# M/S D.C. Food Products v. Commissioner Of Trade Tax, U.P. Lucknow

- **Citation:** (2016) 8 ILRA 407
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-08-31
- **Bench:** Yashwant Varma
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-d-c-food-products-v-commissioner-of-trade-tax-u-p-lucknow-44265
- **Pages:** 13

## Headnote

Central Sales Tax Act, 1956 - Section 14 (vi) (i) - "groundnut" - roasted groundnuts - declared goods -
circular dated 20 July 1979 - Commissioner Trade Tax U.P. - roasted groundnuts covered under entry
"groundnut" - benefit of Section 14 - circular dated 24 May 2004 - annulled earlier circular - unclassified
commodity - Law Department - Gopuram Gram Mill Company v. State of Andhra Pradesh - Milak Brothers v.
Union of India - Usha Martin - Paper Products - Ratan Melting - 1979 circular continued to hold the field -
2004 circular - prospective operation - transactions prior to 24 May 2004.

While the revision raises the question as to whether roasted groundnuts stand covered under the entry
"groundnut" as used in clause (vi) (i) of section 14 of the Central Sales Tax Act, 1956 [1956 Act] the sole
issue upon which submissions have been advanced center and revolve around a circular dated 20 July 1979
[1979 Circular] issued by the Commissioner Trade Tax U.P. which had purported to hold that roasted
groundnuts would stand covered under the aforementioned entry. The dispute arises as a consequence of a
subsequent circular dated 24 May 2004 [2004 Circular] which proceeded to annul the earlier circular.(Para 3)

Held: (Paras 14,19-25)
1.Now it needs to be borne in mind that no judgment of this Court or for that matter the Supreme Court
directly deals/dealt with the issue of whether roasted groundnut would be liable to be treated as falling within
the ambit of the entry 'groundnut' as used in clause (vi) (i) of section 14. Milak, it becomes relevant to note,
was a judgment rendered with reference to the Customs Tariff Act, 1975 and was not really dealing with
section 14 of the 1956 Act. While the interpretation accorded to groundnut in the said judgment may be said
to veer around or tend to support the submission of the revisionist, the Court would be justified in treading
with caution before applying a judgment which has come to be rendered with reference to the provisions of
another statute. This more so when the Court finds that the Customs Tariff Act 1975 did not employ the
words "that is to say". Similarly Gopuram while dealing with the provisions of the 1956 Act, was construing
"gram" and whether parched or fried gram would stand covered. Of course Gopuram does stress upon and
underline the significance of the phrase "that is to say" in section 14 and holds that no expansive meaning can
408 INDIAN LAW REPORTS ALLAHABAD SERIES

be accorded to commodities which stand mentioned therein. Therefore it would be safe to say that there is no
authoritative pronouncement on the issue as to whether roasted groundnut would stand covered under clause
(vi) (i) of section 14. The 1979 circular in unequivocal terms held out that roasted groundnuts would be liable
to be considered as falling within the ambit of clause (vi) (i). The 2004 circular represented an authoritative
yet paradigm shift from what was permitted to

## Text

_Characters 0–39,664 of 40,677. This is a partial read: ask again with offset=39664 for what follows._

8 All. M/S D.C. Food Products Vs Commissioner Of Trade Tax, U.P. Lucknow
407
(2016) 8 ILRA 407
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 31.08.2016

BEFORE

THE HON'BLE YASHWANT VARMA, J.

Sales/Trade Tax Revision No.- 941 Of 2005
&
Sales/Trade Tax Revision No.- 942 Of 2005

M/S D.C. Food Products ...Applicant
Versus
Commissioner Of Trade Tax, U.P. Lucknow ...Opposite Party

Counsel for the Applicant:
S.D. Singh, Harshvardhan Gupta

Counsel for the Opposite Party:
C.S.C.

Central Sales Tax Act, 1956 - Section 14 (vi) (i) - "groundnut" - roasted groundnuts - declared goods -
circular dated 20 July 1979 - Commissioner Trade Tax U.P. - roasted groundnuts covered under entry
"groundnut" - benefit of Section 14 - circular dated 24 May 2004 - annulled earlier circular - unclassified
commodity - Law Department - Gopuram Gram Mill Company v. State of Andhra Pradesh - Milak Brothers v.
Union of India - Usha Martin - Paper Products - Ratan Melting - 1979 circular continued to hold the field -
2004 circular - prospective operation - transactions prior to 24 May 2004.

