Binding recovery notice circular protected assessees from coercive collection of revived sales tax penalty demands.

A binding administrative circular governing recovery of revived sales tax demands required a fresh notice before coercive collection of tax arrears and penalty, even where an earlier demand notice had already been served. The Karnataka HC read the circular as a general procedural safeguard for assessees facing liabilities retrospectively validated by constitutional amendment, and held that subordinate authorities were bound to follow it under the Act. On that basis, revisional interference restoring the penalty was unjustified, and the assessee obtained relief against recovery of the revived penalty demand.

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Issues: Whether the Commissioner's circular required a simple notice to be issued before recovery of tax arrears and penalty under section 13(2) of the Karnataka Sales Tax Act, 1957, even where an earlier demand notice had already been served, and whether the revisional order restoring the penalty was sustainable.

Analysis: The levy of tax on supply of food and drinks had been retrospectively validated by the Constitution (Forty-sixth Amendment) Act, 1982, but the Court held that assessees who had relied on the earlier constitutional position were entitled to a fair reminder before coercive recovery was pursued. Clause 13 of the Commissioner's circular was read as a general procedural instruction applicable to all such revived demands, not as a distinction between cases with or without an earlier demand notice. The Court further held that even if the circular went beyond the bare statutory language, it was binding on subordinate authorities under section 3-A of the Karnataka Sales Tax Act, 1957. On that footing, the revisional interference with the appellate order was unjustified.

Conclusion: The circular was applicable, the penalty could not be recovered without compliance with the notice requirement contemplated by the circular, and the revisional order was liable to be set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee obtained relief against the revived penalty demand, while leaving the Revenue free to proceed in accordance with the circular as interpreted by the Court.

Ratio Decidendi: A binding administrative circular issued to ensure fair recovery procedure must be followed by subordinate tax , and revived tax liabilities validated by constitutional amendment should not be enforced without the notice procedure prescribed by that circular.

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