Arijit Pasayat, J. - (1.) LEAVE granted in special leave petitions.
(2.) CHALLENGE in these appeals is to the legality of the judgment rendered by a Division Bench of the Karnataka High Court holding that the Circular dated 23.10.1999 (Circular No. 31/1999-2000) is valid and Circular No. 5/1996-97 dated 12.4.1996 was inoperative. Background facts in a nutshell are as follows: Appellants are dealers registered under the Karnataka Sales Tax Act, 1957 (in short the 'Act'). Their business activities inter-alia include business of leasing machinery, equipment and motor vehicles. Section 5C of the Act deals with levy of tax on transfer of the right to use the goods which is treated as a transfer for the purpose of levy of sales tax within the State. Originally the levy was on "taxable turnover". An amendment was brought in 1992 to the said provision substituting the expression "total turnover" for "taxable turnover". The same was questioned by several assessees. A Division Bench of the High Court by its judgment in Shetty Leasing India Pvt. Ltd. v. Union of India and Ors. 1996 (100) STC 533 struck down the provision. On 1.4.1986, Section 5C was again amended with retrospective effect restoring the original position i.e. substituting the expression "taxable turnover" for "total turnover". On 12.4.1996, a Circular was issued in terms of Section 3A of the Act providing that the goods which have suffered tax under Section 5 of the Act cannot be again taxed in terms of Section 5C. In other words, where the goods have suffered tax on the actual sale cannot attract levy of tax again. The circular, as noted above, was issued under Section 3A of the Act read with Rule 6(4) of the Karnataka Sales Tax Rules, 1957 (in short the 'Rules'). Subsequently, on 23.10.1999 another Circular was issued stating that the earlier Circular did not reflect the actual position in law and, therefore, there was no bar on the transaction being taxed in terms of Sections 5 and 5C. On 1.4.2000 Section 5C was amended by insertion of a proviso which in essence re-iterated the view expressed in the Circular dated 12.4.1996. Keeping in view the directions contained in the Circular of 23.10.1999 re-assessment proceedings were initiated and/or action in terms of Section 21 for revision was initiated. Both these actions related to completed assessments. A learned Single Judge while dealing with challenge to Circular dated 23.10.1999 held that the Circular of 12.4.1996 did not indicate the correct position in law and, therefore, there was no bar in the Circular dated 23.10.1999 clarifying the position and indicating the correct position. However, it was held that the revenue was bound by the incorrect Circular. Therefore, for the assessment years 1996-97 to 1999-2000 till the date of the subsequent Circular, no action could be taken against the assessees. But the position prior to that i.e. from 1.4.1986 till 31.3.1996 the assessees were not entitled to any relief. This view was taken primarily on the ground that even incorrect circular binds the revenue. The Division Bench held the incorrect circular does not bind the revenue and that the law declared by this Court has a binding effect.
(3.) LEARNED Counsel for the appellants submitted that both the orders of the LEARNED Single Judge and the judgment of the Division Bench do not take into effect of the proviso which is in essence a legislative declaration of a clarificatory nature. The proviso in terms recognizes the correctness of the Circular dated 12.4.1996. In any event, there could not have been any re-opening of the assessment because of mere change in opinion of the Commissioner. When two opinions were expressed in the two circulars it is nothing but a change in the opinion and it is impermissible for the revenue to re-open the complete assessment on the basis of the subsequent Circular. The fact that the proviso was by way of a clarification is clear from the fact that at the first instance only 12 days after Section 5C was amended, the Circular was issued. In essence, the principle of contemporaneous expression applies to the facts of the case. The Circular dated 23.10.1999 is in essence review of the earlier Circular which is impermissible in law. The Circular itself states that those are "revised instructions" and, therefore, cannot have any retrospective force and in any event cannot permit re-opening of complete assessment either by way of re-assessment proceedings or by exercise of revisional powers. In response, learned Counsel for the revenue submitted that the true nature of the proviso has been kept in view. The High Court's conclusions are irreversible. There is no question of proviso being clarificatory in nature. According to him, the proviso can be applicable with effect from the date of introduction because that would determine the taxable event for the assessment year in question and the subsequent period. It is stated that the Circular was not binding on the assessing authorities and they could take their independent view.;