Karnataka High Court
Manish Plastics vs Commissioner Of Commercial Taxes In ... on 24 February, 1995
Equivalent citations: ILR1995KAR1734
Author: Tirath S. Thakur
Bench: Tirath S. Thakur
JUDGMENT Tirath S. Thakur, J.
1. A common question of law has brought these petitions together for a common hearing. The question turns on the true and correct interpretation of section 8(2-A) of the Central Sales Tax Act, 1956, read with entry 46 of the Fifth Schedule to the Karnataka Sales Tax Act, 1957, as the same stood between April 1, 1982 to March 31, 1990. The said entry exempted during the relevant period footwear costing not more than Rs. 30 per pair from the payment of tax under the provisions of the Karnataka Sales Tax Act.
2. The petitioners who are dealers in footwear and have effected inter-State sales of the same, argue, that by reason of the exemption enjoyed by footwear under entry 46 supra, the inter-State sales effected by them are free from the payment of Central sales tax under the Central Sales Tax Act. The exemption granted to footwear costing less Rs. 30 per pair, it is contended is a general exemption within the meaning of section 8(2-A) of the Central Sales Tax Act so as to make the sales effected by the petitioner free from any tax liability.
3. On behalf of the respondents it was argued that the term "exempt from tax generally" appearing in section 8(2-A) of the Central Sales Tax Act does not include goods which are exempt only on specified conditions or in specified circumstances. Reliance was placed in this connection upon the Explanation to section 8(2-A) (supra). It was urged that exemption of footwear in terms of entry 46 of the Fifth Schedule as the same stood during the relevant period was an exemption which was subject to the condition that the cost of the footwear was less than Rs. 30 and therefore any such exemption could not be deemed to be an unconditional or general exemption as would entitle the petitioners to the benefit flowing from section 8(2-A) of the Central Sales Tax Act, 1956.
4. Section 8 of the Central Sales Tax Act, 1956, governs the rates of tax on sales in the course of inter-State trade or commerce. Sub-section (2-A) of section 8 with which we are concerned in these petitions starts with a non obstante clause and, inter alia, provides that no tax shall be payable under the Central Sales Tax Act on the turnover or any part thereof which relates to the sale or as the case may be purchase of any goods which are under the sales tax law of the appropriate State exempt from tax generally. Sub-section (2-A) and the Explanation appended to the same may at this stage be reproduced verbatim :
"Notwithstanding anything contained in sub-section (1-A) of section 6 or in sub-section (1) or clause (b) of sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name) shall be nil or, as the case may be, shall be calculated at the lower rate.
Explanation. - For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods."
5. A plain though conjoint reading of the above provisions leaves hardly any doubt that in order that a commodity be deemed to be exempt from tax generally, such an exemption must be enjoyed by it unconditionally. In other words, an exemption which was conditional or subject to the existence of any specified circumstances does not by reason of the Explanation to section 8 amount to an exemption of a general character so as to exempt the inter-State sales of any such product from the levy of Central sales tax. As to what is the true meaning and purport of the term "exempt from tax generally" in the context of the Explanation to section 8(2-A) fell for consideration of the Supreme Court in Indian Aluminium Cables Ltd. v. State of Haryana [1976] 38 STC 108. That was a case where the cables sold by the appellant to the Delhi Electric Supply Undertaking were exempt from payment of the State tax by virtue of section 5(2)(a)(iv) of the Punjab General Sales Tax Act. The question was whether by reason of such an exemption the appellant was also exempt from the payment of tax under the Central Sales Tax Act. The claim made by the company was negatived by the court holding that the exemption granted under section 5(2)(a)(iv) of the State Act, was not a general but an exemption available only in specified circumstances and under specified conditions. The court pointed out that the specified circumstances in that case were that the sale must be to an undertaking engaged in supplying electrical energy to the public under a licence and the specified condition was that the items of goods purchased by the undertaking must be used for generation or distribution of electrical energy. The fulfilment of these conditions and circumstances stipulated by section 5(2)(a)(iv) of the Punjab Act was essential for claiming exemption from the State tax. It was in these circumstances held that if any one of the conditions specified by the said provision was not satisfied no exemption would be available to the sales made by the company. The court emphasised that "general exemption" means that the goods should be totally exempt from tax before a similar exemption from levy of Central sales tax can become available, and that where exemption from taxation is granted subject to conditions or in certain circumstances there was no exemption from tax generally.
