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M/S Hindustan Computers Ltd. v. The Commissioner Of Trade Tax - SALES/TRADE TAX REVISION No. 1025 of 2000 [2007] RD-AH 3125 (24 February 2007)


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M/s Hindustan Computers Ltd.       ....Applicant


The Commissioner of Trade Tax.   .Opp.party


Hon'ble Rajes Kumar, J.

Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 03.06.2000 relating to the assessment year 1985-86 under Central Sales Tax Act (hereinafter referred to as "Central Act").

During the year under consideration, applicant had sold certain goods outside the State of U.P. in the course of inter-State sales without declaration form. In the absence of declaration form, assessing authority levied the tax @ 12% while passing the assessment order under section 9 of Central Act. Later on assessing authority initiated the proceedings under section 21 of the Act on the ground that in view of the decision of the Apex court in the case of Aiyasha Hosiery, surcharge was also leviable. Assessing authority accordingly, levied the surcharge on the inter-State sales. Against the order passed under section 21 of the Act applicant filed appeal before the Deputy Commissioner (Appeals), Trade Tax, Ghaziabad, who allowed the appeal on the ground that the proceedings under section 21 of the Act was barred by limitation following the decision of this Court in the case of M/s Chopra Diesel Spare and another Vs. State of U.P. and others, reported in 1994 UPTC, 115. Being aggrieved by the order of the Deputy Commissioner (Appeals), Commissioner of Trade Tax filed appeal before the Tribunal. Tribunal by the impugned order allowed the appeal and set aside the order of the first appellate authority and restored the assessment order. Tribunal held that the proceedings under section 21 of the Act was within time relying upon the decision of the Apex court in the case of Additional Commissioner (Legal), Trade Tax Vs. M/s Jyoti Traders And Others, reported in 1999 NTN (Vol.14), SC, 12 Tribunal further held that the circular contrary to the law was not binding relying upon the decision of the Apex Court in the case of Bengal Iron Corporation and another Vs. Commercial Tax Officer and others, reported in 1993 UPTC, 1312.

Heard learned counsel for the parties.

Learned counsel for the applicant submitted that the circular even contrary to the law was binding upon the assessing authority. He submitted that vide circular dated 26.07.1982 issued by Additional Commissioner, U.P. Lucknow based on the decision of the Government of U.P. it has been held that the Additional tax could not be levied by calculating the tax under section 8 (2-A) of the Central Act. Learned Standing Counsel relied upon the order of the Tribunal.

Having heard learned counsel for the parties, in my view, order of the Tribunal is not sustainable so far as it restored the order of the assessing authority levying the additional tax  is concerned. This Court in the case of M/s U.P. Ceramics And Potteries Limited, Ghaziabad Vs. Commissioner of Sales Tax, reported in 1992 UPTC, 1333 held that the additional tax is not leviable in view of the circular dated 26.07.1982, which is binding upon the assessing authority. It is true that the circular is not binding upon the Court as held by the Apex Court in the case of Bengal Iron Corporation and another Vs. Commercial Tax Officer and others(Supra)  but it has been consistently held by the Apex Court that the circulars are binding upon the revenue authorities even though it is contrary to the statute.

It is settled principal of law that the circulars though contrary to the provisions are binding upon the revenue authorities.

In the case of Commissioner of Sales Tax, U.P. Vs. M/s Indra Industries, reported in 2000 UPTC, 472, Apex Court held as follows:

"A circular by tax authorities is not binding on the courts. It is not binding on the assessee. However, the interpretation that is thereby placed by the taxing authority on the law is binding on that taxing authority. In other words the taxing authority cannot be heard to advance an argument that is contrary to that interpretation."

In the case of Paper Products Ltd. Vs. Collector of Central Excise, reported in (1997) 7 SCC, 84, Apex Court held as follows:

"This question is no more res integra in view of the various judgments of this Court. This Court in a catena of decision has held that the Circulars issued under Section 37-B of the said Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. These judgments have also held that the position may be different with regard to an assessee who can contest the validity or legality of such instructions but so far as the department is concerned, such right is not available. See Collector of Central Excise v. Usha Martin Industries. In the case of Ranadey Micronutrients v. Collector of Central Excise, this Court held that the whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. The Court also held that it does not lie in the mouth of the revenue to repudiate a Circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are, according to this Court, of for greater importance than the winning or losing of Court proceedings. In the case of Collector of Central Excise v. Jayant Dalal (P) Ltd. This Court has held that it is not open to the revenue to advance an argument or even file an appeal against the correctness of the binding nature of the Circulars by the Board. Similarly is the view taken by this Court in the case of Collector of Central Excise v. Kores (India) Ltd."

Similar view has been taken by the Apex Court in a recent decision in the case of Saci Allied Products Ltd., U.P. Vs. Commissioner of Central Excise, Meerut, reported in (2005) 7 SCC, 159,  Union of India and another Vs. Azadi Bachao Andolan and another, reported in 263 ITR, 706.

In the case of Simplex Castings Ltd. Vs. Commissioner of Customs (Vishakhapatnam, reported in (2003) 5 SCC, 528, Apex Court held that it is not open to the Customs Department to prefer appeal before CEGAT contrary to what was laid down in the circular.

In the result, revision is allowed. Order of the Tribunal is set aside and it is held that the assessing authority has erred in levying the additional tax.




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