'contemporanea expositid' and may be held to throw light on the legislative intention. 'Contemporanea exposition' helps to show what people thought the Act meant in the period immediately after it was passed. Official statements on its meaning are particularly important here, since every Act is supervised, and most originally were promoted by a Government Department which may be assumed to know what the legislative intent was".
The aforesaid view is reiterated by the Supreme Court in K.P. Verghese's case , which view has been followed by a division Bench of this Court in the case of Bangalore Wood Industries v. Asst. Commissioner of Commercial Taxes, Hassan [1994] 92 STC 603, wherein it is observed that "the rule of construction by reference to 'contemporanea expositio' is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous". Therefore, in our view, the courts must give much weight to the interpretation put upon it by the persons whose duty is to construe and execute it. But that does not mean the courts are bound to follow the interpretation of the executive while construing a statutory provision when the language of the statute is plain and unambiguous. In the instant case, after an elaborate discussion of the statutory provision, namely, Section 5-C of the Act, and the first circular issued by the Commissioner of Commercial Taxes dated April 12, 1996, the learned single Judge has concluded that the circular is contrary to the provisions of Section 5-C of the Act and therefore, erroneous, which in our opinion, is the correct view, and therefore the "doctrine of contemporanea expositio" cannot be pressed into service to give relief to the assessees for the assessment period April 1, 1986 to March 31, 1996.
40. The learned Counsel Sri Thirumalesh would submit that since all assessments, reassessments, etc., are validated by incorporating Clause 7 in the Karnataka Taxation Laws (Second Amendment) Act, 1996, the assessments made prior to Karnataka Act No. 5 of 1996 cannot be disturbed by the assessing authority or the revisional authority. Therefore, notices issued by the assessing authority either under Section 12-A of the Act or by the revisional authority under Section 21 or 22-A of the Act are without authority of law and therefore, the same requires to be nullified by this Court. To answer this issue of the learned Counsel, the effective portion of the validation clause requires to be extracted. It is as under :
Clause 7. Validation of assessments, etc.-(1) Notwithstanding anything contained in any judgment, decree or order of any court, Tribunal or other authority anything done or any action taken, purporting to be done or taken (including any notice issued or order made and any proceedings held for levy, assessment, reassessment, revision of assessment and collection of tax or any amount purported to be by way of tax) under the provisions of the principal Act on or after the first day of April, 1986 and before the commencement of this Act, shall so far as such thing done or action taken or purported to be done or taken or notice issued or order made or proceeding held is consistent with the provisions of the principal Act as amended by Sub-section (2) of Section 6 of this Act shall be deemed to be as valid and effective for all purposes as if action, thing, notice, order or proceeding had been taken, done, issued, made or held under the principal Act as amended by Sub-section (2) of Section 6 of this Act and accordingly,-
(a) all acts, things or proceedings done or held by the Government or by any officer of the Government or by any authority in connection with the assessment, reassessment, revision of assessment, levy or collection of such tax shall, for all purposes be deemed to be, and to have always been done or held in accordance with law ;
(b) no suit or other proceedings shall be entertained or continued in any court or Tribunal or before any authority for the refund of any such tax : and
(c) no court shall enforce any decree or order directing the refund of any such tax.
41. The true intent of this clause is that, the levy and collection of tax is validated notwithstanding anything contained in any judgment, or order of any court or Tribunal or other authority under the provisions of Principal Act on or after April 1, 1986 and before the commencement of Act No. 5 of 1996 in so far as things done or taken or notice issued or order made or proceedings held consistent with the principal Act as amended by Sub-section (2) of Section 6 of the Act shall be deemed to be valid.
Sub-section (2) of Section 6 of the Karnataka Taxation Laws (Second Amendment) Act has substituted Section 5-C of the Act with effect from April 1, 1986, by replacing the expression "total turnover" and re-employing the expression "taxable turnover" in the principal Act. If any proceedings under the Act had been completed by applying the concept of "taxable turnover", such assessments are deemed to be valid and effective for all purposes as if they are done under the amended provision. If not, for this validation clause, even those assessments, reassessments, etc., had to be redone, in view of insertion of Section 5-C of the Act. Therefore, in our view, validation clause inserted in the Karnataka Taxation Laws (Second Amendment) Act, would in no way come to the aid of the assessees.
42. Now coming to the submissions made by the learned Counsel Sri Indrakumar, that if two views are possible on the construction or interpretation of the statutory provisions, Rules, notifications, circulars, the one that is beneficial to the assessees should be preferred. No exception can be taken to the submission of the learned Counsel, since the same is the settled legal position in law. But, in the instant case, this principle need not be applied, since there is only one view that is possible on the interpretation of circular dated April 12, 1996 and its application for the assessment period April 1, 1996 to March 31, 1997 and onwards till it was replaced by circular dated October 23, 1999. Therefore, it is not possible to accept the submission made by Sri Indrakumar, learned Counsel.
43. In view of the aforesaid discussions, the following ;
ORDER I. Writ appeals filed by the assessees, in W.A. Nos. 5271 of 2002, 5181 of 2002, 5224 of 2002, 5227 of 2002, 5230 of 2002, 5232 of 2002, 5260 of 2002, 5265 of 2002, 5274 of 2002, 5355 of 2002, and 5441 of 2002, 7793 of 2003 and 7938 of 2003, 65 of 2004, 5182 of 2002, 5391 of 2002, 5184 of 2002, 5194 of 2002, 5214 of 2002, and 6180 of 2002 and 2264 of 2004 are rejected.
II. Writ appeals filed by the Revenue in W.A. Nos. 3059 of 2003, 5707 of 2002, 5724 of 2002, 5807 of 2002, 6475 of 2002 and 6493 of 2002, 141 of 2003, 142 of 2003 and 2290 of 2003, 4571 of 2004, 5781 of 2002 and 1752 of 2003 are allowed.
III. The declaration made by the learned single Judge that the circular issued by the Commissioner of Commercial Taxes dated April 12, 1996 is binding on the assessing authorities in regard to the assessment period April 1, 1996 till March 31, 2000 is set aside.
IV. In all other aspects, the impugned order passed by the learned single Judge is affirmed.
V. In the facts and circumstances of the case, parties are directed to bear their own costs. Ordered accordingly.