While the revision raises the question as to whether roasted groundnuts stand covered under the entry
"groundnut" as used in clause (vi) (i) of section 14 of the Central Sales Tax Act, 1956 [1956 Act] the sole
issue upon which submissions have been advanced center and revolve around a circular dated 20 July 1979
[1979 Circular] issued by the Commissioner Trade Tax U.P. which had purported to hold that roasted
groundnuts would stand covered under the aforementioned entry. The dispute arises as a consequence of a
subsequent circular dated 24 May 2004 [2004 Circular] which proceeded to annul the earlier circular.(Para 3)

Held: (Paras 14,19-25)
1.Now it needs to be borne in mind that no judgment of this Court or for that matter the Supreme Court
directly deals/dealt with the issue of whether roasted groundnut would be liable to be treated as falling within
the ambit of the entry 'groundnut' as used in clause (vi) (i) of section 14. Milak, it becomes relevant to note,
was a judgment rendered with reference to the Customs Tariff Act, 1975 and was not really dealing with
section 14 of the 1956 Act. While the interpretation accorded to groundnut in the said judgment may be said
to veer around or tend to support the submission of the revisionist, the Court would be justified in treading
with caution before applying a judgment which has come to be rendered with reference to the provisions of
another statute. This more so when the Court finds that the Customs Tariff Act 1975 did not employ the
words "that is to say". Similarly Gopuram while dealing with the provisions of the 1956 Act, was construing
"gram" and whether parched or fried gram would stand covered. Of course Gopuram does stress upon and
underline the significance of the phrase "that is to say" in section 14 and holds that no expansive meaning can
408 INDIAN LAW REPORTS ALLAHABAD SERIES

be accorded to commodities which stand mentioned therein. Therefore it would be safe to say that there is no
authoritative pronouncement on the issue as to whether roasted groundnut would stand covered under clause
(vi) (i) of section 14. The 1979 circular in unequivocal terms held out that roasted groundnuts would be liable
to be considered as falling within the ambit of clause (vi) (i). The 2004 circular represented an authoritative
yet paradigm shift from what was permitted to hold the field for decades namely, the 1979 circular. The 2004
circular, it may be noted, did not rest itself upon a declaration of the law that roasted groundnut would not be
covered. It was based upon the opinion of the Law Department of the State which in turn rested upon the
interpretation to section 14 as accorded to it by the Supreme Court in Gopuram. This Court, it must be noted,
is not called upon to test the correctness of the opinion expressed therein nor must it be understood to have
ruled upon its validity. All that the Court is called upon to consider and answer essentially is whether the 2004
circular would have the effect of effacing the benefits derived by the revisionist from and under the 1979
circular.
2.What is discernible from the law as declared by the Supreme Court is that circulars issued by departmental
authorities in exercise of statutory powers is clearly binding on them though not on courts or tribunals. They
have been rightly described as representing the views and understanding of the department of the statutory
provisions. They continue to hold the field till the view expressed and embodied therein is overruled or
eclipsed by an authoritative pronouncement of the High Court or the Supreme Court. Once a precedent comes
to be handed down and entered which enunciates the law on the point at variance with what the circular
purported to hold, the circular must necessarily give way. At such a juncture a party cannot contend that the
circular would continue to operate even though it may run contrary to a binding verdict or declaration of law
by a High Court or the Supreme Court. The primary purpose as noted by the Supreme Court in holding the
department to the views taken and expressed in such circulars is to ensure a uniform practice 2and to enable
the trade to arrange its business accordingly.

3.If the above principles as enunciated by the Supreme Court are borne in mind it is clear and apparent that
the revisionist was justified in proceeding to arrange its affairs in accordance with the 1979 circular. The 1979
circular was issued by the Commissioner of Trade Tax U.P. who was duly empowered in terms of rule 4 of the
U.P. Trade Tax Rules, 1948. This circular was clearly binding upon the other subordinate authorities working
under and administering the 1948 Act. In any view of the matter the revisionist could not have been held
liable to pay additional tax and denied the benefits flowing from section 14. Its actions were based entirely
upon the 1979 circular which continued to hold the field till 24 May 2004 when the second circular came to be
issued. All transactions prior to 24 May 2004 were therefore liable to be treated in accordance with the
provisions of the 1979 circular.

4.That then takes us to the issue of whether the 2004 circular had the effect of impacting transactions which
had already been subjected to tax prior thereto. To this the answer must obviously be in the negative.

5.As noted above, the 1979 circular continued to hold the field for decades. The 2004 circular represented a
considered and definitive shift in the stand and understanding of the department on the subject. It
represented a paradigm change of position and thought. The said circular was neither explanatory in
character nor was it an instrument to clear conflicting views and opinions. The letter dated 3 March 2001
addressed by the Assistant Commissioner (Law), Trade Tax, U.P, it becomes worthy of note, was merely a
communication of the Assistant Commissioner (Law). It was not a circular issued by the Commissioner of
Trade Tax in exercise of statutory powers. It did not have the effect of overriding or rescinding the 1979
circular. The 2004 circular can be rightly described as an outcome of a revisit and a reconsideration of the
vexed issue of taxability of roasted groundnut and whether it was liable to be treated as an unclassified item.
However the moment one arrives at the conclusion that the 2004 circular was merely an outcome of an
exercise of "revisit" and "reconsideration" and not an expression of opinion based upon an authoritative
pronouncement of law by a competent court, it must be treated as having prospective operation.
8 All. M/S D.C. Food Products Vs Commissioner Of Trade Tax, U.P. Lucknow
409
6.While arriving at the above conclusions, the Court has also weighed in consideration the flux in the legal
position and the fact that the issue of taxability of roasted groundnut as an unclassified item was/is an issue
not free from debate and question. In such a situation as the Supreme Court held in Usha Martin benefit of
doubt must be given to the assessee and that opinion which is in its favor must be given effect to.

