Declared goods by incorporation and limits on trade circulars shape tax treatment of woollen carpets and fresh assessments.

A taxing enactment that incorporates an excise entry by reference will generally track later changes to the incorporated schedule, so woollen carpets ceased to fall within the declared-goods description after the 1979 excise amendment on a strict reading. However, because the earlier construction had been accepted and acted on for years, the 4 per cent tax position was preserved prospectively up to 12 May 1988 to avoid disturbing settled practice. A trade circular could not fetter the assessing authority's quasi-judicial function or override independent assessment, so the circular and assessment steps founded on it were liable to be quashed or set aside, with fresh assessment left open in accordance with the ruling.

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Issues: (i) Whether woollen carpets made wholly of wool or containing the prescribed wool content continued to be treated as declared goods within section 14(x) of the Central Sales Tax Act, 1956, and to attract tax only up to 4 per cent up to 12 May 1988 despite the 1979 amendment to the Central Excises and Salt Act, 1944. (ii) Whether the Commissioner could validly issue the trade circular fixing a higher tax position and whether the impugned assessment/review notices and orders based on that circular were sustainable.

Issue (i): Whether woollen carpets made wholly of wool or containing the prescribed wool content continued to be treated as declared goods within section 14(x) of the Central Sales Tax Act, 1956, and to attract tax only up to 4 per cent up to 12 May 1988 despite the 1979 amendment to the Central Excises and Salt Act, 1944.

Analysis: The definition of woollen fabrics in section 14(x) was treated as an incorporation of the corresponding entry in the excise schedule. The 1979 insertion of Explanation III in item 21 of the First Schedule to the Central Excises and Salt Act, 1944, which excluded floor coverings falling under item 22G, meant that woollen carpets ceased to remain within the declared-goods description on a strict reading. At the same time, the judgment recognised that the earlier Division Bench view had been accepted and acted upon in the State for years, and that disturbing that settled position retrospectively would be unfair to dealers. Applying the principle against unsettling a long-accepted construction, the rate of tax on woollen carpets was allowed to continue at 4 per cent up to 12 May 1988.

Conclusion: Woollen carpets were not held to remain declared goods indefinitely after the 1979 excise amendment, but the 4 per cent rate was upheld for the period up to 12 May 1988 in favour of the assessee.

Issue (ii): Whether the Commissioner could validly issue the trade circular fixing a higher tax position and whether the impugned assessment/review notices and orders based on that circular were sustainable.

Analysis: The Commissioner's circular was held to be an impermissible attempt to control or fetter the quasi-judicial function of the assessing authority. The circular could not override the statutory duty of independent assessment. However, the Tribunal did not grant a general declaration or prohibition in every case; instead, relief was confined to quashing the circular and the impugned notices or orders where appropriate, while leaving fresh assessment open in accordance with the judgment.

Conclusion: The circular was invalid and the impugned notices or orders founded on it were set aside or quashed to the extent ordered, in favour of the assessee.

Final Conclusion: The common decision granted only limited relief: the higher-rate circular and specific reassessment steps were struck down, the 4 per cent position was preserved up to 12 May 1988, and fresh assessments were left to be made according to the ruling where necessary.

Ratio Decidendi: Where a statutory reference in a taxing enactment operates by incorporation, later amendment of the incorporated entry can alter the scope of the reference, but a long-accepted judicial construction may be preserved prospectively in taxation matters to avoid disturbing settled practice; administrative circulars cannot direct or fetter quasi-judicial assessments.

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