TaxTMI 
TaxTMI 
2011 (3) TMI 1537
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....nt of sales tax, or the benefit of payment of sales tax at a reduced rate, which the Legislature has, otherwise, vested in him? In the answers to the questions, posed above, rest the decision in this appeal. However, an incidental question, which we have to answer, in this appeal, has also arisen, and the question is : when a statutory authority, while determining the question of reopening of assessment of taxable liability, acts on the basis of the clarification, which such an authority obtains from his superior authority, on the issue raised in the proceedings of reopening of assessment, and opens the assessment and makes assessment on the basis of the clarifications received from his superior authority, whether such an action is sustainable in law, particularly, when, there is no independent application of mind by the authority, who reopens the assessment as to whether the clarification, as given by his superior authority, is attracted to die facts of the case or not? The questions, indicated above, have arisen in the context of section 9 of the Assam General Sales Tax Act, 1993 (in short, "the AGST Act, 1993"), which, in some specified cases, provides for granting of exemptio....
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.... intra-State sale of PVC pipes carried higher rate of tax, the State Government decided to reduce the rate of tax, in respect of local manufacturers, to 4.4 per cent. The benefit of such reduced rate of tax could not have been given to the local manufacturers except by way of issuing requisite notification under section 9 of the AGST Act, 1993, which empowers the State Government, as indicated above, to grant exemption from payment of tax, or to pay tax at a reduced rate. A notification was accordingly issued, on April 28; 1998, under section 9(3) of the AGST Act, 1993, making the notification effective for a period of three years. It is noteworthy, now, that according to section 9(3) of the AGST Act, 1993, the validity of a notification, issued under sub-section (3) of section 9 of the AGST Act, 1993, shall not exceed a period of three years from the date of its issue. Ordinarily, therefore, a notification issued under section 9 of the AGST Act, 1993, would remain, unless earlier withdrawn, valid and effective for a period of three years from the date of its issue. Seen in this light, the notification, dated April 28, 1998, (which was initially issued), could not have remained ef....
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....e into force on May 1, 2001, the appellant herein claimed and was given by the assessing authority the benefit of the notification, in question, for the assessment year 2004-05, inasmuch as the appellant was allowed to pay tax at the reduced rate, even for the assessment year 2004-05, against supply of PVC pipes, manufactured by it, to various Government Departments in Assam. To be precise, for the assessment year 2004-05, the Superintendent of Taxes completed assessment, on February 14, 2006, by allowing payment of tax by the appellant at a concessional rate of four per cent. However, the problem for the appellant started, when a notice was issued, on November 6, 2008, to the appellant by respondent No. 4 herein, namely, Superintendent of Taxes, contending therein, inter alia, that the appellant had been wrongly allowed payment of tax at the concessional rate of four per cent, on its turnover, for the assessment year 2004-05, against supply of PVC pipes to various Government Departments of the State Government on the strength of the notification, dated January 3, 2003, aforementioned inasmuch as the notification, being effective from May 1, 2001, could not have continued to remai....
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....y 1, 2001. Reacting to the clarification, which the respondent No. 4 had so sought for by his letter, dated December 5, 2004, respondent No. 3, namely, Commissioner of Taxes, Assam, issued a clarification, on February 19, 2009, conveying to respondent No. 4 to the effect that though the notification, in question, had been issued on January 3, 2003, yet since the notification was brought into force with effect from May 1, 2001, the notification ought to be treated to have remained in force from May 1, 2001 to April 30, 2004. The clarification, so issued by respondent No. 3, on February 19, 2009, being relevant to the present appeal, is reproduced below:- "Subject:- Clarification Reference:- Your letter No. 6356 dated December 5, 2008. With reference to your letter seeking clarification in respect of Government Notification issued vide FTX-189/93/pt/268, dated January 3, 2003, giving effect from May 1, 2001, it is stated that the notification was issued under section 9(3) of the Assam General Sales Tax Act, 1993, since repealed. As per proviso to section 9(3)(ii) the validity of notification issued under said section shall ....
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....enjoyed the benefit, with retrospective effect, cannot make contrary claim and derive benefit of the notification by contending that the notification was effective from the date of its issue, i.e., January 3, 2003, and shall be treated to have remained valid till January 2, 2006. The revision, filed by the appellant, was accordingly dismissed on the premises aforementioned. It is, thus, clear that the appellant was denied the benefit of the notification aforementioned on two grounds, namely, that the notification having mentioned that it had come into force on May 1, 2001, the notification could not have been treated to have remained in force beyond April 30, 2004, and, secondly, equity estopped the appellant from claiming the benefit of the notification, because the appellant had already availed of the benefit for a maximum period of three years covering thereby the period, when (according to the appellant itself), the notification could not have been, in law, effective. Aggrieved by the dismissal of the revision, the appellant filed a writ petition under article 226 of the Constitution of India, which gave rise to (Kamakhya Plastics (P) Ltd. v. State of Assam) W. P. (C) No. 485....