7.One last submission of Sri B.K. Pandey which needs to be noticed and considered is his contention that the
2004 circular declared the 1979 circular as void and a nullity and therefore the views expressed therein would
be deemed to have never operated. With respect, this Court is unable to countenance the said submission.
The Commissioner Trade Tax U.P. it needs to be noted is not a court. The power to declare the law is vested
in and with a court. The power to issue a declaration of nullity does not inhere in the Commissioner. The
submission itself is based upon principles, applicable to the issue of decrees and declarations by courts. The
2004 circular therefore did not have the effect of effacing the 1979 circular with retrospective effect.

8.In light of the above, this Court holds that question no. 2 must be answered in favor of the revisionist and it
be held that prior to the promulgation of the 2004 circular the 1979 circular held the field and all transactions
in roasted groundnuts as entered into by the assessee be subjected to tax in accordance therewith.

Case Law discussed:
1.Gopuram Gram Mill Company v. State of Andhra Pradesh, (1994) 95 STC 358- paras 5,10,13, 14
2.Milak Brothers v. Union of India, 1991 Supp (1) SCC 71 - paras 7, 8, 10, 14
3.Collector of Central Excise, Patna v. Usha Martin Industries, (1997) 7 SCC 47 - paras 9, 16, 23
4.Paper Products Ltd. v. Commissioner of Central Excise, (1999) 7 SCC 84 - paras 9, 17
5.State of Karnataka v. Sri Lakshmi Coconut Industries, (1997) 11 SCC 621 - para 9
6.KBB Nuts Pvt. Ltd. v. Commissioner of Value Added Tax, ST. Appl. No. 5/2014 (Delhi High Court, decided on
28 March 2014) - para 9
7.Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries, 2008 NTN (Vol. 38) 206 - paras
11, 18
8.Kalyani Packaging Industry v. Union of India, (2004) 6 SCC 719 - para 18

(Delivered by Hon'ble Yashwant Varma, J.)

1. Heard Sri S.D. Singh, learned Senior Counsel for the revisionist and Sri B.K. Pandey,
learned standing counsel for the respondent.

2. These revisions raise the following questions of law:

"A. Whether roasted groundnuts are declared goods under
Section 14 (vi) (i) of the Central Sales Tax, 1956?

B. Whether in view of the circular dated 20.07.1979 issued by the Commissioner
of Trade Tax, U.P Lucknow groundnuts could be taxed as an unclassified commodity prior to
23.05.04?"

3. While the revision raises the question as to whether roasted groundnuts stand covered
under the entry "groundnut" as used in clause (vi) (i) of section 14 of the Central Sales Tax Act,
1956 [1956 Act] the sole issue upon which submissions have been advanced center and revolve
around a circular dated 20 July 1979 [1979 Circular] issued by the Commissioner Trade Tax U.P.
410 INDIAN LAW REPORTS ALLAHABAD SERIES

which had purported to hold that roasted groundnuts would stand covered under the
aforementioned entry. The dispute arises as a consequence of a subsequent circular dated 24 May
2004 [2004 Circular] which proceeded to annul the earlier circular.

4. In terms of the 1979 Circular, the Commissioner, Trade Tax U.P. clarified that roasted
groundnuts were liable to be treated as comprised in clause (vi) (i) of Section 14 of the 1956 Act.
The entry under clause (vi) and with which we are concerned reads thus:

"(vi) Oilseeds, that is say. -

 (i) Groundnut or Peanut (Arachis hypogaea];"

From the submission of the learned counsel for the revisionist, it transpires that
based upon the aforesaid circular, the revisionist assessee treated roasted groundnut manufactured
by it as being covered by the aforesaid entry and therefore entitled to the benefits flowing from
Section 14 of the 1956 Act. This position is stated to have continued till the 2004 circular came to
be issued by the Commissioner, Trade Tax. The relevant part of the said

circular reads as follows:

