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S.N. Gondakar Vs. Commissioner of Commercial Taxes in Karnataka, Bangalore and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberS.T.R.P. No. 112 of 1981
Judge
Reported in[1983]54STC190(Kar)
ActsKarnataka Sales Tax Act, 1957 - Sections 3A, 23 and 23(1)
AppellantS.N. Gondakar
RespondentCommissioner of Commercial Taxes in Karnataka, Bangalore and anr.
Appellant AdvocateE.R. Indrakumar, Adv.
Respondent AdvocateS. Rajendra Babu, Government Adv.
Excerpt:
.....turnover was brought to tax under entry 118. the petitioner also produced a circular instruction issued by the commissioner of commercial taxes in karnataka ('the commissioner'). the commissioner in that circular no. therefore the lower authorise are perfectly right in holding that pickle jars, i. income-tax officer, ernakulam [1981]131itr597(sc) ]. we, therefore, do not see any good reason to ignore the circular which has a material bearing on the question raised in this case. apart from its binding character to the statutory authorities, it is, in our opinion, clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of entry 112 and entry 118. dealing with this principle of construction, the supreme court in varghese' case [1981]131itr597(sc)..........i.e., barani, the barani sold by the appellant falls under special entry 112, taxable at 8 per cent. entry 118 is a general entry which relates to all containers. therefore the lower authorise are perfectly right in holding that pickle jars, i.e., barani, which are made of china clay fall under entry 112 of the second schedule taxable at 8 per cent.' 4. the first submission of mr. e. r. indrakumar in this revision petition is that the circular issued by the commissioner treating the jars taxable at 4 per cent under entry 118 of the second schedule to the act, is binding on all the authorities constituted under the act and it is not open to them to deviate from the said circular and tax the turnover of jars under entry 112 at 8 per cent. before dealing with this contention, it is.....
Judgment:

Jagannatha Shetty, J.

1. This revision petition under section 23(1) of the Karnataka Sales Tax Act, 1957 (the Act), raises a narrow but not very easy point. The question raised for our consideration is whether the pickle jar or otherwise commonly called 'barani' falls under entry 112 or entry 118 of the Second Schedule to the Act. For immediate reference, we set out those two entries as below :

'112. Chinaware, porcelain ware and stoneware Eight per cent. other than those falling under any other entry.

118. Containers other than gunnies. Four per cent.'

2. The petitioner is a dealer registered under the provisions of the Karnataka Sales Tax Act. For the assessment year 1975-76 the petitioner submitted the return of turnover declaring taxable turnover at Rs. 23,758.88 out of which the turnover of Rs. 19,938.68 pertains to sales to pickle jars. It was contended before the assessing authority that that turnover should be brought to tax at the rate of 4 per cent under entry 118. But the assessing authority did not accept that contention. That turnover was taxed at 8 per cent treating the pickle jars as chinaware or porcelain ware under entry 112. The petitioner preferred an appeal to the Assistant Commissioner of Commercial Taxes (Appeals) Dharwad Division, challenging the order of the assessing authority. The appellate authority dismissed the appeal. The petitioner's further appeal to the Karnataka Appellate Tribunal was also dismissed.

3. Before the Tribunal, the petitioner produced the copies of previous orders of the assessing authority and that of the Tribunal relating to the earlier assessment years in which the like turnover was brought to tax under entry 118. The petitioner also produced a circular instruction issued by the Commissioner of Commercial Taxes in Karnataka ('the Commissioner'). The Commissioner in that circular No. MSRCR-553/75-76 has stated that the jars made of clay are taxable at 4 per cent under entry 118 of the Second Schedule to the Act. The Tribunal, however, did not give credence to that circular on the ground that it was not applicable to the case of the petitioner. The Tribunal finally concluded :

'The next point for consideration is whether the barani made of china clay fall under entry 112 or entry 118. Entry 118 relates to the containers other than gunnies while entry 112 relates to chinaware and porcelain ware. As there is a special entry for these chinaware, i.e., barani, the barani sold by the appellant falls under special entry 112, taxable at 8 per cent. Entry 118 is a general entry which relates to all containers. Therefore the lower authorise are perfectly right in holding that pickle jars, i.e., barani, which are made of china clay fall under entry 112 of the Second Schedule taxable at 8 per cent.'

4. The first submission of Mr. E. R. Indrakumar in this revision petition is that the circular issued by the Commissioner treating the jars taxable at 4 per cent under entry 118 of the Second Schedule to the Act, is binding on all the authorities constituted under the Act and it is not open to them to deviate from the said circular and tax the turnover of jars under entry 112 at 8 per cent. Before dealing with this contention, it is necessary to state that the said circular was withdrawn by the Commissioner in 1979. But, the assessment year concerned in this case is admittedly prior to 1979. Therefore, the withdrawal of that circular has no consequence on the decision which we make in this case.

