Set-off circular invalid where it foreclosed independent assessment and exceeded the power under the rules.

A circular directing denial of set-off on purchases from named dealers merely because the sellers' returns did not reflect corresponding sales was held invalid. The Court reasoned that entitlement to set-off depended on the statutory scheme governing taxable turnover and tax-paid goods, including purchases from registered dealers and prescribed conditions, and could not be overridden by administrative direction. A direction under rule 3(5) of the Madhya Pradesh Vanijyik Kar Niyam, 1995 could not control or pre-empt the independent quasi-judicial assessment of statutory entitlement. The circular therefore transgressed the limits of administrative power, was beyond the rules, and was quashed.

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Issues: Whether the circular issued by the Commissioner of Commercial Tax, which directed denial of set-off on purchases from named dealers on the footing that their returns did not show corresponding sales, was valid in law and binding on the assessing and appellate authorities.

Analysis: The circular purported to require subordinate authorities to reject claims of set-off merely because the sellers had not disclosed sales in their returns. The statutory scheme defining taxable turnover and tax-paid goods recognised entitlement by reference to purchases from registered dealers and the prescribed conditions, and the power under rule 3(5) of the Madhya Pradesh Vanijyik Kar Niyam, 1995 could not be used to issue a direction that overrides the Act or controls the exercise of quasi-judicial functions. A circular of this kind, by foreclosing an independent adjudication on the statutory entitlement to set-off, transgressed the limits of administrative direction and entered the quasi-judicial domain.

Conclusion: The circular was invalid and beyond the power conferred by the 1995 Rules, and it was quashed.

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