"विषय :- रोस्टेड ग्राउण्ड नट सीड्स पर व्यापार कर देयता के सम्बन्ध में।
कृपया
इस
कायाालय
के
पररपत्र
संख्या-
विधध-1-(1)
ओ-2-(79-
80)-1041/मुख्यालय ददनांक 20-7-1979 का सन्दर्ा ग्रहण करें जिसके द्िारा कच्ची म ूँगफली पर कर अदा ककये िाने के
पश्चात उसको र् नकर पुनः बेचने पर करदेयता के सम्बन्ध में यह स धचत ककया गया था कक केन्रीय बबक्रीकर
अधधननयम की धारा-14 के खण्ड-6 के उपखण्ड-1 के अनुसार म ूँगफली चाहे िह कच्ची हो या र्ुनी हुई, नतलहन ही मानी
िायेगी। इसके उपरान्त इस कायाालय के पत्र संख्या-विधध-1(1) ओ-2-(98-99) 2298/व्यापार कर ददनांक 3-3-2001 के
द्िारा इसे अिगीकृत िस्तु की र्ाूँनत करयोग्य माना गया था। उक्त िस्तु की करदेयता के सम्बन्ध में पररपत्र संख्या-
विधध -1-(1) ओ-2-(79-80)-1041/मुख्यालय ददनांक 20-7-1979 ि पत्र संख्या-विधध-1-(1) ओ-2-(98-99)-2298/मुख्यालय
ददनांक 03-03-2001 के कारण र्ुनी हुई म ूँगफली की करदेयता के सम्बन्ध में वििाद उत्पन्न हो गया था। इस वििाद
को समाप्त करने हेतु प्रकरण शासन को पुनः सन्दर्र्ात ककया गया था।

शासन द्िारा न्याय विर्ाग से परामशा के उपरान्त अपने पत्र संख्या-क0नन0-2-680/11-20049(62)/2001 ददनांक 21-4-2004 से स धचत ककया है :-

"कक प्रकरण में न्याय विर्ाग का अर्र्मत प्राप्त ककया गया। न्याय विर्ाग द्िारा माननीय उच्चतम
न्यायालय द्िारा प्रनतपाददत विधध व्यिस्था के अिलोकनोपरान्त यह अर्र्मत व्यक्त ककया गया है कक तले र्ुने म ूँगफली
के दाने, कच्ची म ूँगफली के दानों से र्र्न्न िस्तु है। अतः इसे अिगीकृत िस्तु की श्रेणी में रखे िाने में कोई विधधक
कदिनाई प्रतीत नहीं हो रही है।" सन्दर्र्ात ननणाय सिाश्री गोपुरम ग्राम र्मल कम्पनी बनाम स्टेट ऑफ आन्र प्रदेश के
िाद में माननीय सिोच्च न्यायालय की तीन सदस्यीय पीि द्िारा ददनांक 23-8-1994 (1995 STC-358) को पाररत
8 All. M/S D.C. Food Products Vs Commissioner Of Trade Tax, U.P. Lucknow
411
ननणाय है। उपरोक्त के पररप्रेक्ष्य में मुख्यालय का पररपत्र संख्या- विधध 1-1(1)-ओ-2(79-80)-1041/मुख्यालय ददनांक 207-79 ननष्प्प्रर्ािी समझा िायेगा।

(दीपक र्संघल)
कर्मश्नर व्यापार कर, उत्तर प्रदेश।"

5. As a perusal of the 2004 Circular would show and establish, the opinion of the Law
Department of the State Government is stated to have been obtained to clarify as to whether roasted
groundnut would stand covered by the entry "groundnut" as used in clause (vi) (i) of Section 14.
This reference to the Law Department itself is stated to have been occasioned on account of a
conflict between the circular dated 1979 circular and the letter dated 3 March 2001 addressed by
the Assistant Commissioner (Law), Trade Tax, U.P. The Law Department basing its opinion on a
judgment rendered by the Supreme Court in Gopuram Gram Mill Company and another Vs.
State of Andhra Pradesh [1994 (95) STC 358] held that groundnut as specified in clause (vi) (i)
of Section 14 would not encompass roasted groundnut. Accepting the said opinion as submitted by
the Law Department, the Commissioner clarified accordingly and passed directions annulling the
earlier circular dated 20 July 1979.

6. It becomes relevant to note here that the present revisions themselves relate to the
Assessment Years 199899 and 1999 2000 and in respect of which assessment orders were passed
on 20 March 2001 and 29 August 2001. The first appellate authority affirmed these orders by a
common order dated 7 February 2002 and the Tribunal by its judgment dated 3 June 2005. The
dates noted above would show that the assessee was assessed to tax and denied the benefits of
section 14 prior to the issuance of the 2004 circular.

7. Sri S.D. Singh has advanced the following submissions:

A. The 1979 circular of the Commissioner continued to hold the field till it was
overridden on 24 May 2004. He submits that therefore the assessee was liable to the benefit of the
said circular and that the assessing authority as well as the first appellate authority had clearly
committed an illegality in proceeding to hold that roasted groundnuts were not liable to be accorded
the benefit of Section 14 of the 1956 Act.

B. The 1979 circular issued by the Commissioner, Trade Tax was to the benefit of
the assessee and it was based upon the same that the assessee structured its business dealings. The
subsequent 2004 circular cannot retroactively take away a benefit which stood conferred upon the
assessee.