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....ee years from the date of its issue. Thus, the notification, as envisaged by the second proviso is, according to Mr. Dutta, prospective in nature. When the parent legislation, i.e., AGST Act, 1993, makes the exemption prospective in nature, the subordinate legislation, i.e., the notification, in question, could not have been made retrospective and cannot be read in law as retrospective. So contends Mr. Dutta. In support of this submission, Mr. Dutta places reliance on Bakul Cashew Co. v. Sales Tax Officer, Quilon reported in [1986] 62 STC 122 (SC) ; [1986] 159 ITR 565 (SC) ; [1986] 2 SCC 365. Elaborating his submission, as noted above, Mr. Dutta points out that the second proviso to section 9(3) makes it clear that the validity of the notification, which is issued under section 9(3), shall not remain valid for more than three years from the "date of its issue". Since the proviso uses the expression, "from the date of its issue", Mr. Dutta contends that the date of issue of the notification, in the present case, being January 3, 2003, the notification ought to have been held to have remained valid for a period of three years commencing from March 1, 2003 and, in such circumstances,....
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....uthority, for, such a conduct of being guided and controlled by superior authority would amount to abdication of authority by the authority, which has to exercise quasi-judicial power in determining the question as to whether it shall or shall not reopen the assessment. In the present case, submits Mr. Dutta, in order to reach a decision as to whether the assessment, already made, needed to be reopened or not, respondent No. 4 looked to his superior, namely, respondent No. 3 for guidance as to whether the notification, in question, should be treated to have come into force on January 3, 2003, which was the date of issuance of the notification, or should it be read retrospectively with effect from the date on which the notification stated to have come into force. Responding to the clarification, which respondent No. 4 had so sought for, respondent No. 3, points out Mr. Dutta, gave his "clarification" and it is this "clarification", which respondent No. 4 treated as his guidance and reopened the assessment. There was, thus, contends Mr. Dutta, no independent application of mind by respondent No. 4, which was nothing but complete abdication of authority by respondent No. 4. The impug....
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....ated to have remained in force for three years with effect from January 3, 2003, for, such continuation of validity, if permitted, would make the notification valid for five years. Moreover, according to Mr. Saikia, as the appellant had already availed the benefit of concessional rate of tax for a period of three years on the strength of the notification, the appellant, could not have claimed and cannot, now, once again, claim the benefit of concessional rate of tax under the same notification by asking the authorities concerned, or the High court, to treat the notification as prospective in nature. In effect, Mr. Saikia points out, in this regard, that the provisions of exemption from payment of tax, or payment of tax at a concessional rate, has to be construed strictly and, on the basis of this principle, the appellant must be denied, and has been rightly denied, its claim to receive benefit for longer than three years. For the purpose of sustaining his contention, that a notification, granting exemption, has to be construed strictly, Mr. Saikia has referred to, and relied upon, the decision in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal reported in [2011]....
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....at what the appellant wanted before the statutory authorities, as well as before the learned single judge, was determination of the question as to what the statutory date of coming into force of a notification, issued under section 9, is ; but, without deciding this crucial question, the statutory authorities rejected the claim of the appellant and the learned Single judge fell into error in not interfering with the same. As the appellant was seeking benefit under the notification, there was, according to Mr. Dutta, no question of challenging the notification. Mr. Dutta reiterates that what the appellant had been asking the statutory authorities and the High Court was to give a legal and correct interpretation of the notification in respect of the validity period of a notification irrespective of the fact as to whether the appellant had or had not legally or justifiably enjoyed the benefit as regards the rate of tax payable by the appellant. The correct interpretation of statutory provisions cannot, submits Mr. Dutta, depend on the fact as to whether the appellant has already availed of the benefit of concessional rate of tax in the past or not. The decision, therefore, reached by ....
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....ass of industries within the State or within any specified part of the State on or after such date as may be specified in such scheme and producing such goods as may be specified therein by way of full or partial exemption of any tax payable under this Act on the raw materials or other input purchased by them within the State or on the manufactured goods sold by them within the State or in the course of inter-State trade or commerce for such period or periods as may be specified or by way of deferment of the tax payable by them under this Act for such period as may be specified and subject to such other restrictions and conditions as may be provided in such scheme or schemes:- Provided that the State Government may withdraw any such exemption granted under any scheme at any time as it may think fit and proper." A microscopic reading of the provisions of section 9, as a whole, and, in particular, the proviso to section 9(3) clearly shows that the validity of a notification, issued under section 9, shall not exceed beyond a period of three years from the date of its issue. The expression, date of its issue, would, ....