6. Then came Pine Chemicals Ltd. v. Assessing Authority where the question was whether an exemption granted from payment of the sales tax under the Jammu and Kashmir General Sales Tax Act on finished products manufactured by a new industrial unit for a period of 5 years could be said to be a general exemption within the meaning of section 8(2-A) of the Central Sales Tax Act. The Supreme Court after referring to Indian Aluminium Cables' case [1976] 38 STC 108 held that the exemption granted was general in nature as the circumstances prescribed by the notification allowing such an exemption were meant only to identify the goods and once the goods were identified there were no conditions subject to which the claim for exemption could be made. On that reasoning the court held that the goods manufactured by a new industrial unit must be deemed to be generally exempt from the payment of sales tax under the States Sales Tax Act and therefore exempt even from the payment of the Central sales tax. This view was followed by the Supreme Court in Hindustan Paper Corporation Ltd. v. State of Kerala [1993] 89 STC 473. That was a case in which the Government of Kerala had exempted the petitioner-corporation's turnover relating to the sale of newsprint manufactured by the corporation from payment of sales tax for a period of two years from the date it went into production. The petitioner-corporation contended that the exemption granted to it by the State Government was general in nature and therefore the same had the effect of exempting the inter-State sales effected by it from the payment of the Central sales tax. This claim was rejected by the sales tax authorities and the High Court of Kerala. Before the Supreme Court, it was argued that the exemption was general in character. Reliance was placed upon the judgment in Pine Chemicals case . This argument prevailed and following the said judgment the apex Court held that the terms "specified circumstances" and "specified conditions" referred to in the Explanation to section 8(2-A) should related to the transaction of the sale of the goods and not the identification of the dealer or the commodity for which the exemption was claimed. The court observed the conditions relating to identity of the goods and the dealer are always there in every exemption and the same did not amount to a condition of sale. Following the judgment in Pine Chemicals case the appeals filed by the assessee/corporation were allowed and the claim for exemption upheld.
7. Review petitions thereafter appear to have been filed against both the judgments aforesaid. These petitions were heard by a Bench of three Judges and were allowed reversing the view taken in both these cases. Relying upon a judgment in Indian Aluminium Cables' case and International Cotton Corporation case , the Supreme Court held that the terms "specified circumstances and specified conditions" referred to in the Explanation had reference to the goods in respect of which the exemption was sought, and that a general exemption means that the goods should be totally exempt from tax under the State Act before a similar exemption from the levy under the Central Act can become available. The conditions stipulated by the notifications granting exemption, namely, that the goods should be manufactured by a new industrial unit and that the same shall be exempt for a period of 5 years were held to be specified circumstances and conditions subject to which the exemption was available and therefore any such exemption could not be a general exemption within the meaning of section 8(2-A) of the Central Sales Tax Act. The following passage from the judgment in review - Commissioner of Sales Tax, Jammu and Kashmir v. Pine Chemicals Ltd. succinctly states the reasoning behind the said view :
"The idea behind sub-section (2-A) of section 8 of the Central Sales Tax Act, which we have analysed hereinbefore, is to exempt the sale/purchase of goods from the Central sales tax where the sale or purchase of such goods is exempt generally under the State sales tax law. We must give due regard and attach due meaning to the expression 'generally' which occurs in the sub-section and which expression has been defined in the Explanation. If the said expression had not been there, it could probably have been possible to argue that inasmuch as the goods sold by a particular manufacturer-dealer are exempt from the State tax in his hands, they must equally be exempt under the Central Act. But sub-section (2-A) requires specifically that such exemption must be a general exemption and not an exemption operative in specified circumstances or under specified conditions. Can it be said that the goods sold by the dealers in this case are exempt from tax generally under the State sales tax enactment ? The answer can only be in the negative. Such goods are exempt from tax only when they are manufactured in a large or medium scale industrial unit within five years of its commencement of production and sold within the said period, i.e., in certain specified circumstances alone. The exemption is not a general one but a conditional one. The exemption under the Government Order No. 159 is not with reference to goods or a class or category of goods but with reference to the industrial unit producing them and their manufacture and sale within a particular period. For the purposes of the Government order, the nature, class or category of goods is irrelevant; it may be any goods. It is concerned only with the industrial unit producing them and the period within which they are manufactured and sold. Can it be said in such a case that it is an instance where the sale is of goods, the sale or purchase of which is under sales tax law of the appropriate State, exempt from tax generally ? Certainly not. Exemption provided by Government Order No. 159, to repeat, is not with reference to goods but with reference to the industrial unit. So long as it is (i) a large or medium scale industry and (ii) it manufactures and sells goods within the five years of its going into production, the sale of such goods is exempt irrespective of the nature of classification of goods. Similar goods may be manufactured by another unit but if it does not satisfy the above two requirements, the goods manufactured and sold by it would not be entitled to exemption from tax. Indeed, the goods manufactured by that very unit would not be eligible for exemption if they are manufactured after the expiry of five years from the date it goes into production and/or sells them beyond the said period. The period of exemption may also vary from unit to unit depending on the date of commencement of production in each unit. For the above reasons, we are of the opinion that the exemption granted under the aforesaid Government order does not satisfy the requirements of section 8(2-A)."