C. Tax under the U.P. Trade Tax Act 1948 [1948 Act], is an indirect impost, which
a selling dealer is entitled to pass on to a purchaser. In the transactions effected during the course
of the two assessment years in question, the tax liability which was passed onto the purchaser was
412 INDIAN LAW REPORTS ALLAHABAD SERIES

based upon the understanding that the 1979 circular applied. Accordingly it was submitted that no
retrospective liability could have been imposed upon the revisionist.

D. The issue of whether roasted groundnuts stood covered by the entry
"groundnut" as employed in clause (vi) (i) of Section 14 viewed in the absence of circular of the 20
July 1979 was a contentious issue or at least one which was/is open to debate. He refers what the
Supreme Court held in Milak Brothers Vs. Union of India[1991 Supp (1) SCC 71]. It was urged
that Milak was considering the question as to whether groundnut which had undergone a roasting
and salting process would loose its identity as groundnut. It was submitted that the Supreme Court
had held that it was possible to envisage two different commercial commodities falling under the
same entry of Section 14. In such a situation the Supreme Court held that there was no reason why
the entry should be restricted to only one of them.

8. He submitted that the subsequent decision rendered by three Judges of the Supreme
Court in Gopuram did not notice Milak and even otherwise was not dealing with the issue of a
commodity in its roasted or finished form and was therefore clearly distinguishable.

9. The essence of the submission being that in case of a state of doubt with respect to the
taxability of an item, the circular issued by the Commissioner was liable to prevail and benefits
accorded to the assessee. He has in support of his submissions above, relied upon the following
judgments:

1. Collector of Central Excise Patna Vs. Usha Martin Industries [(1997) 7 SCC
47]

2. Paper Products Ltd Vs. Commissioner of Central Excise [(1999) 7 SCC 84]

3. State of Karnataka and another Sri Lakshmi Coconut Industries [(1997) 11
SCC 621]

4. M/s. KBB Nuts Pvt Ltd Vs. Commissioner of Value Added Tax. [ST.
Appl.5/2014 dated 28 March 2014 [Delhi High Court]

10. Sri B.K. Pandey per contra, made the following submissions:
A. The 2004 circular of the Commissioner had in express term annulled the 1979
circular. This recital in the 2004 circular would have to be construed as if the 1979 circular never
existed or held the field.

B. Even prior to the issuance of the 2004 circular, a doubt had been expressed with
respect to the taxability of roasted groundnut and the Additional Commissioner (Law), Trade Tax,
U.P had expressed the opinion that roasted groundnut would not stand covered under the entry of
groundnut as provisioned for in clause (vi) (i) of Section 14 of the 1956 Act.
8 All. M/S D.C. Food Products Vs Commissioner Of Trade Tax, U.P. Lucknow
413
C. No question of retrospectivity applies inasmuch as the judgment of the Supreme
Court in Gopuram is liable to be treated as declaratory. He submits that not only was Gopuram
rendered by a larger Bench of the Supreme Court than which decided Milak, the law as enunciated
therein would always deemed to have operated.

D. This Court should not and cannot grant primacy to the 1979 circular over and
above what the Supreme Court held in Gopuram.

11. Sri Pandey in support of his submissions above, relied upon the judgment of the
Supreme Court in Commissioner of Central Excise, Bolpur Vs. M/s. Ratan Melting & Wire
Industries[2008 NTN (Vol.38) - 206]

12. It is these rival submissions, which now fall for consideration.

13. Clause (vi) of Section 14 of the 1956 Act refers to various categories of oil seeds. The
description of the commodity and various commodities which are then classified as falling within
the same genre are prefaced by the words "that is to say". It is trite to note that in Gopuram, three
learned Judges of the Supreme Court have noticed and held that the usage of the phrase 'that is to
say' indicates the intent of the legislature to make clear or fix the meaning of what is sought to be
explained or defined. Their Lordships held that the phrase 'that is to say' indicates an exhaustive
enumeration and therefore consequently the benefit of Section 14 must be limited to the goods
expressly mentioned therein.

14. Now it needs to be borne in mind that no judgment of this Court or for that matter the
Supreme Court directly deals/dealt with the issue of whether roasted groundnut would be liable to
be treated as falling within the ambit of the entry 'groundnut' as used in clause (vi) (i) of section
14. Milak, it becomes relevant to note, was a judgment rendered with reference to the Customs
Tariff Act, 1975 and was not really dealing with section 14 of the 1956 Act. While the
interpretation accorded to groundnut in the said judgment may be said to veer around or tend to
support the submission of the revisionist, the Court would be justified in treading with caution
before applying a judgment which has come to be rendered with reference to the provisions of
another statute. This more so when the Court finds that the Customs Tariff Act 1975 did not
employ the words "that is to say". Similarly Gopuram while dealing with the provisions of the
1956 Act, was construing "gram" and whether parched or fried gram would stand covered. Of
course Gopuram does stress upon and underline the significance of the phrase "that is to say" in
section 14 and holds that no expansive meaning can be accorded to commodities which stand
mentioned therein. Therefore it would be safe to say that there is no authoritative pronouncement
on the issue as to whether roasted groundnut would stand covered under clause (vi) (i) of section
14. The 1979 circular in unequivocal terms held out that roasted groundnuts would be liable to be
considered as falling within the ambit of clause (vi) (i). The 2004 circular represented an
authoritative yet paradigm shift from what was permitted to hold the field for decades namely, the
1979 circular. The 2004 circular, it may be noted, did not rest itself upon a declaration of the law
that roasted groundnut would not be covered. It was based upon the opinion of the Law Department
414 INDIAN LAW REPORTS ALLAHABAD SERIES

