Retrospective circulars cannot withdraw earlier G Form concessions, and penalty fails absent misuse of declared goods.

A later circular cannot be applied retrospectively to withdraw a concession already available under an earlier clarification unless it clearly says so, so the assessee retained the benefit of purchasing cement against G Forms for prior assessment years. Penalty under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957 was also unwarranted because the cement was used as raw material in a manufacturing unit to produce cement pipes, and there was no sale of the purchased goods contrary to the G Form declaration. The Tribunal's setting aside of the penalty was sustained.

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Issues: (i) Whether the circular issued on 08.01.2005 could be applied to earlier assessment years to deny the assessee the benefit of purchasing cement against G Forms at a concessional rate and to sustain penalty. (ii) Whether the assessee's purchase of cement against G Forms for manufacture of cement pipes, which were later used in works contracts, attracted penalty under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Issue (i): Whether the circular issued on 08.01.2005 could be applied to earlier assessment years to deny the assessee the benefit of purchasing cement against G Forms at a concessional rate and to sustain penalty.

Analysis: The record showed that the assessee had been acting under an earlier clarification permitting the use of G Forms, and the later circular of 08.01.2005 did not contain any express retrospective mandate. The legal position applied was that a circular may bind the department, but it cannot be given retrospective effect in the absence of clear language to that effect. The benefit available under the earlier regime therefore could not be taken away for prior years merely on the strength of the later circular.

Conclusion: In favour of the assessee. The later circular could not be applied retrospectively to deny the concessional treatment for the earlier periods.

Issue (ii): Whether the assessee's purchase of cement against G Forms for manufacture of cement pipes, which were later used in works contracts, attracted penalty under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The assessee had manufacturing units and purchased cement for use as raw material in the manufacture of cement pipes. The Tribunal's factual finding was that the assessee did not sell the cement contrary to the declaration; rather, the cement was used in the manufacture of finished goods, and the pipes were then treated as goods transferred in the course of works contracts. On that basis, the statutory conditions for penalty were not satisfied. The penalty provision was held to operate only where the dealer either had no manufacturing unit or sold the goods contrary to the declaration made in the G Form.

Conclusion: In favour of the assessee. The ingredients for levy of penalty were not made out and the assessee was not liable under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Final Conclusion: The Tribunal's order setting aside the penalty and restoring the appellate order was sustained, and the revision was rejected.

Ratio Decidendi: A later circular cannot be retrospectively applied to withdraw a concession for earlier years absent express retrospective effect, and penalty for misuse of G Forms under the relevant sales tax provision lies only when the dealer lacks a manufacturing unit or sells the purchased goods contrary to the declaration.

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