8. The question therefore is whether footwear in which the petitioners deal could be said to be generally exempt from payment of sales tax under the Karnataka Sales Tax Act, 1957. Indeed, if the answer is in the affirmative the petitioners must succeed for then there is no escape from the conclusion that footwear would be exempt from payment of Central sales tax under section 8(2-A) (supra). In other words, the question is whether the stipulation that footwear costing less than Rs. 30 per pair only is exempt is a "condition" or a "specified circumstance" within the meaning of Explanation to section 8(2-A) of the Central Sales Tax Act.
9. An answer to this question would take us to section 8 of the Karnataka Sales Tax Act to which the Fifth Schedule and entry 46 therein owe their origin. Section 8 of the State Act, deals with non-taxable goods, and reads thus :
Section 8 : "No tax shall be payable under this Act on the sale of goods specified in the Fifth Schedule subject to the conditions and exceptions, if any, set out therein."
Entry 46 may also be reproduced at this stage; it runs as under :
"46. Footwear costing not more than thirty rupees per pair."
10. A plain reading of the provisions of section 8 makes it fairly obvious, that the same, makes goods set out in the Fifth Schedule non-taxable subject to the "conditions" and "circumstances" prescribed in the said Schedule. In other words, what is set out in the Fifth Schedule is not only a description of the goods which are granted exemption; but also, the conditions subject to which the same is granted. It is also obvious, that the description of the goods, as given in the Schedule is different from the conditions subject to which the same have been exempted. It is important to note that the description of goods remains the same regardless of whether the goods are mentioned in the Fifth Schedule or any other Schedule to the Act. For instance footwear, appearing in the Fifth Schedule signifies and describes the same goods as footwear appearing in the Second Schedule, which was during the relevant period, i.e., April 1, 1982 to March 31, 1990 taxed at 10 per cent if the value per pair of such footwear exceeded Rs. 30. Similarly mangal sutra worn by a bride on the occasion of marriage appearing in entry 3 of the Fifth Schedule is a description, and not a condition, as is the case with carpets woven on handlooms which too is a description of the goods rather than the condition subject to which the exemption is granted. It therefore follows that if the goods described in the Schedule are granted exemption not unconditionally but upon certain terms which go beyond the description thereof, then what is in excess of the description is either a condition or a circumstance. Take for instance mangal sutra and footwear which answer the same description irrespective of whether the value of a pair of footwear is Rs. 30 or Rs. 3,000 or the price of a mangal sutra is Rs. 500 or Rs. 2,500. Footwear does not cease to be footwear nor does it become a footwear of a different specie or commercially different commodity merely because its price, goes beyond a particular amount. So also is the case with mangal sutra and carpets woven on handlooms which continue to remain the goods of the particular description regardless of what their price is. In case therefore such goods are grant exemption subject to their price being less than the amount mentioned in the Schedule the condition regarding the price is obviously a condition within the meaning of section 8 of the Central Sales Tax Act, thereby making the exemption a conditional exemption available only when the condition prescribed is fulfilled.
