# MIS. BINANI INDUSTRIES LIMITED v. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, VI CIRCLE, BANGALORE AND ORS

- **Citation:** [2007] 4 S.C.R. 797
- **Court:** Supreme Court of India
- **Decided:** 2007-04-04
- **Case number:** Civil Appeal No. 1784 of 2007
- **Bench:** Dr. Arijit Pasa Y At, S.H. Kapadia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-binani-industries-limited-v-assistant-commissioner-of-commercial-taxes-vi-22797
- **Pages:** 26

## Headnote

Karnataka Sales Tax Act, 1957: Sections 3-A, 5 and 5-C.
A
B
Sales Tax-A Ys 1987-88 to 1996-97-Levy of sales tax-The assessee C
was a dealer registered under the Sales Tax Act-His business activities
inter-alia included business of leasing machinery, equipment and motor
vehicles-Section 5-C of the Act dealt with levy of tax on transfer of the right
to use the goods which were treated as a transfer for the purpose of levy of
sales tax within the State-Originally, the levy was on "taxable turnover"- D
An amendment was brought in 1992 to the said provision substituting the
expression ''total turnover'' for ''taxable turnover' '-The same was questioned
by several assesses-A Division Bench of the High Court struck down the
provision-On 1.04.1986, Section 5-C was again amended with retrospective
effect restoring the original position i.e. substituting the expression "taxable
turnover" for "total turnover"-On 12.04.1996, a Circular was issued in E
terms of Section 3-A of the Act providing that the goods which have suffered
tax under Section 5 of the Act could not be again taxed in terms of Section
5-C-!n other words, where the goods had suffered tax on the actual sale
cannot attract levy of tax again-The Circular was issued under Section 3A of the Act read _with Rule 6(4) of Sales Tax Rules-Subsequently, on F
23.10.1999 another Circular was issued stating that the earfier 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 5-C-On 1.04.2000,
Section 5-C was amended by insertion of a proviso which in essence reiterated
the view expressed in the Circular dated 12.04.1996-Keeping in view the
directions contained in the Circular of 23.10.1999 reassessment proceedings G
were initiated and/or action in terms of Section 21 for revision was initiatedA Single Judge while dealing with the challenge to the Circular dated
23.10.1999 held that the Circular of 12.04.1996 did not indicate the correct
position in law and, therefore, there was no bar in the Circular dated
797
H
798
SUPREME COURT REPORTS
[2007) 4 S.C.R.
A 23.10. 1999 clarifying the position and indicating the correct positionHowever, it was held that the revenue was bound by the incorrect Circu/arTherefore, for the assessment years 1996-97 to 1999-2000 till the date of the
subsequent Circular, no action could be taken against the assessee-But the
position prior to that i.e. from 1.04.1986 till 31.03.1996 the assessee was not
B entitled to any relief-However, The Division Bench held that the incorrect
Circular did not bind the revenue and that the law declared by this Court
had a binding effect-Correctness of-Held: Reopening of an assessment is
not permissible by mere change of the opinion of the assessing officer-The
Circular dated 23.10.1999 was on account of change of opinion of the
Commissioner and that too while reviewing the earlier Circular-High Court's
C judgment set aside-Karnataka Sales Tax Rules, 1957, R. 6(4).
Interpretation of Statutes:
Provisd-Meaning and effect of-Held: Normally, a proviso does not
travel beyond the provision to which it is a proviso-It carves out an
D exception to the main provision to which it is a proviso and to no other
provision.
Words & Phrases:
''Taxable turnover' '-Meaning of-In the context of Section 5-C of the
E Karnataka Sales Tax Act, 1957.
The appellants were dealers registered under the Karnataka Sales .Tax
Act, 1957. Their b\lsiness activities inter-at;a included business of leasing
machinery, equipment and motor vehicles.
p
Section 5-C of the Act dealt with levy of tax on transfer of the right to
use the goods which were treated as a transfer for the purp<)se 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
G turnover" for "taxable turnover". The same was questioned by several
assessees. A Division Bench of the High Court st

## Text

_Characters 0–39,986 of 60,376. This is a partial read: ask again with offset=39986 for what follows._

