TaxTMI 
TaxTMI 
2011 (4) TMI 1080
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....er G.O. Ms. No. 119 dated April 13, 1994 issued by the Commercial Taxes and Religious Endowments Department of the State. 2. Before we traverse the facts, which have given rise to the present appeal, in order to appreciate the issue involved, it would be expedient to refer to the relevant State Government orders/memorandum notified from time to time, in exercise of powers conferred under section 17A of the Tamil Nadu General Sales Tax Act, 1959 (for short, "the TNGST Act") and section 9(2) of the Central Sales Tax Act, 1956 (for short, "the CST Act"). 2.1 With a view to promote industrialisation, the Government of Tamil Nadu had declared 105 taluks of the State as industrially backward for the purpose of grant of interest-free sales tax loan, interest-free sales tax deferral, State capital subsidy, etc. In furtherance thereof and to correct regional imbalances in industrialisation, vide G.O. Ms. No. 500 dated May 14, 1990, the Government declared 30 taluks from amongst the 105 industrially backward taluks to be industrially most backward taluks, offering them further incentives. It was directed that the new industries to be set up in these 30 most backward taluks as also in t....
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....h April, 1994, imposed certain conditions and issued directions that were required to be complied with by the expansion/diversification units for availing sales tax benefits. For the sake of ready reference, the relevant portion of the said G.O. is extracted below: "3. The Government after careful examination, have decided to accept the suggestions of the special Commissioner and Commissioner of Commercial Taxes as they protect the Revenue and also help to increase the production level of the industries availing the concession. Accordingly, the Government direct that- i) The industry will be eligible for sales tax deferral only if in a financial year production exceeds the base production volume which is the highest annual production in the 3 years prior to expansion. ii) When the actual production in the industry in any financial year exceeds the base production volume, the industry would be eligible for deferral of sales tax for sales made in that year in excess of the base sales volume under Tamil Nadu General Sales Tax, which is the highest of the actual annual sales in the last 3 years prior to expansion. (iii) The above conditions are appli....
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.... the eligibility certificate, on 12th April, 2000, the first respondent entered into an agreement with the Zonal Assistant Commissioner, Commercial Taxes, undertaking to comply with the Base Production Volume and Base Sales Volume (hereinafter referred to as "BPV" and "BSV" respectively) as indicated in the essentiality certificate. 4. The first respondent continued to remit the sales tax until they reached the level of BSV, viz. the highest of the actual annual sales in the last three years prior to the expansion, stating that they had also reached, in the financial year, BPV, viz. the highest production in the last three years prior to the expansion and submitted its return claiming the deferral of tax on the sale in excess of BSV. 5. The Assistant Commissioner of Commercial Taxes, issued a notice dated 19th March, 2002, inter alia, informing the first respondent that once the BSV is reached, then the eligibility for availment of deferral under the eligibility certificate dated 13th February, 1998 would be available only for the unit at Dalavoi and the deferral could not be stretched to include the production of other units and accordingly, directed the respondent to pay a ....
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....er 1991 and Notification No.II(1)/CTRE/213/92 in G.O.Ms.No.376 dated 27th October, 1992. In both the said petitions, it was contended that clauses 3(i) and (ii) of G.O.Ms.No.119 dated 13^th April, 1994 as well as the consequential qualification prescribed in the eligibility certificate dated 13th February, 1998 in paragraph 5.3 would offend the spirit and object of the sales-tax deferral scheme, if the conditions in agreement dated 12th April, 2000 are construed to mean that the holder of the eligibility certificate would be eligible for the benefit of deferral scheme only when they achieve both the BPV/BSV levels together and not otherwise. 9. Relying on an earlier decision of the High Court dated 5th December, 2001, in the case of Madras Cement Limited, wherein it was held that the Government Order makes it clear that even if the sales of the unit had reached the BSV, they would be eligible for deferral of sales tax on sales made in that year only when they reached the BPV, the Tribunal dismissed both the original petitions. Thus, the Tribunal held that before the first respondent could claim deferral of sales tax, both the BPV and BSV shall have to be reached. In other words,....
