Board Circulars Granting Administrative Relief Bind Tax Officers Until Withdrawn: Supreme Court

The assessee bought field latex in Kerala, processed it into centrifuged latex in Tamil Nadu and sold it in Kerala and inter-State (opening paragraph). Its assessments for 1997-98 were completed on the basis of Board of Revenue Circular No. 16/98, which treated field and centrifuged latex as one commodity under Entry 110 (paras 3-4). Relying on a Kerala High Court ruling that the two were different products, the Department issued notices under Section 19 to reopen the completed KGST and CST assessments (paras 5, 7). The High Court quashed the reassessments as contrary to the circular, which had never been withdrawn (paras 7-8).

The Court found no merit in the State's case that the circular was legislation or exemption beyond the Board's power (paras 15-17). Field latex is raw rubber, while centrifuged latex is a product (para 17). Exemption is a policy matter for the Government and interpreting an entry is quasi-judicial, but the Board, which superintends the officers, may grant administrative relief, including relief against double taxation (para 18). Section 3(1A) resembles Section 119(1) of the Income-tax Act; in granting relief the Board may consider the effect of entries, and businesses arrange their affairs relying on such circulars (para 19). Under Azadi Bachao Andolan, a circular on the proper administration of the Act is relatable to the statutory power whatever its name (para 20). The circular is statutory and binds the Department; if the State thought it illegal, it could withdraw it under Section 60, and letting officers disregard it would lead to chaos and indiscipline in tax administration (para 21). As in Steel Authority of India, an erroneous trade notice must first be withdrawn or amended (para 22).