2011 (4) TMI 1080 - SC - VAT / Sales Tax

Sales tax deferral scheme circulars: whether departmental clarifications bind tax authorities; held binding on authorities, appeal dismissed.

Whether departmental circulars governing a sales tax deferral scheme bind authorities under the State sales tax statute was the dominant issue. The SC ... Benefit of the sales tax deferral scheme - whether circulars issued by the Revenue are binding on the departmental authorities – Held that:- clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive, it is not the case of the Revenue that circular dated May 1, 2000 is in conflict with either any statutory provision or the deferral schemes announced under the aforementioned Government orders, circular is binding in law on the adjudicating authority under the TNGST Act, no merit in this appeal and the same is dismissed accordingly Issues: Whether, for the purpose of entitlement to interest-free sales tax deferral under G.O. Ms. No. 119 (1994) and the eligibility certificate, the dealer becomes eligible for deferral in a financial year as soon as sales exceed the Base Sales Volume (BSV) or only when both the Base Production Volume (BPV) and the BSV are reached in that year.Analysis: The sales tax deferral scheme flows from statutory power under Section 17A of the Tamil Nadu General Sales Tax Act, 1959 and is implemented by G.O. Ms. No. 119 (1994) together with eligibility certificates and consequential agreements, which have statutory force. Paragraph 5.3 of the eligibility certificate ties deferral to increased volume of production/sale measured against highest of the last three years. A harmonious reading of clauses 3(i) and 3(ii) of G.O. Ms. No. 119 shows the scheme benchmarks both production and sales to protect revenue while promoting productivity. The departmental circular dated May 1, 2000 (issued under Section 28A of the TNGST Act) clarifies that liability to pay tax is with reference to BPV or BSV whichever is reached earlier and that deferral liability relates to sales volume; such circulars are binding on the departmental authorities. Applying principles of fiscal construction and giving effect to the scheme's object without compromising revenue, clause 3(ii) must be read so that the dealer is entitled to deferral from the date of reaching either BPV or BSV, whichever is earlier, subject to the condition that BPV/BSV for the year is verifiable and, if BPV is not ultimately achieved for the year, any deferral availed becomes refundable with interest.Conclusion: The dealer is entitled to claim sales tax deferral in any financial year from the date of reaching BPV or BSV, whichever is earlier; the interpretation upheld is in favour of the assessee.