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....hen" even plainly as "when", the blending of two clauses 3(i) and 3(ii) as suggested by us above, by way of harmonized and reasonable construction, is inevitable, as the same cannot be ruled out keeping in mind the intention behind the schemes and the goal to achieve the same in the public interest, viz. to improve the production in the most Backward and backward Areas, certainly without compromising with the revenue of the State, in whatever manner, the word "when" found in clause 3(ii) is read whether as "when" of "if" or "after" as the case may be. The above interpretation is, in our considered opinion, unavoidable because any other construction would lead to absurdity frustrating the object behind the scheme." 11. Hence the instant appeal by the State of Tamil Nadu, in which SIPCOT has been arrayed as pro forma respondent No. 2. 12. Mr. Rajiv Dutta, learned senior counsel appearing for the State strenuously urged that the only interpretation that could be given to clause 3(ii) of G.O. Ms. No. 119 dated April 13, 1994, which is also reflected in the eligibility certificate and the agreement entered into by the first respondent, is that both the base production volume (BPV)....
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....ds the BPV and the benefit should date back to the date of reaching the BSV. The learned counsel also argued that in light of the circular dated May 1, 2000 issued under section 28A of the TNGST Act, clarifying the position as to when the benefit of deferral of sales tax scheme would follow, the Revenue cannot be permitted to contend that in order to avail of the benefit of sales tax deferral the industry must reach both BPV and BSV and not when either of the two is reached earlier, as contemplated in the circular. In support of the proposition that a beneficial and promotional exemption should be liberally construed, reliance was placed on a decision of this court in Commissioner of Customs (Preventive), Mumbai v. M. Ambalal & Co. [2011] 6 GSTR 62 (SC); [2011] 2 SCC 74. 14. Thus, the short question which falls for consideration is whether the first respondent would be eligible for sales tax deferral in any financial year for the sales made in that year in excess of the base sales volume (BSV) as soon as they exceed the BSV or only when their production also exceeds the base production volume (BPV) in that year. 15. The source of the sales tax deferral scheme is traceable to ....
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.... to the commencement of the commercial production in the expansion unit, resulting in higher revenue on higher sales. The benchmark for availing of the benefit of the sales tax deferral scheme having been fixed both with reference to the production as also to the sales, in our opinion, it is immaterial whether the unit concerned reaches BPV or the BSV earlier. In our view, the word "when" employed in clause 3(ii) of G.O. Ms. No. 119, whether read as "if" or "after" only signifies that in order to avail of the benefit of sales tax deferral for sales made in the year in excess of the BSV, the industry must achieve in that year the BPV, which is the highest production of the last three years prior to the expansion, for every assessment year of the total number of years, viz., 12 years, besides reaching BSV in that particular year. It is obvious that by insisting that the BSV should also be reached, the revenue of the State gets protected in every assessment year during the entire period of deferral and, in fact, the industry gets the benefit of deferral only on sales which are in excess of the BSV. It is pertinent to note that if for any reason the beneficiary ultimately fails to achi....
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....98. Mercury Fittings (P) Ltd. It was held that GOM No.119/CTRE/13.4.1994 (sic) contemplate the liability to pay tax with reference to Base Production Volume or Base Sales Volume whichever is reached earlier and the liability for deferral is only with reference to volume of Sales and not with reference to taxes paid on sales for the base year. Thus all Deputy Commissioners and Assistant Commissioners shall thoroughly verify all expansion cases and satisfy themselves that taxes have been paid until the BPV/BSV has been achieved." (Emphasis supplied by us) 18. It is manifest from the highlighted portion of the circular that as per the clarification issued by the Commissioner of Commercial Taxes, in exercise of the power conferred on him under section 28A of the TNGST Act, the benefit of the sales tax deferral scheme would be available to a dealer from the date of reaching of BPV or BSV, whichever is earlier, as is pleaded on behalf of the first respondent. It is trite law that circulars issued by the Revenue are binding on the departmental authorities and they cannot be permitted to repudiate the same on the plea that it is inconsistent with the statutory provisions or it mitiga....
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....le an appeal against the order passed by an appellate authority which is in conformity with a departmental circular. In fact, His Lordship went on to observe that when there is a statutory mandate to observe and follow the orders and instructions of CBEC in regard to specified matters, that mandate has to be complied with. It is not open to the adjudicating authority to deviate from those orders or instructions which the statute enjoins that it should follow. If any order is passed contrary to those instructions, the order is liable to be struck down on that very ground. 22. In Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries [2008] 13 SCC 1., a Constitution Bench of this court has clarified the confusion created on account of the view expressed in para 11 of Dhiren Chemical Industries [2002] 126 STC 122 (SC); [2002] 2 SCC 127., on the question of binding effect of judgment of this court vis-a-vis State and Central Government circulars thus: "7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question ....