Taxing circular on old gold ornaments struck down for ignoring the applicable tariff entry and its explanation.

A taxing circular directing that purchases of old ornaments from unregistered dealers be treated as general goods and taxed at the general rate was found inconsistent with entry 21 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957. The Court noted that entry 21 covered articles and jewellery made of bullion or specie, and Explanation I extended "bullion" to pure gold or silver as well as mixed forms. Because the circular relied on a different Supreme Court ruling and ignored the plain wording of entry 21 and its explanation, it was held ultra vires and quashed. The assessee's old gold and silver ornaments fell within entry 21, and recovery was stayed pending disposal of the appeals.

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Issues: Whether the circular dated 5 October 1988 directing that purchases of old ornaments from unregistered dealers be treated as general goods and taxed at the general rate was valid, and whether the articles handled by the assessee fell within entry 21 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The entries in the First Schedule distinguished between bullion and specie under entry 20 and articles and jewellery made of bullion or specie, excluding precious stones, under entry 21. Explanation I made it clear that the expression "bullion" in items 20 and 21 included pure gold or silver and also gold or silver mixed with base metals. The circular proceeded on the basis of the Supreme Court decision dealing with a different and narrower entry and did not take account of entry 21 or its explanation. On the facts, the old gold and silver ornaments dealt with by the assessee were covered by entry 21 and the explanation thereto. The Government had already disapproved the earlier circular and directed that assessments not be reopened in pursuance of it.

Conclusion: The circular dated 5 October 1988 was held to be ultra vires entry 21 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957, and was quashed. The assessments and appeals were directed to be dealt with in accordance with this declaration, with stay of recovery pending disposal of the appeals.

Ratio Decidendi: Where a taxing circular ignores the plain wording of the relevant tariff entry and its explanation, and extends a higher rate by relying on an inapplicable precedent, it is liable to be struck down as contrary to the statute.

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