11. On behalf of the petitioners it was urged that the price stipulated for the availability of exemption was not a specified condition or circumstance but a mode of identifying the goods to which the exemption was being granted. It was contended that footwear costing less than Rs. 30 per pair had been by a legal fiction, identified as a commercially different commodity than footwear costing more than Rs. 30 per pair and that if viewed from that angle footwear costing less than Rs. 30 per pair was a distinctly different class of goods which were exempt generally from the payment of the State sales tax within the meaning of section 8(2-A) of the Central Sales Tax Act. I am not impressed by this argument either. I say so for more than one reason. In the first place the inclusion of footwear costing less than Rs. 30 per pair in the Fifth Schedule does not in my opinion amount to creating by an assumed legal fiction a distinctly different class or category of goods than what is understood, by the use of the term "footwear", costing more than Rs. 30 per pair. What remains the essence in either situation is the nature or the category of the goods, namely, footwear. To say that footwear costing less than Rs. 30 per per pair will not be "footwear" or will be a different specie of the goods falling in that description is in my opinion neither warranted by the provisions of the Act nor supported by any recognised principle of law. The very fact that the Legislature had exempted footwear costing less than Rs. 30 by inclusion in the Fifth Schedule and taxed footwear costing more than Rs. 30 by putting the same in the Second Schedule during the relevant period does not bring about the creation of a distinctly different commodity by the use of a legal fiction as argued by the petitioners. Secondly the price of Rs. 30 per pair is a stipulation in the nature of a condition or a circumstance which must be satisfied before any sale of the said commodity can be said to be exempt from the payment of tax. The very fact that what is sold is footwear does not entitle the transaction to immunity from the payment of tax. Such an exemption is available only when it is proved further that the sale was of footwear costing less than Rs. 30 per pair. The term "specified condition" as appearing in the Explanation to section 8(2-A) of the Act, has not been defined nor has the term "specified circumstances" been so defined. The term condition has been given the following meaning in Black's Law Dictionary, 6th Edition :
"A future and uncertain event upon the happening of which is made to depend the existence of an obligation; or that which subordinates the existence of the liability under a contract to a certain future event ..............
A qualification, restriction; or limitation modifying or destroying the original act with which it is connected."
12. When seen in the light of the above meaning, it is manifest that the grant of exemption to footwear is conditional, for the exemption is subject to the qualification or the restriction that the same would be available not to footwear generally but only to such footwear as fulfils the prescribed condition of the price thereof being less than Rs. 30 per pair. The sale of footwear for a price less than Rs. 30 per pair may even be a specified circumstance the existence whereof may entitle the goods sold to the grant of exemption from payment of sales tax.
13. It was next argued that the underlying object behind the provisions of section 8(2-A) was that if the goods were exempt from payment of the State sales tax, then the State would not be interested in recovering the Central sales tax on the inter-State sales of such exempted goods. It was urged that the entire controversy in the present cases ought to be viewed in the light of the above objective and when so viewed an interpretation which advances that objective should be preferred over the one which may defeat the same.
14. It is true that the Legislature has made its object clear that goods which are exempt from the payment of the State tax ought to be free even from the Central sales tax but the said exemption, it is apparent, would not be available unless the goods are generally exempt from the payment of the State tax. The language used by the Parliament while enacting section 8(2-A) and in particular explanation of the term "exempt from tax generally" leaves hardly any doubt that conditional or rusticated exemptions or exemptions granted in specified circumstances would not be enough for the grant of exemption from the payment of the Central sales tax. That being so, it is difficult to ignore the mandate of the provisions of law only to subserve the objective which in the opinion of the petitioners was meant to be achieved by the same. It is well-settled that when the language employed by the enactment is clear there is no question of interpreting the provisions in any manner except by giving them their plain and obvious meaning.
