Quashed circular cannot sustain reassessment where statutory notification benefit for inter-State electronic goods sales remains operative.

Reassessment proceedings based solely on a circular that had already been quashed could not survive in law, because the invalid circular destroyed the foundation for reopening. The Court also treated the notification governing inter-State sale of electronic goods as conferring a benefit that could not be denied without cogent, reasoned material. On that basis, the reassessment proceedings and impugned orders were unsustainable, and the questions of law were answered in favour of the assessee and against the Revenue.

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Issues: Whether reassessment proceedings could be sustained when they were initiated on the basis of a circular that had already been quashed, and whether the tax rate applicable to inter-State sale of electronic goods was to be governed by the notification relied upon by the assessee.

Analysis: The reassessment was founded on the circular dated 18.03.2002, which treated the notification dated 10.10.1995 as inapplicable to inter-State sale of electronic goods. That circular had already been quashed, so the very foundation of the reassessment proceedings failed. Once the basis for reopening was invalid, the reassessment could not survive in law. The Court also noted that, in the connected matter relating to regular assessment, the notification itself conferred a benefit that could not be denied without cogent or reasoned material.

Conclusion: The reassessment proceedings and the impugned orders were unsustainable, and the questions of law were answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Reassessment proceedings cannot be upheld when their sole foundation is a circular that has been quashed, and a statutory notification governing tax treatment cannot be disregarded without lawful basis.

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