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....aling with almost similar fiscal statute, as the one at hand, and referring to section 7 of the Orissa Sales Tax Act, 1947 (which was the subject-matter of discussion in Mangalam Timber Products Ltd. v. State of Orissa reported in [2008] 18 VST 1 (Orissa)), it was pointed out by a Division Bench that when section 7 is prospective, it is obvious that the notification, issued in exercise of power under section 7, cannot become retrospective. The court, therefore, in Mangalam Timber Products Ltd. [2008] 18 VST 1 (Orissa), read the notification, in question, as operative from the date of the notification and not from any date prior thereto making it clear that any attempt to read the notification, with effect from the date on which the notification had not stood issued, would not be sustainable in law. The concern of the revenue (same as the case at hand), was that it would require the revenue to make adjustment of benefits, which the assessee might have, in the meanwhile, received. The court, in Mangalam Timber Products Ltd. [2008] 18 VST 1 (Orissa), pointed out, in this regard, that if the effect of reading of the notification prospectively would require making of some adjustments to....
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....1970] 75 ITR 174 (SC) ; [1969] 2 SCC 351, wherein the court observed (page 177 in 75 ITR):- "Now it is open to a sovereign Legislature to enact laws which have retrospective operation. Even when Parliament enacts retrospective laws such laws are-in the words of Willes, J. in Phillips v. Eyre [1870] 40 Law J. Rep. (N. S.) Q.B. 28 at page 37 ; L. R. 6 Q.B 1, 23:- ' . . .no doubt, prima facie of questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon, the faith of the then existing law.' The courts will not, therefore, ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the Legislature. Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the Legislature it may or m....
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....tification by the State Government as a delegatee under the AGST Act, 1993 ; more so, when the validity of the notification is to be counted with effect from the date of its issue and not from any date prior thereto. As regards the submissions made on behalf of the State that an exemption notification has to be construed strictly, there can be really no dispute. However, reliance placed by Mr. Saikia; in support of such a proposition, on the case of Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC) ; [2011] 1 SCC 236, is not incorrect inasmuch as the decision in Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC) ; [2001] 1 SCC 236, has no application to the facts of the present case. When construed strictly, there remains no escape from the conclusion that the validity of a notification, issued under section 9(3), commences from the "date of its issue" and can remain in force, at the most, for a period of three years from the "date of its issue". We, now, come to Mr. Saikia's argument that the appellant, as a writ petitioner, had not impugned the notification and the appellant may, therefore, be held debarred from receiving the benefit from the notification inasmuch as the notification,....
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....ely, i.e., May 1, 2001. Sadly enough, respondent No. 4 did not apply his own mind to the facts of the given case and, thus, abdicating his authority and the duty to decide himself, look to his superior authority and merely carried into execution the views of his superior authority as had been expressed in the said "clarification". This, in itself, was sufficient to warrant interference, with the impugned order of assessment, in the revision. Coupled with the above, the clarification, which respondent No. 3 had issued, was, it is clear, wholly contrary to law inasmuch as no subordinate legislation can run counter to the parent legislation and when the parent legislation, in the present case, was prospective in nature, the subordinate legislation, i.e., the notification, dated January 3, 2003, could not have been given retrospective effect. If this fundamental aspect of law had been borne in mind by respondent No. 3, there could not have been any controversy as to the date on which the notification shall be treated to have come into force. The notification, such as the one at hand, must be read subservient to the parent legislation and when the parent legislation states that the not....
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.... retrospectively so far as, at least, the case of the appellant was concerned. This was a completely incorrect approach by respondent No. 3 inasmuch as no tax can be imposed on a person unless permitted by law. So guarantees article 366. In the name of equity, therefore, the right not to pay tax cannot be denied to an assessee by the State. This is the basis of each fiscal legislation. No tax can be made payable by a person unless the law requires him to do so. When the law does not require him to pay tax, tax cannot be realized. Even if, therefore, the appellant had, in the present case, incorrectly or illegally, enriched himself by taking the benefit of concessional rate of tax relying on the notification aforementioned, this could not have denied, in the name of equity, the appellant's right to ask the respondents to decide, as a matter of law, as to when the notification shall be taken to have come into effect. An interpretation of a legislation has to be neutral. A decision, in a given case, may take its colour from the facts of the given case ; but, while deciding the question of law, the fact cannot colourise the decision. When interpreted with neutrality, the notificati....
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....ppellant his right to receive the benefit of notification in accordance with what the parent legislation contemplated, In fact, the learned single judge too fell into serious error of law in allowing equity to prevail over the law, in the case, while interpreting the fiscal statute inasmuch as the learned single judge pointed out that the petitioner, i.e., the appellant herein, having availed of the benefit of reduced rate of tax, cannot claim prospective enforcement of the notification. Reminds the Supreme Court, in Polestar Electronic (P) Ltd. v. Additional Commissioner, Sales Tax, Delhi reported in [1978] 41 STC 409 (SC) ; [1978] 1 SCC 636, that in construing a taxing statute, one must have regard to the strict letter of the law and not merely to the spirit of the statute or substance of the law. There is no equity about a tax nor can there be any presumption as to the tax inasmuch as one must look fairly at the language used in the statute and the Act. In fact, in Polestar Electrons (P) Ltd, [1978] 41 STC 409 (SC) ; [1978] 1 SCC 636, the Supreme Court has further pointed out that it is a firmly established rule that the words of a taxing Act must never be stretched against a ta....