15. I may at this stage refer to the judgment of a single Judge of this Court in W.P. No. 32104 of 1994 delivered on November 15, 1994 [Reported as Shashtha Industries v. Additional Deputy Commissioner of Commercial Taxes [1995] 98 STC 219 (Kar)] in which a near identical question arose for consideration. The question was whether the exemption granted to footwear costing less than Rs. 30 per pair was a general exemption within the meaning of section 8(2-A) of the Central Sales Tax Act. It had arisen in the context of a notification dated July 30, 1992, issued by the Government of Karnataka under section 8A of the Karnataka Sales Tax Act exempting from payment of tax the sale of footwear costing less than Rs. 30 per pair. Relying upon the judgment of the apex Court in Indian Aluminium Cables case [1976] 38 STC 108 this Court held that the exemption in question was not for footwear in general but only on the "specified condition" or the "specified circumstances" namely, the cost of the footwear being not more than Rs. 30 per pair. This Court observed thus :
"If the said test is applied it would be seen that the chappals or footwear costing not more than Rs. 30 per pair will not be entitled for exemption under the CST Act. If the exemption under the KST Act was in regard to the footwear in general, then such exemption would have extended in regard to tax under the CST Act also. But, the exemption notification under section 8A of the KST Act does not give exemption to footwear in general but gives exemption only under a specified condition or circumstance, that is the cost of the footwear being not more than Rs. 30 per pair. Thus the exemption is dependent on the act of the dealer in selling the footwear at a price of not more than Rs. 30 per pair. In other words, the exemption under the State Act is conditional and is available only in a special circumstances, when the sale price is less than Rs. 30 per pair. As the exemption is not general but subject to a specified condition, the benefit of the exemption cannot be extended to the turnover relating to such footwear under the CST Act having regard to the explanation of section 8(2-A)."
Learned counsel appearing for the petitioners however tried to distinguish this judgment, from the facts of the present cases primarily on the ground that the said case related to the period, namely, July 4, 1992 to March 31, 1993 during which period the exemption in question was available not by reason of the inclusion of "footwear costing less than Rs. 30 per pair" in the Fifth Schedule but on the basis of the notification issued by the Government under section 8A of the Act. They argued that this circumstance distinguishes the said case from the present batch of cases and therefore the view taken in the said case was wholly inapplicable. I do not find any substance in this submission. The question whether the exemption granted to "footwear costing less than Rs. 30 per pair" was general or conditional in the context of section 8(2-A) of the Central Sales Tax Act, fell directly for consideration in the said case as it does in the present. The answer to this question did not depend on whether the exemption was available by reason of a separate notification issued by the Government or by reason of the inclusion of "footwear costing less than Rs. 30 per pair" in the Fifth Schedule. The goods and the condition subject to which the same were exempted are identical in both the situations. The reasoning adopted by this Court in the said case for holding that the exemption was conditional, therefore applies with equal force to the present cases also. The distinction sought to be made out by the learned counsel appearing for the petitioners is in my opinion without any difference.
16. It was next argued by Mr. Prasad appearing for some of the petitioners that prior to the impugned clarification issued by the Commissioner of Commercial Taxes, there was in existence another clarification dated August 20, 1987, forming annexure B to W.Ps. Nos. 20975 to 20981 which was issued by the Commissioner of Commercial Taxes to M/s. Santosh Rubber Industries in response to its letter dated July 10, 1987 and stated that chappals costing less than Rs. 30 were exempt from tax both under the Karnataka Sales Tax and Central Sales Tax Acts. Mr. Prasad argued that the said clarification held the field till the date the clarification impugned in these petitions was issued. The respondent-authorities could not therefore, contended the learned counsel, bring to tax footwear costing less than Rs. 30 for the period prior to the date of issue of the impugned clarification. In support of his submission he placed reliance upon section 3-A(2) of the Karnataka Sales Tax Act and the judgment of this Court in T. M. Mohan v. Additional Agricultural Income-tax Officer [1990] 184 ITR 190. He also placed reliance upon a Full Bench judgment of the High Court of Kerala in Commissioner of Income-tax v. B. M. Edward [1979] 119 ITR 334 and argued that clarification issued by the Commissioner in exercise of his statutory powers would be binding even if such clarifications were contrary to the provisions of the Act, under which the same were issued.
17. Smt. Vidya, learned Government Advocate, on the other hand placed reliance upon the judgment of the Supreme Court in Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47 and urged that the clarifications issued by the Commissioner could never supersede or defy the statutory; provisions of the Act let alone bind the courts. Reliance was placed by her upon a Division Bench judgment of this Court in Lipton India Limited v. State of Karnataka .
