Retrospective effect of tax circulars denied where later circular changed departmental stand, preserving earlier circular for prior transactions.

Departmental circulars issued under a taxing statute are binding on subordinate authorities and are intended to ensure uniformity and predictable business conduct. A later circular cannot retrospectively displace an earlier circular unless it is merely clarificatory and reflects an authoritative declaration of law; where it instead signals a change in departmental stand, it does not nullify the earlier circular for prior transactions. If the legal position remains debatable, the benefit of doubt goes to the assessee. The 1979 circular therefore continued to govern transactions entered into before the 2004 circular, and the assessee remained entitled to its benefit for the earlier assessment years.

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Issues: Whether the 2004 circular could retrospectively displace the 1979 circular and thereby deny the assessee the treatment accorded to roasted groundnuts for transactions entered into before 24 May 2004.

Analysis: Circulars issued by the departmental authority under the taxing statute were binding on subordinate authorities and were intended to secure uniformity and enable trade to arrange its affairs accordingly. The 1979 circular had remained in force for years and had guided the assessee's business conduct. The 2004 circular was not shown to be a mere explanatory clarification flowing from an authoritative declaration of law by a court; rather, it reflected a reconsideration and change in departmental stand. In such circumstances, it could not be treated as having the effect of nullifying the earlier circular retrospectively. Where the legal position remained debatable, the benefit of doubt had to go to the assessee.

Conclusion: The 1979 circular continued to govern transactions entered into before the issuance of the 2004 circular, and the assessee could not be denied the benefit arising from it for the earlier assessment years.

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