Binding tax circulars bar reassessment where original assessments followed the prevailing exemption instructions.

Under the Karnataka Sales Tax Act, reassessment under section 12-A was held unavailable where the original assessments on raw silk and silk yarn were completed in conformity with a binding circular issued under section 3-A and the Government's exemption notification under section 8-A. The administrative instructions reflected the prevailing exemption position, and assessments made on that basis could not later be recast as escaped assessments or wrongly allowed exemptions merely because the revenue later adopted a different view. The reassessment orders and proposition notices were therefore invalid and quashed in favour of the assessee.

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Issues: Whether reassessment orders and proposition notices issued under section 12-A of the Karnataka Sales Tax Act, 1957, seeking to levy turnover tax on raw silk and silk yarn for the period 1 April 1991 to 27 August 1991, were valid in the face of the Commissioner's circular issued under section 3-A and the Government's notification under section 8-A.

Analysis: The levy of turnover tax on raw silk and silk yarn was dealt with through a chain of statutory measures and administrative directions. The Government notification under section 8-A, as varied on 28 August 1991, and the Commissioner's circular directing officers not to demand turnover tax from 1 April 1991 reflected the administrative understanding of the exemption scheme. Section 3-A made the Commissioner's instructions binding on subordinate officers. Assessments were originally completed following that circular. The Court held that such assessments could not thereafter be reopened under section 12-A by treating them as escaped assessments or wrongly allowed exemptions, because what was properly done in obedience to binding circular instructions could not be characterized as an escapement or under-assessment.

Conclusion: The reassessment orders and proposition notices were invalid and liable to be quashed; the issue was answered in favour of the assessee.

Ratio Decidendi: Where subordinate tax authorities act in conformity with a binding circular issued by the competent administrative authority under the Act, completed assessments cannot later be reopened as escaped assessments under the reassessment provision merely because the revenue adopts a different view of the same exemption or levy.

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