18. In T. M. Mohan v. Additional Agricultural Income-tax Officer [1990] 184 ITR 190, one of the questions that fell for consideration of a Division Bench of this Court was whether the circular issued by the Commissioner of Agricultural Income-tax stating that no surcharge shall be leviable where assessments were pending was binding upon the department. A learned single Judge of this Court had repelled the contention holding that any circular which was contrary to the provisions of the statute was unenforceable and could be ignored. In appeal however, Shivashankar Bhat, J., speaking for the Bench and relying upon the judgments of the apex Court in Navnit Lal C. Javeri v. K. K. Sen, Appellate Assistant Commissioner of Income-tax, Bombay [1965] 56 ITR 198 and in Ellerman Lines Ltd. v. Commissioner of Income-tax, West Bengal [1971] 82 ITR 913 held that the circulars issued by the Commissioner of Agricultural Income-tax was binding on subordinate officers and that the assessing authorities under the Karnataka Agricultural Income-tax Act, were bound to give effect to any such circular. The view taken by the Division Bench has however been considerably watered down by a later judgment of the Supreme Court in Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47. That was a case in which the Government of Andhra Pradesh had in exercise of its power under section 42(2) of the Andhra Pradesh General Sales Tax Act, 1957, clarified that cast iron castings were covered within the term cast iron including ingot moulds, occurring in item 2 of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957. Section 42 of the Andhra Act empowered the Government to remove difficulties in giving effect to the provisions of the said Act. Reliance upon the clarification issued by the Government was placed by the petitioner/assessee in the said case in support of its claim that case iron castings were included in cast iron. Their Lordships of the Supreme Court however repelled this argument holding that clarifications/circulars issued by the Central Government or a State Government simply represented their understanding of the statutory provisions, and that any such circulars or clarifications were not binding upon the courts nor was there any estoppel against law. Their Lordships observed thus :
"So far as clarifications/circulars issued by the Central Government and/or State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law. There can be no estoppel against the statute. The understanding of the Government, whether in favour or against the assessee, is nothing more than its understanding and opinion. It is doubtful whether such clarifications and circulars bind the quasi-judicial functioning of the authorities under the Act. While acting in quasi-judicial capacity, they are bound by law and not by any administrative instructions, opinions, clarifications or circulars. Law is what is declared by this Court and the High Court - to wit, it is for this Court and the High Court to declare what does a particular provision of statute say, and not for the executive. Of course, the Parliament/Legislature never speaks or explains what does a provision enacted by it mean. (See Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal Ltd. ).
Now coming to G.O. Ms. 383, it is undoubtedly of a statutory character but, as explained hereinbefore the power under section 42 cannot be utilised for altering the provisions of the Act but only for giving effect to the provisions of the Act. Since the goods manufactured by the appellant are different and distinct goods from case iron, their sale attracts the levy created by the Act. In such a case, the Government cannot say, in exercise of its power under section 42(2) that the levy created by the Act shall not be effective or operative. In other words, the said power cannot be utilised for dispensing with the levy created by the Act, over a class of goods or a class of persons, as the case may be. For doing that, the power of exemption conferred by section 9 of the A.P. Act has to be exercised."
19. A similar question arose for consideration before a Division Bench of this Court in Lipton India Limited v. State of Karnataka . In that case reliance was placed by the petitioner/assessee upon a letter of the Commissioner of Sales Tax addressed to the assessee with reference to the letter sent by the assessee to the former stating that the assessee was not eligible for the benefit of exemption on sale of blended tea. The assessee placed reliance upon this letter and contended that the same was a clarification within the meaning of section 3A(2) of the Karnataka Sales Tax Act. Repelling this argument this Court held that it was difficult to construe the Commissioner's reply sent to the assessee as a suo motu clarification about the rate of tax payable nor could the said letter be treated as a clarification made to the officers or persons employed in the execution of the Act to be followed by them. This Court held that since the clarification in question was not addressed to any of the subordinate officers it was difficult to treat the same as a clarification within the meaning of section 3A(2) of the Karnataka Sales Tax Act. Reliance was placed upon the judgment of the Bengal Iron Corporation [1993] 90 STC 47 (SC) for holding that the clarification in question simply represented the understanding of the Government or the Commissioner of the statutory provisions and could not bind the quasi-judicial function of the authorities under the Act. The Division Bench observed thus :
"It is difficult to appreciate how the reply of the Commissioner dated April 2, 1992, to the appellant can ever be construed as suo motu clarification by the Commissioner about the rate of tax payable and that the said clarification can be said to have been made to officers and persons employed in the execution of the Act, who have to follow such clarification. The said reply given by the Commissioner was not in exercise of any suo motu power. Secondly, it was not a clarification issued in connection with any rate of tax. Thirdly, it was not addressed to any of the subordinate officers ........ It is also now well-settled by a catena of decisions of the Supreme Court that general executive instructions cannot bind the assessing authorities discharging quasi-judicial functions under the Act. In the case of Bengal Iron Corporation , it has been in terms laid down by the Supreme Court that such clarifications and circulars issued by the Central Government or State Government regarding taxability of certain items represent merely their understanding of the statutory provisions. It is doubtful whether such clarifications and circulars bind the quasi-judicial functioning of the authorities under the Act; while acting in quasi-judicial capacity, they are bound by law and not by any administrative clarifications or circulars. It must, therefore, the held that assessing authority was not justified in relying upon the so-called clarification of the Commissioner of Sales Tax dated April 2, 1992. To that extent, the assessment orders are erroneous."