5. The said circular is found even in the Commercial Taxes Bulletin for the quarter ending March, 1976, issued under the authority of the State Government. It is stated therein that the jars made of clay are taxable at 4 per cent under entry 118 of the Second Schedule to the Act. This circular was evidently issued by the Commissioner in exercise of his power under section 3-A of the Act. Section 3-A provides :

'Instructions to subordinate authorities. - (1) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions, and directions of the State Government and the Commissioner.' (proviso not necessary)

It is clear from the above provision that the circular issued by the Commissioner or the Government is binding on all officers and persons employed in the execution of the Act and they shall faithfully follow the instructions or the directions thereunder.

6. Mr. S. Rajendra Babu, the learned counsel for the revenue, however, submitted that the opinion expressed by the Commissioner in regard to classification of articles for the purpose of levy cannot be binding on this Court and it is therefore necessary to determine whether pickle jars would fall under entry 112 or under entry 118 of the Second Schedule to the Act. It is true that such circulars may not be binding on this Court. But, we are not called upon to adjudicate the question independent of the orders made by the statutory authorities. We are exercising a revisional jurisdiction under section 23 of the Act. We cannot therefore altogether ignore the circular issued by the competent authority and examine the question with pristine purity.

7. Section 3-A of the Act is similar to section 119 of the Income-tax Act, 1961. While dealing with the circulars issued by the Central Board of Revenue under section 119 of the Income-tax Act, the Supreme Court, at least in three decisions, has stated that such circulars are binding on all officers and persons employed in the execution of the Income-tax Act, even if the circulars deviate from the provisions of the Act [See : (i) Naunit Lal C. Javeri v. K. K. Sen Appellate Assistant Commissioner : [1965]56ITR198(SC) , (ii) Ellerman Lines Ltd. v. Commissioner of Income-tax : [1971]82ITR913(SC) and (iii) K. P. Varghese v. Income-tax Officer, Ernakulam : [1981]131ITR597(SC) ]. We, therefore, do not see any good reason to ignore the circular which has a material bearing on the question raised in this case. On the contrary, we must proceed on the basis that the circular issued by the Commissioner stating that the turnover relating to the sale of pickle jars is liable to tax only at 4 per cent under entry 118, is binding on those who are charged with the duty to implement the provisions of the Act and it is not open to them to ignore that circular and tax such turnover at 8 per cent stating that jars in question fall under entry 112 of the Second Schedule to the Act.

8. There is also one other reason why we should not ignore the circular issued by the Commissioner. Apart from its binding character to the statutory authorities, it is, in our opinion, clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of entry 112 and entry 118. Dealing with this principle of construction, the Supreme Court in Varghese' case : [1981]131ITR597(SC) observed at page 612 :

'The rule of construction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction, 1940 Edn., where it is stated in paragraph 219 that 'administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive.' The validity of this rule was also recognised in Baleshwar Bagarti v. Bhagirathi Dass [1908] ILR 35 Cal 701, 713, where Mookerjee, J., stated the rule in these terms :

'It is a well-settled principle of interpretation that courts in construing a state will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it.'

and this statement of the rule was quoted with approval by this court in Deshbandhu Gupta & Co. v. Delhi Stock Exchange Association Ltd. : [1979]3SCR373 .'

9. Mr. Babu, however, submitted that the principal of contemporanea expositio has no application to modern statutes and in support of his contention, he relied upon the decision of House of Lords in Governors of Campbell College, Belfast v. Commissioner of Valuation for Northern Ireland (1964) 2 All ER 705 at 727, wherein Lord Upjohn said :

'As to contemporanea expositio, this doctrine is, I believe, truly confined to the construction of ambiguous language used in very old statutes where indeed the language itself may have had a rather different meaning in those days.'

But, our Supreme Court appears to have applied that doctrine even to modern states where the language is ambiguous as it would be clear from the decision in Varghese's case : [1981]131ITR597(SC) . We have, therefore, no good reason for not depending upon the doctrine of contemporanea expositio, to clear the mist in the understanding of the nature of an article the components and classification of which are not plain as plain could be.

10. Apart from that, we find that there is no justification for the Tribunal to depart from the view consistently taken in the previous assessment years up to 1974-75 in the case of the same assessee. Consistency in the judicial administration should not ordinarily be sacrificed unless there is compelling reason. The Tribunal, while taking a different view, has not given any justifiable reason except stating that the circular of the Commissioner was not applicable to the case. That could hardly be said to be a reason to be given by a quasi-judicial authority.

11. In the result, this petition is allowed, the orders of the authorities are set aside and the matter stands remitted to the assessing authority to modify the assessment order by taxing the turnover relating to the sale of the pickle jars under entry 118 of the Second Schedule to the Act.


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