Subsisting tax circulars bind the department, preventing contrary assessment and penalty where the circular remains in force.

A subsisting sales tax circular issued by the Commissioner bound departmental authorities in their own dealings and could not be disowned in later litigation. Although such a circular cannot override the statute and does not bind courts or the assessee, the department was required to follow its own interpretation while it remained in force. On that basis, sales effected through commission agents were excluded from turnover for the relevant assessment years, and the penalty imposed under the U.P. Sales Tax Act, 1948 was not sustainable. The assessee's relief was therefore maintained.

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Issues: Whether a circular issued by the Commissioner of Sales Tax, so long as it remained in force, bound the departmental authorities in assessing turnover and imposing penalty under the U.P. Sales Tax Act, 1948, and whether the assessee was liable to tax and penalty in the relevant assessment years.

Analysis: The assessee held an eligibility certificate under section 4-A of the U.P. Sales Tax Act, 1948 for the relevant period. The disputed assessment turned on a circular issued by the Commissioner directing that sales effected through commission agents were to be included in turnover. The circular had not been withdrawn. A taxing authority may not assert, in litigation, a view contrary to its own subsisting circular. While such circulars do not bind courts and cannot override statute, they do bind the department as the interpretation adopted by the authority itself. The observation in Bengal Iron Corporation applies, at most, where a true case of estoppel against statute is made out.

Conclusion: The circular bound the sales tax department, the sales were not taxable in the relevant years, and the penalty under section 3-B of the U.P. Sales Tax Act, 1948 was also not sustainable. The appeals failed.

Final Conclusion: The departmental challenge to the High Court's decision was rejected, and the relief granted to the assessee stood affirmed with costs.

Ratio Decidendi: A subsisting circular issued by a taxing authority binds that authority in its own dealings and cannot be disowned by the department in subsequent litigation, although it does not bind the courts or the assessee.

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