Binding Supreme Court precedent, limitation, and machinery provisions governed revisional tax action, builder levy, and void assessments

A declared Supreme Court law remains binding under Article 141 until overruled, so revisional action based on that precedent was valid despite reference to a larger Bench. An amended limitation period could not revive revision claims already time-barred, and the exception clause for revisional jurisdiction could not justify delay where the triggering event arose within the ordinary period. Departmental circulars bind officers but not courts. The levy on builders failed for the period before workable machinery provisions came into force on 16.5.2010, but was sustainable thereafter. An assessment framed against a merged company that had ceased to exist was void.

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Issues: (i) Whether revisional power could be exercised on the basis of the earlier Supreme Court decision despite the matter having been referred to a larger Bench; (ii) whether the extended period for revision could revive cases where the original limitation had already expired; (iii) whether the exception clause for revisional jurisdiction could be invoked when the triggering event occurred within the normal limitation period; (iv) whether departmental circulars were binding; (v) whether Explanation (i) to Section 2(1)(zg) was ultra vires; (vi) whether levy on builders was sustainable in the absence of machinery provisions up to 16.5.2010 and thereafter; and (vii) whether assessment could be framed against a company which had merged and ceased to exist.

Issue (i): Whether revisional power could be exercised on the basis of the earlier Supreme Court decision despite the matter having been referred to a larger Bench.

Analysis: The governing principle under Article 141 of the Constitution of India is that the law declared by the Supreme Court remains binding until it is overruled or modified. A reference to a larger Bench does not suspend the operation of the existing declaration of law. The earlier decision on taxability of such transactions therefore continued to be binding when the revisional action was initiated.

Conclusion: The revisional power could validly be exercised on the basis of the earlier Supreme Court decision; the answer is against the assessee.

Issue (ii): Whether the extended period for revision could revive cases where the original limitation had already expired.

Analysis: Limitation, though procedural, cannot resurrect a claim that had already become time-barred before the amendment. Once the original three-year period under Section 34 had expired, the right to revise stood extinguished. Enlargement of the period from three years to six years could operate only where the claim was still alive on the date of amendment.

Conclusion: The extended period could not revive dead claims; the answer is in favour of the assessee.

Issue (iii): Whether the exception clause for revisional jurisdiction could be invoked when the triggering event occurred within the normal limitation period.

Analysis: The exception clause is intended for exceptional situations and must be strictly construed. If the ground relied upon for revision existed long before the expiry of the normal limitation, the department was expected to act within the ordinary period. The exception cannot be used to justify inaction or to keep matters indefinitely alive, though a marginal case close to expiry may depend on its own facts.

Conclusion: In normal circumstances the event must arise after expiry of the ordinary period; the answer is in favour of the assessee.

Issue (iv): Whether departmental circulars were binding.

Analysis: Instructions issued under the Act bind departmental officers and promote uniform administration, but they do not bind the court. A circular contrary to the statute or to judicial declaration has no legal force. The circulars here, however, supported the accepted legal position on works contracts and limitation only to the extent consistent with the statute.

Conclusion: Departmental circulars are binding on departmental authorities, but not on the court; the answer is partly in favour of the assessee.

Issue (v): Whether Explanation (i) to Section 2(1)(zg) was ultra vires.

Analysis: The provision was earlier examined and upheld as a definitional clause and not a charging provision. It was held not to transgress constitutional limits merely because it defined sale price in the context of works contracts. There was no basis to reopen that conclusion.

Conclusion: The challenge to vires failed; the answer is against the assessee.

Issue (vi): Whether levy on builders was sustainable in the absence of machinery provisions up to 16.5.2010 and thereafter.

Analysis: For the period up to 16.5.2010, the statutory and rule framework did not provide an effective mechanism for determining taxable turnover in builder works contract cases, making the levy unenforceable. From 17.5.2010 onwards, the Rules supplied the necessary machinery, later aligned with the judicial directions, so the levy could be sustained for the later period.

Conclusion: The levy was unenforceable up to 16.5.2010 and sustainable thereafter; the answer is partly in favour of the assessee and partly in favour of the Revenue.

Issue (vii): Whether assessment could be framed against a company which had merged and ceased to exist.

Analysis: Once a company is merged and loses its separate legal identity, it ceases to exist in the eye of law. An assessment made in the name of such a non-existent entity is void and cannot be saved as a mere procedural irregularity. Participation by the successor does not cure the defect.

Conclusion: The assessment against the dissolved company was invalid and was set aside; the answer is in favour of the assessee.

Final Conclusion: The batch was disposed of by upholding the validity of the revisional power on the basis of the earlier binding law, rejecting the challenge to vires, and sustaining the levy only for the period after the machinery provisions came into force, while protecting assessees from time-barred revisional action and invalid assessments made against non-existent companies.

Ratio Decidendi: A declared law of the Supreme Court remains binding until overruled, an expired limitation cannot be revived by subsequent enlargement of time, and a tax levy affecting composite works contracts must be backed by workable machinery provisions and must not be enforced against a non-existent legal person.

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