of the State which in turn rested upon the interpretation to section 14 as accorded to it by the
Supreme Court in Gopuram. This Court, it must be noted, is not called upon to test the correctness
of the opinion expressed therein nor must it be understood to have ruled upon its validity. All that
the Court is called upon to consider and answer essentially is whether the 2004 circular would have
the effect of effacing the benefits derived by the revisionist from and under the 1979 circular.

15. Now the effect of departmental circulars issued under taxing statutes is a subject that is
no longer res integra.

16. In Usha Martin the law on the subject was enunciated in the following terms:

"6. There is no doubt that as per the above notification if any amount of duty has
been paid on the raw material, the output product would escape from excise duty. The doubt arose
was regarding the expression in the notification i.e." on which the appropriate amount of duty of
excise has already been paid" as to whether it is capable of two interpretations, one as claimed by
the assessee and the other as put forth by the revenue".

19. No doubt the court has to interpret statutory provisions and notifications
thereunder as they are with emphasis to the intention of the legislature. But when the Board made
all others to understand a notification in a particular manner and when the latter have acted
accordingly, is it open to the Revenue to turn against such persons on a premise contrary to such
instructions?

21. Through a catena of decisions this Court has pronounced that Revenue cannot
be permitted to take a stand contrary to the instructions issued by the Board. It is a different matter
that an assessee can contest the validity or legality of a departmental instruction. But that right
cannot be conceded to the department, more so when others have acted according to such
instructions, [vide Collector of Central Excise. Bombay vs. Collector of Central Excise [1996(88)
ELT 638], Ranadey Micronutrients vs. collector of Central Excise [1996(87) ELT 19], Poulose and
Mathen vs. collector of central Excise [1997(90) ELT 264, British Machinery Supplies Co. vs.
Union of India [1996(86) ELT 449]. Of course the appellate authority is also not bound by the
interpretation given by the Board but the assessing officer cannot take a view contrary to the
Board's interpretation.

22. We may observe particularly that a special aspect highlighted by the Bench in
Poulose and Mathen vs. Collector of Central Excise [1997(90) ELT 264] is apposite for fastening
the revenue with binding force as regards the instructions issued, while constructing a notification
which was not free from doubt, Learned judges in that decision have observed thus: "One aspect
deserves to be noticed in this context. The earlier tariff advice no. 83/81 on the basis of which trade
notice No. 222/81 was issued by the Collector of Central Excise and Customs is binding on the
department. It should be given effect to . There is no material on record to show that this has been
rescinded or departed from, and even so, to what extent. Even assuming that the later tariff advice
No.6/85 has taken a different view about which there is no positive material the facts point out that
8 All. M/S D.C. Food Products Vs Commissioner Of Trade Tax, U.P. Lucknow
415
the concerned department itself was having considerable doubts about the matter. The position was
not free from doubt. It was far from clear. In such a case, where two opinions are possible, the
assessee should be given the benefit of doubt and that opinion which is in its favour should be
given effect to. In the light of the above, it is unnecessary to adjudicate the other points involved in
the appeal on the merits." (emphasis supplied)

17. Declaring the law in similar terms in Paper Products the Supreme Court held:

"4. The question for our consideration in these appeals is: what is the true nature
and effect of the Circulars issued by the Board in exercise of its power under Section 37B of the
Central Excise Act, 1944? This question is no more res integra in view of the various judgments of
this Court. This Court in a catena of decisions has held that the Circulars issued under Section 37B
of the said Act are binding on the Department and the Department cannot be permitted to take a
stand contrary to the instructions issued by the Board. These judgments have also held that the
position may be different with regard to an assessee who can contest the validity or legality of such
instructions but so far as the Department is concerned, such right is not available. [See Collector of
Central Excise, Patna v. Usha Martin Industries (1997 7 SCC 47)]. In the case of Ranadey
Micronutrients v. Collector of Central Excise (1996 (87) ELT 19), this Court held that the whole
objective of such Circulars is to adopt a uniform practice and to inform the trade as to how a
particular product will be treated for the purposes of excise duty. The Court also held that it does
not lie in the mouth of the Revenue to repudiate a Circular issued by the Board on the basis that it is
inconsistent with a statutory provision. (emphasis supplied). Consistency and discipline are,
according to this Court, of far greater importance than the winning or losing of court proceedings.
In the case of Collector of Central Excise, Bombay v. Jayant Dalal Pvt. Ltd. (1997 10 SCC 402),
this Court has held that it is not open to the Revenue to advance an argument or even file an appeal
against the correctness of the binding nature of the Circulars issued by the Board. Similar is the
view taken by this Court in the case of Collector of Central Excise, Bombay v. Kores [India] Ltd.
(1997 10 SCC 338).

