Statutory deduction formula must be applied as written; a circular cannot rewrite tax computation or sustain faulty assessments.

An administrative circular could not alter the statutory formula under rule 6(1)(l) for computing deduction from the sale price of rice. The rule required deduction to be worked out strictly by reference to the tax rate applicable to rice, while the circular wrongly introduced the rebate relating to paddy and double taxation into that computation. Because the circular departed from the plain language of the rule, it was invalid in law, and assessment orders founded on it could not stand. Fresh assessments were left open on the basis of whether, and to what extent, tax formed part of the sale price, without reference to the circular.

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Issues: (i) Whether the Commissioner's circular directing computation of deduction under rule 6(1)(l) by first reducing the tax attributable to paddy from the tax payable on rice was consistent with the rule; (ii) Whether the assessment orders based on that circular could be sustained.

Issue (i): Whether the Commissioner's circular directing computation of deduction under rule 6(1)(l) by first reducing the tax attributable to paddy from the tax payable on rice was consistent with the rule.

Analysis: Rule 6(1)(l) prescribed a formula for deduction from aggregate sale prices including sales tax, and the expression used in the formula was the rate of tax applicable to the sale of rice. The circular introduced the rebate under Explanation III to the Third Schedule into the computation of the deduction, although that explanation only granted relief from double taxation on paddy and rice and did not alter the rate of tax. The circular therefore sought to rewrite the statutory formula and could not be reconciled with the plain language of the rule.

Conclusion: The circular was contrary to rule 6(1)(l) and invalid in law.

Issue (ii): Whether the assessment orders based on that circular could be sustained.

Analysis: The assessments were made on the basis of the circular, and the deduction under rule 6(1)(l) was worked out on an erroneous understanding of the rule. Since the circular could not control the statutory formula, the assessments founded on it could not stand. The Court left it open to the assessing authority to enquire whether and to what extent tax formed part of the sale price and to make fresh assessments on that basis.

Conclusion: The impugned assessment orders were set aside and fresh assessments were directed.

Final Conclusion: The writ petitions succeeded to the extent that the assessments based on the circular were quashed and the matters were remitted for fresh assessment without reference to the circular.

Ratio Decidendi: An administrative circular cannot override or modify the plain operation of a statutory formula, and a deduction for tax embedded in sale price must be computed strictly in accordance with the rule as enacted.

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