20. In the light of the authoritative pronouncements both by the Supreme Court as also by the Division Bench of this Court in the above cases, there is no gain saying that the clarification issued by the Commissioner in the year 1987, was relatable neither to the provisions of section 3A of the Act nor was the same binding upon the department or its officers. The said clarification was not addressed to the petitioner nor was it endorsed for compliance to the subordinate officers. It was a reply sent to one of the dealers in footwear and could therefore not be deemed to be a clarification in exercise of the suo motu powers of the Commissioner. The nature of this communication issued by the Commissioner it is significant to note was analogous to the one that fell for consideration of the Division Bench in Lipton India's case , which was held not binding upon the authorities. I am not therefore inclined to take a view different than the one taken by the Division Bench.
21. Mr. Prasad, next argued that even if the clarification was not binding upon the authorities for any reason, it was highly unfair and inequitable for the authorities to act contrary to the said clarifications at least for the period the same had held the field. It was submitted that assessees who had changed their position to their detriment acting upon any such clarification court not be deprived of the benefit available thereunder for the period during which the clarification remained in force. He placed reliance upon the judgment of the High Court of Kerala in Commissioner of Income-tax, Kerala-I v. B. M. Edward [1979] 119 ITR 334 [FB] and that of the Supreme Court in State Bank of Travancore v. Commissioner of Income-tax, Kerala [1986] 158 ITR 102.
22. I find no substance even in this submission of the learned counsel. In order that the petitioners or any one of them could rely upon the principles of promissory or equitable estoppel, it was essential for them to lay the requisite factual foundation for any such claim. It was imperative for the petitioners to have stated that they had acted upon the clarifications in question and changed their position to their detriment. It was only if the petitioner had clearly asserted and convincingly demonstrated the above by reference to some acceptable evidence or material that they could possibly rely upon the principles of promissory estoppel. No such case has however been made out by the petitioners or any one of them. The clarification relied upon by the petitioners was never addressed to them nor is it otherwise shown to have been circulated for the information of the industry. Even assuming that the clarification had been sent to the subordinate officers of the department, as was urged by Mr. Prasad, which fact is not borne out by record of this Court, yet unless the petitioners showed further that they had acted upon the representation contained in the clarification, they can neither claim prejudice nor call in aid any equitable considerations in their favour. Reliance upon the judgment of the Kerala High Court in Commissioner of Income-tax v. B. M. Edward [1979] 119 ITR 334 [FB] and that of the Supreme Court in State Bank of Travancore v. Commissioner of Income-tax, Kerala [1986] 158 ITR 102 is therefore wholly misplaced particularly when the facts of the said cases are distinguishable from the facts of the present cases noticed above.
23. In the result these writ petitions fail and are hereby dismissed but in the circumstances without any orders as to costs. Interim orders passed shall stand vacated.
Immediately after the judgment was announced, the learned counsel for the petitioners prayed for the continuance of the interim orders of stay for a further period of six weeks to enable them to prefer writ appeals before a Division Bench or this Court.
In the peculiar facts and circumstances of the case and with a view to give the petitioners a fair opportunity to agitate the matter in the appeal, I direct that the interim orders of stay granted in all these cases shall continue for a period of six weeks from today.
24. Writ petitions dismissed.