6. As stated above, it is an admitted fact that by virtue of Circular No.4/85 dated
23.7.1986 as clarified by Circular dated 7.8.1987, all the three products of the appellant are to be
treated as the products of the printing industry and not that of the packaging industry. A change in
the said view of the Board occurred for the first time by virtue of its Circular No.6/89 dated
16.1.1989. Further, the Board itself by its subsequent Circular No.29/89 dated 5.5.1989 has made it
abundantly clear that the change notified in Circular No.6/89 will be prospective from the date of
issuance of Circular No.6/89, that is, from 16.1.1989. Therefore, it is clear that till the issuance of
Circular No.6/89 which is dated 16.1.1989 the products of the appellant, by virtue of the two
Circulars dated 23.7.1986 and 7.8.1987, have to be classified under Chapter 49 of the Act as being
products of the printing industry eligible for exemption of duty under Notification Nos.122/75 and
234/82 as applicable at the relevant time. The impugned show cause notices and consequent
demand being ab initio bad inasmuch as the same was contrary to the existing Circulars of the
Board, the same cannot be sustained." (emphasis supplied)
416 INDIAN LAW REPORTS ALLAHABAD SERIES

18. A Constitution Bench in Ratan Melting summarized the law in the following words

"2. It was noted by the threeJudge Bench that the effect of the aforesaid
observations was noted in several decisions. In Kalyani Packaging Industry v. Union of India and
Anr. (2004 (6) SCC 719), it was noted as follows:

"We have noticed that para 9 (para 11 in SCC) of Dhiren Chemical case (2004 (6)
SCC 722) is being misunderstood. It, therefore, becomes necessary to clarify para 9 (para 11 in
SCC) of Dhiren Chemical case (2004 (6) SCC 722). One of us (Variava, J.) was a party to the
judgment of Dhiren Chemical case and knows what was the intention in incorporating para 9 (para
11 in SCC). It must be remembered that law laid down by this Court is law of the land. The law so
laid down is binding on all courts/tribunals and bodies. It is clear that circulars of the Board cannot
prevail over the law laid down by this Court. However, it was pointed out that during hearing of
Dhiren Chemical case because of the circulars of the Board in many cases the Department had
granted benefits of exemption notifications. It was submitted that on the interpretation now given
by this Court in Dhiren Chemical case the Revenue was likely to reopen cases. Thus para 9 (para
11 in SCC) was incorporated to ensure that in cases where benefits of exemption notification had
already been granted, the Revenue would remain bound. The purpose was to see that such cases
were not reopened. However, this did not mean that even in cases where the Revenue/Department
had already contended that the benefit of an exemption notification was not available, and the
matter was sub judice before a court or a tribunal, the court or tribunal would also give effect to
circulars of the Board in preference to a decision of the Constitution Bench of this Court. Where as
a result of dispute the matter is sub judice, a court/tribunal is, after Dhiren Chemical case, bound to
interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested
would mean that courts/tribunals have to ignore a judgment of this Court and follow circulars of the
Board. That was not what was meant by para 9 of Dhiren Chemical case."

"5. Circulars and instructions issued by the Board are no doubt binding in law on
the authorities under the respective statutes, but when the Supreme Court or the High Court
declares the law on the question arising for consideration, it would not be appropriate for the Court
to direct that the circular should be given effect to and not the view expressed in a decision of this
Court or the High Court. So far as the clarifications/circulars issued by the Central Government and
of the State Government are concerned they represent merely their understanding of the statutory
provisions. They are not binding upon the court. It is for the Court to declare what the particular
provision of statute says and it is not for the Executive. Looked at from another angle, a circular
which is contrary to the statutory provisions has really no existence in law."

19. What is discernible from the law as declared by the Supreme Court is that circulars
issued by departmental authorities in exercise of statutory powers is clearly binding on them though
not on courts or tribunals. They have been rightly described as representing the views and
understanding of the department of the statutory provisions. They continue to hold the field till the
view expressed and embodied therein is overruled or eclipsed by an authoritative pronouncement of
the High Court or the Supreme Court. Once a precedent comes to be handed down and entered
8 All. M/S D.C. Food Products Vs Commissioner Of Trade Tax, U.P. Lucknow
417
which enunciates the law on the point at variance with what the circular purported to hold, the
circular must necessarily give way. At such a juncture a party cannot contend that the circular
would continue to operate even though it may run contrary to a binding verdict or declaration of
law by a High Court or the Supreme Court. The primary purpose as noted by the Supreme Court in
holding the department to the views taken and expressed in such circulars is to ensure a uniform
practice 2and to enable the trade to arrange its business accordingly.

