Departmental circulars cannot override the charging provision or gain retrospective effect without legislative authority.

Administrative circulars under the Karnataka Sales Tax Act cannot be treated as retrospectively operative without statutory authority. A circular dated 12 April 1996 could not govern assessment years preceding its issue, even though the underlying provision was later amended or validated retrospectively. The later circular dated 23 October 1999 correctly reflected section 5-C as an independent, multi-point levy on transfer of the right to use goods; once the earlier circular was found inconsistent with that charging provision, it could not continue to bind assessments for the relevant period. Contemporanea expositio, benefit of doubt, and the validation clause did not displace the plain statutory meaning.

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Issues: (i) Whether the circular dated 12 April 1996 issued under section 3-A of the Karnataka Sales Tax Act, 1957 could be given retrospective effect so as to govern assessment years prior to its issue. (ii) Whether the later circular dated 23 October 1999 correctly represented the law under section 5-C and whether the earlier circular, having been found erroneous, could nevertheless continue to bind the assessing authorities for the period 1 April 1996 to 31 March 2000. (iii) Whether the doctrines of contemporanea expositio, the rule that the assessee gets the benefit of doubt, and the validation clause in the amending legislation supported the assessees' claim.

Issue (i): Whether the circular dated 12 April 1996 issued under section 3-A of the Karnataka Sales Tax Act, 1957 could be given retrospective effect so as to govern assessment years prior to its issue.

Analysis: The circular was an administrative clarification and not a legislative enactment. The Court held that administrative circulars cannot be treated as retrospectively operative in the absence of statutory authorisation. Section 5-C created an independent levy on transfer of the right to use goods, and the fact that the provision was retrospectively amended did not make the later administrative clarification retrospectively applicable. The binding character of a circular operates while it is in force, but that does not authorise its application to closed past periods merely because the provision itself was later validated or amended retrospectively.

Conclusion: The circular dated 12 April 1996 could not be applied retrospectively to assessment years prior to its issuance.

Issue (ii): Whether the later circular dated 23 October 1999 correctly represented the law under section 5-C and whether the earlier circular, having been found erroneous, could nevertheless continue to bind the assessing authorities for the period 1 April 1996 to 31 March 2000.

Analysis: The Court held that the earlier circular was contrary to section 5-C because it wrongly imported the concept of tax suffered goods from section 5(3)(a) into an independent charging provision. The later circular correctly interpreted section 5-C as a separate, multi-point levy. Once the Court declared the earlier circular erroneous and inconsistent with the statutory provision, it could not continue to control assessments for the relevant period. The doctrine that departmental circulars bind the revenue cannot override the Court's declaration of the law, and the relief-based approach adopted in certain Supreme Court decisions could not be transplanted here.

Conclusion: The circular dated 23 October 1999 correctly interpreted section 5-C, and the earlier circular could not remain binding for the assessment period 1 April 1996 to 31 March 2000.

Issue (iii): Whether the doctrines of contemporanea expositio, the rule that the assessee gets the benefit of doubt, and the validation clause in the amending legislation supported the assessees' claim.

Analysis: The Court held that contemporanea expositio cannot prevail against plain statutory language and cannot be used to sustain an interpretation already found erroneous. The rule favouring the assessee where two views are possible was held inapplicable because the Court found only one legally tenable construction of the circular and the provision. The validation clause protected completed lawful acts and assessments consistent with the amended provision, but it did not prevent reassessment or revision where the impugned circular was inconsistent with the statute.

Conclusion: None of these doctrines altered the statutory interpretation in favour of the assessees.

Final Conclusion: The assessees did not succeed in challenging the Revenue's interpretation of section 5-C, and the directions treating the earlier circular as binding for the later assessment period were set aside.

Ratio Decidendi: A departmental circular is binding on the revenue only so long as it is consistent with the statute and operative in law; once it is found contrary to the charging provision, it cannot be enforced to govern assessments, nor can an administrative clarification be given retrospective effect in the absence of legislative authority.

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