Case: State Of Tamil Nadu  Vs. India Cements Ltd.

are not available the particulars of production/sales for prior three years shall be ascertained from the books of the dealers and Eligibility Certificate got amended to incorporate the particulars to avoid any dispute. As per decision of Tamil Nadu Taxation Special Tribunal in O.P.1229/1230/1231/98 dated 23.11.1998. Mercury Fittings (P) Ltd. It was held that GOM No.119/CTRE/13.4.1994 (sic) contemplate the liability to pay tax with reference to Base Production Volume or Base Sales Volume whichever is reached earlier and the liability for deferral is only with reference to volume of Sales and not with reference to taxes paid on sales for the base year. Thus all Deputy Commissioners and Assistant Commissioners shall thoroughly verify all expansion cases and satisfy themselves that taxes have been paid until the BPV/BSV has been achieved." (Emphasis supplied by us)18. It is manifest from the highlighted portion of the circular that as per the clarification issued by the Commissioner of Commercial Taxes, in exercise of the power conferred on him under Section 28A of the TNGST Act, the benefit of sales tax deferral scheme would be available to a dealer from the date of reaching of BPV or BSV, whichever is earlier, as is pleaded on behalf of the first respondent. It is trite law that circulars issued by the revenue are binding on the departmental authorities and they cannot be permitted to repudiate the same on the plea that it is inconsistent with the statutory provisions or it mitigates the rigour of the law.19. In Paper Products Ltd. Vs. Commissioner of Central Excise3, while interpreting Section 37-B of the Central Excise Act, 1944, which is in pari materia with Section 28A of the TNGST Act, this Court had held that the circulars issued by the Central Board of Excise & Customs are 3 (1999) 7 SCC 84 binding on the department and the department is precluded from challenging the correctness of the said circulars, even on the ground of the same being inconsistent with the statutory provision. It was further held that the department is precluded from the right to file an appeal against the correctness of the binding nature of the circulars and the departments action has to be consistent with the circular which is in force at the relevant point of time.20. In Collector of Central Excise, Vadodara Vs. Dhiren Chemical Industries ((2002) 2 SCC 127 ), a Constitution Bench of this Court had held that if there are circulars issued by the Central Board of Excise & Customs which place a different interpretation upon a phrase in the statute, the interpretation suggested in the circular would be binding upon the revenue even regardless of the interpretation placed by this Court.21. Similarly, in Commissioner of Customs, Calcutta & Ors. Vs. Indian Oil Corpn. Ltd. & Anr. ((2004) 3 SCC 488 ), dealing with the circular issued by the Board under Section 151-A of the Customs Act, 1962, which is again in pari materia with Section 28A of the TNGST Act, Ruma Pal, J., had opined that the circular will be binding primarily on the basis of the language of the statutory provisions buttressed by the need of the adjudicating officers to maintain uniformity in the levy of tax/duty throughout the country.Although in the same judgement, while concurring with the view expressed by Ruma Pal, J., on the facts of that case, P. Venkatarama Reddi, J., entertaining certain doubts as to the correctness of the proposition laid down by the Constitution Bench in Dhiren Chemical Industries (supra), had observed that there was a need to redefine succinctly the extent and parameters of the binding character of the circulars of the Central Board of Direct Taxes or Central Excise etc., by another Constitution Bench, yet the learned Judge did not disagree with the proposition that it is not open to the revenue to file an appeal against the order passed by an appellate authority which is in conformity with a departmental circular. In fact, His Lordship went on to observe that when there is a statutory mandate to observe and follow the orders and instructions of CBEC in regard to specified matters, that mandate has to be complied with. It is not open to the adjudicating authority to deviate from those orders or instructions which the statute enjoins that it should follow. If any order is passed contrary to those instructions, the order is liable to be struck down on that very ground.22. In Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wire Industries ((2008) 13 SCC 1 ), a Constitution Bench of this Court has clarified the confusion created on account of the view expressed in para 11 of Dhiren Chemical Industries (supra), on the question of binding effect of judgment of this Court vis-à-vis State and Central Government circulars thus: "7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." 23. In the present case, it is not the case of the revenue that circular dated 1st May, 2000 is in conflict with either any statutory provision or the deferral schemes announced under the afore-mentioned government orders. We, therefore, hold that the said circular is binding in law on the adjudicating authority under the TNGST Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]16. A conjoint reading of clauses 3(i) and (ii) of G.O.Ms.No.119 dated 13th April, 1994, and paragraph 5.3 of eligibility certificate dated 13th February, 1998 would show that the object of the conditions with reference to reaching of BPV is to ensure that the concerned unit achieves the highest production and sale of the existing unit in the last three years prior to the commencement of the commercial production in the expansion unit, resulting in higher revenue on higher sales. The benchmark for availing the benefit of the sales tax deferral scheme having been fixed both with reference to the production as also to the sales, in our opinion, it is immaterial whether the unit concerned reaches BPV or the BSV earlier. In our view, the word "when" employed in clause 3(ii) of G.O.Ms.No.119, whether read as "if" or "after" only signifies that in order to avail of the benefit of sales tax deferral for sales made in the year in excess of the BSV, the industry must achieve in that year the BPV, which is the highest production of the last three years prior to the expansion, for every assessment year of the total number of years, viz., 12 years, besides reaching BSV in that particular year. It is obvious that by insisting that the BSV should also be reached, the revenue of the State gets protected in every assessment year during the entire period of deferral and, in fact, the industry gets the benefit of deferral only on sales which are in excess of the BSV. It is pertinent to note that if for any reason the beneficiary ultimately fails to achieve the BPV during the financial year, the benefit of deferral of sales tax availed of by it on achieving BSV becomes refundable forthwith along with interest thereon. In