20. If the above principles as enunciated by the Supreme Court are borne in mind it is clear
and apparent that the revisionist was justified in proceeding to arrange its affairs in accordance with
the 1979 circular. The 1979 circular was issued by the Commissioner of Trade Tax U.P. who was
duly empowered in terms of rule 4 of the U.P. Trade Tax Rules, 1948. This circular was clearly
binding upon the other subordinate authorities working under and administering the 1948 Act. In
any view of the matter the revisionist could not have been held liable to pay additional tax and
denied the benefits flowing from section 14. Its actions were based entirely upon the 1979 circular
which continued to hold the field till 24 May 2004 when the second circular came to be issued. All
transactions prior to 24 May 2004 were therefore liable to be treated in accordance with the
provisions of the 1979 circular.

21. That then takes us to the issue of whether the 2004 circular had the effect of impacting
transactions which had already been subjected to tax prior thereto. To this the answer must
obviously be in the negative.

22. As noted above, the 1979 circular continued to hold the field for decades. The 2004
circular represented a considered and definitive shift in the stand and understanding of the
department on the subject. It represented a paradigm change of position and thought. The said
circular was neither explanatory in character nor was it an instrument to clear conflicting views and
opinions. The letter dated 3 March 2001 addressed by the Assistant Commissioner (Law), Trade
Tax, U.P, it becomes worthy of note, was merely a communication of the Assistant Commissioner
(Law). It was not a circular issued by the Commissioner of Trade Tax in exercise of statutory
powers. It did not have the effect of overriding or rescinding the 1979 circular. The 2004 circular
can be rightly described as an outcome of a revisit and a reconsideration of the vexed issue of
taxability of roasted groundnut and whether it was liable to be treated as an unclassified item.
However the moment one arrives at the conclusion that the 2004 circular was merely an outcome of
an exercise of "revisit" and "reconsideration" and not an expression of opinion based upon an
authoritative pronouncement of law by a competent court, it must be treated as having prospective
operation.

23. While arriving at the above conclusions, the Court has also weighed in consideration
the flux in the legal position and the fact that the issue of taxability of roasted groundnut as an
unclassified item was/is an issue not free from debate and question. In such a situation as the
Supreme Court held in Usha Martin benefit of doubt must be given to the assessee and that
opinion which is in its favor must be given effect to.
418 INDIAN LAW REPORTS ALLAHABAD SERIES

24. One last submission of Sri B.K. Pandey which needs to be noticed and considered is his
contention that the 2004 circular declared the 1979 circular as void and a nullity and therefore the
views expressed therein would be deemed to have never operated. With respect, this Court is
unable to countenance the said submission. The Commissioner Trade Tax U.P. it needs to be noted
is not a court. The power to declare the law is vested in and with a court. The power to issue a
declaration of nullity does not inhere in the Commissioner. The submission itself is based upon
principles, applicable to the issue of decrees and declarations by courts. The 2004 circular therefore
did not have the effect of effacing the 1979 circular with retrospective effect.

25. In light of the above, this Court holds that question no. 2 must be answered in favor of
the revisionist and it be held that prior to the promulgation of the 2004 circular the 1979 circular
held the field and all transactions in roasted groundnuts as entered into by the assessee be subjected
to tax in accordance therewith.
----------
8 All. M/S Bon Ton Plastics Pvt. Ltd. Delhi Vs Sri Ramesh Chawla & Anr.
419
(2016) 8 ILRA 419
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 30.08.2016

BEFORE

THE HON'BLE PANKAJ MITHAL, J.

SCC Revision No.- 279 Of 2016

M/S Bon Ton Plastics Pvt. Ltd. Delhi ...Revisionist
Versus
Sri Ramesh Chawla & Anr. ...Opposite Parties

Counsel for the Revisionist:
Vijay Praksah

Counsel for the Opposite Parties:
Ranjit Saxena

Revision - Section 25 Provincial Small Causes Court Act, 1887 - SCC Suit - Eviction - Arrears of rent -
Written statement - Order 8 Rule 1 C.P.C. - Filing of written statement - Thirty days - Ninety days -
Extension of time - Directory in nature - Exceptional and rare cases - Discretion of Court - Application
rejected - Revision dismissed.

The order dated 31.5.2016 passed by the Additional District Judge in exercise of power as Judge, Small Cause
Court, rejecting the application of the defendant-revisionist (paper No.33-Ga) for taking on record its written
statement is subject of this revision u/s 25 of the Provincial Small Causes Court Act, 1887.(Para 2)

It appears that the plaintiff-respondents filed SCC Suit No.75 of 2013 for eviction of the defendant-revisionist
on the ground of arrears of rent after determining its tenancy. The defendant-revisionist in the said suit had
put in its appearance on 20.11.2013. The defendant-revisionist on 24.7.2015 filed an application under Order
7 Rule 11 C.P.C. for rejection of the plaint. The said application was rejected vide order dated 18.1.2016.(Para
3)