1994 (12) TMI 328

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....d Counsel for the revisionist and the learned Standing Counsel. 3. Section 3-G of the U. P. Sales Tax Act, 1948, provides for a special rate of tax on certain sales. Sales to which Section 3-G applies are sales to a department of the Central Government or of a State Government, or to a Corporation or undertaking established or constituted by or under a Central Act or an U. P. Act, or to a Government Company as defined in Section 617 of the Companies Act, 1956 (not being a Nagar Mahapalika, Municipal Board, Zila Parishad, Town Area Committee, Notified Area Committee, Cantonment Board, a University or an educational institution or an institution managed for the time being by an authorised controller). Sub-section (2) of Section 3-G creates a....

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....sional rate under Section 3-G (1) of the Act by issuing Form III-D to the selling dealers. The assessing officer took the view that since the goods so purchased were used for the manufacture of sugar which the revisionist sold, it was not entitled to purchase the goods at a special rate under Section 3-G (1) and it used the goods so purchased for the manufacture of sugar in violation of sub-section (2) of Section 3-G and, therefore, in exercise of powers under Section 3-G (3) of the Act, he passed orders dated 15-2-1985 for assessment years 1979-80 and 1980-81 levying ₹ 12,043 84 paise and ₹ 15,752 44 paise respectively. For assessment year 1981-82 and order dated 27th February, 1985 was passed levying ₹ 55,199-81 paise. T....

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.... Commissioner issued another circular dated 13th October, 1947 reversing the view taken in the aforesaid documents. 6. It is thus clear that the revisionist availed the concession under Section 3-G of the Act in pursuance of a specific determination by the Government and the issue of a circular by the Commissioner. Learned Counsel for the revisionist contended that the circular issued by the Commissioner in exercise of powers under Rule 4 (2) of the U. P. Sales Tax Rules is binding on the authorities and, therefore, the assessing officer was not entitled to levy the amounts in question under Section 3-G (3) of the Act when the revisionist had acted in accordance with the position of law as explained by the Government and subsequently by th....

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....as binding on the Income-Tax Officer. This judgment was followed in Ellermm Lines Ltd. v. Commissioner of Income Tax, (1971) 82 ITR 913 (SC), These two judgments were again followed by the Supreme Court in K. P. Varghese v. Income Tax Officer, (1981) 131 ITR 597 in which it was observed as under : "But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the CBDT to which we have just referred are legally binding on the revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well settled as a r....