our opinion, in light of the intention behind the schemes, clause 3(ii) of the G.O.Ms.No.119 cannot be construed to mean that the benefit would flow only from the date of reaching the BPV and not from the date of reaching the BSV, particularly when the main object of the schemes is to increase the productivity without compromising with the revenue of the State. Any other interpretation of the said GOM would frustrate the object of the scheme. It is now well established principle of law that if a plain meaning given to the provision for the purpose of considering as to whether the applicant had fulfilled the eligibility criteria as laid down in the notification or not is found to be clear, purpose and object the notification seeks to achieve must be given effect to. (See: G.P. Ceramics Private Limited Vs. Commissioner, Trade Tax, Uttar Pradesh ((2009) 2 SCC 90 ).)17. In any event, we feel that the decision of the High Court cannot be flawed with in light of the circular dated 1st May, 2000 issued by the office of the Principal Commissioner and Commissioner of Commercial Taxes, Chennai, in exercise of power conferred on him under Section 28A of the TNGST Act. For the sake of ready reference, the relevant portion of the circular is extractedper GOMs No.119, CT & RE/13.4.1994 as regards expansion cases it was decided that the past revenue shall be protected obtained prior to expansion. The BPV/BSV is fixed on the basis of highest annual production/sales in the 3 years prior to expansion. Thus the industries will have to pay the taxes due upon the turnover and until the Base Production Volume/Base Sales volume mentioned in the Eligibility Certificate is achieved. The BPV/BSV shall have to be worked out and incorporated in the Eligibility Certificate by SIPCOT and other district centres as per above Government order. Hence if the details are not available the particulars of production/sales for prior three years shall be ascertained from the books of the dealers and Eligibility Certificate got amended to incorporate the particulars to avoid any dispute. As per decision of Tamil Nadu Taxation Special Tribunal in O.P.1229/1230/1231/98 dated 23.11.1998. Mercury Fittings (P) Ltd. It was held that GOM No.119/CTRE/13.4.1994 (sic) contemplate the liability to pay tax with reference to Base Production Volume or Base Sales Volume whichever is reached earlier and the liability for deferral is only with reference to volume of Sales and not with reference to taxes paid on sales for the base year. Thus all Deputy Commissioners and Assistant Commissioners shall thoroughly verify all expansion cases and satisfy themselves that taxes have been paid until the BPV/BSV has beensupplied by us)18. It is manifest from the highlighted portion of the circular that as per the clarification issued by the Commissioner of Commercial Taxes, in exercise of the power conferred on him under Section 28A of the TNGST Act, the benefit of sales tax deferral scheme would be available to a dealer from the date of reaching of BPV or BSV, whichever is earlier, as is pleaded on behalf of the first respondent. It is trite law that circulars issued by the revenue are binding on the departmental authorities and they cannot be permitted to repudiate the same on the plea that it is inconsistent with the statutory provisions or it mitigates the rigour of the law.19. In Paper Products Ltd. Vs. Commissioner of Central Excise3, while interpreting Section 37-B of the Central Excise Act, 1944, which is in pari materia with Section 28A of the TNGST Act, this Court had held that the circulars issued by the Central Board of Excise & Customs are 3 (1999) 7 SCC 84 binding on the department and the department is precluded from challenging the correctness of the said circulars, even on the ground of the same being inconsistent with the statutory provision. It was further held that the department is precluded from the right to file an appeal against the correctness of the binding nature of the circulars and the departments action has to be consistent with the circular which is in force at the relevant point of time.20. In Collector of Central Excise, Vadodara Vs. Dhiren Chemical Industries ((2002) 2 SCC 127 ), a Constitution Bench of this Court had held that if there are circulars issued by the Central Board of Excise & Customs which place a different interpretation upon a phrase in the statute, the interpretation suggested in the circular would be binding upon the revenue even regardless of the interpretation placed by this Court.21. Similarly, in Commissioner of Customs, Calcutta & Ors. Vs. Indian Oil Corpn. Ltd. & Anr. ((2004) 3 SCC 488 ), dealing with the circular issued by the Board under Section 151-A of the Customs Act, 1962, which is again in pari materia with Section 28A of the TNGST Act, Ruma Pal, J., had opined that the circular will be binding primarily on the basis of the language of the statutory provisions buttressed by the need of the adjudicating officers to maintain uniformity in the levy of tax/duty throughout the country.Although in the same judgement, while concurring with the view expressed by Ruma Pal, J., on the facts of that case, P. Venkatarama Reddi, J., entertaining certain doubts as to the correctness of the proposition laid down by the Constitution Bench in Dhiren Chemical Industries (supra), had observed that there was a need to redefine succinctly the extent and parameters of the binding character of the circulars of the Central Board of Direct Taxes or Central Excise etc., by another Constitution Bench, yet the learned Judge did not disagree with the proposition that it is not open to the revenue to file an appeal against the order passed by an appellate authority which is in conformity with a departmental circular. In fact, His Lordship went on to observe that when there is a statutory mandate to observe and follow the orders and instructions of CBEC in regard to specified matters, that mandate has to be complied with. It is not open to the adjudicating authority to deviate from those orders or instructions which the statute enjoins that it should follow. If any order is passed contrary to those instructions, the order is liable to be struck down on that very ground.22. In Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wire Industries ((2008) 13 SCC 1 ), a Constitution Bench of this Court has clarified the confusion created on account of the view expressed in para 11 of Dhiren Chemical Industries (supra), on the question of binding effect of judgment of this Court vis-à-vis State and Central Government circularsCirculars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.In the present case, it is not the case of the revenue that circular dated 1st May, 2000 is in conflict with either any statutory provision or the deferral schemes announced under the afore-mentioned government orders. We, therefore, hold that the said circular is binding in law on the adjudicating authority under the TNGST Act.