MIS. BINANI INDUSTRIES LIMITED
v.
ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, VI CIRCLE,
BANGALORE AND ORS.
APRIL 04, 2007
[DR. ARIJIT PASA Y AT AND S.H. KAPADIA, JJ.]
Karnataka Sales Tax Act, 1957: Sections 3-A, 5 and 5-C.
A
B
Sales Tax-A Ys 1987-88 to 1996-97-Levy of sales tax-The assessee C
was a dealer registered under the Sales Tax Act-His business activities
inter-alia included business of leasing machinery, equipment and motor
vehicles-Section 5-C of the Act dealt with levy of tax on transfer of the right
to use the goods which were treated as a transfer for the purpose of levy of
sales tax within the State-Originally, the levy was on "taxable turnover"- D
An amendment was brought in 1992 to the said provision substituting the
expression ''total turnover'' for ''taxable turnover' '-The same was questioned
by several assesses-A Division Bench of the High Court struck down the
provision-On 1.04.1986, Section 5-C was again amended with retrospective
effect restoring the original position i.e. substituting the expression "taxable
turnover" for "total turnover"-On 12.04.1996, a Circular was issued in E
terms of Section 3-A of the Act providing that the goods which have suffered
tax under Section 5 of the Act could not be again taxed in terms of Section
5-C-!n other words, where the goods had suffered tax on the actual sale
cannot attract levy of tax again-The Circular was issued under Section 3A of the Act read _with Rule 6(4) of Sales Tax Rules-Subsequently, on F
23.10.1999 another Circular was issued stating that the earfier 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 5-C-On 1.04.2000,
Section 5-C was amended by insertion of a proviso which in essence reiterated
the view expressed in the Circular dated 12.04.1996-Keeping in view the
directions contained in the Circular of 23.10.1999 reassessment proceedings G
were initiated and/or action in terms of Section 21 for revision was initiatedA Single Judge while dealing with the challenge to the Circular dated
23.10.1999 held that the Circular of 12.04.1996 did not indicate the correct
position in law and, therefore, there was no bar in the Circular dated
797
H
798
SUPREME COURT REPORTS
[2007) 4 S.C.R.
A 23.10. 1999 clarifying the position and indicating the correct positionHowever, it was held that the revenue was bound by the incorrect Circu/arTherefore, for the assessment years 1996-97 to 1999-2000 till the date of the
subsequent Circular, no action could be taken against the assessee-But the
position prior to that i.e. from 1.04.1986 till 31.03.1996 the assessee was not
B entitled to any relief-However, The Division Bench held that the incorrect
Circular did not bind the revenue and that the law declared by this Court
had a binding effect-Correctness of-Held: Reopening of an assessment is
not permissible by mere change of the opinion of the assessing officer-The
Circular dated 23.10.1999 was on account of change of opinion of the
Commissioner and that too while reviewing the earlier Circular-High Court's
C judgment set aside-Karnataka Sales Tax Rules, 1957, R. 6(4).
Interpretation of Statutes:
Provisd-Meaning and effect of-Held: Normally, a proviso does not
travel beyond the provision to which it is a proviso-It carves out an
D exception to the main provision to which it is a proviso and to no other
provision.
Words & Phrases:
''Taxable turnover' '-Meaning of-In the context of Section 5-C of the
E Karnataka Sales Tax Act, 1957.
The appellants were dealers registered under the Karnataka Sales .Tax
Act, 1957. Their b\lsiness activities inter-at;a included business of leasing
machinery, equipment and motor vehicles.
p
Section 5-C of the Act dealt with levy of tax on transfer of the right to
use the goods which were treated as a transfer for the purp<)se 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
G turnover" for "taxable turnover". The same was questioned by several
assessees. A Division Bench of the High Court struck down the provision.
On 1.04.1986, Section 5-C was again amended with retrospect~ve effect
i
restoring the original position i.e. substituting the expression "taxable ·
~-
turnover" for "total turnover". On 12.04.1996, a Circular was mued in terms
H of Section 3-A of the Act providing that the goods which have suffered tax
j
DINAN! INDUSTRIES LTD v. ASSISTANT COMMNR. OF COMMERCIAL TAXES, V1 CIRCLE, BANGALORE
799
under Section 5 of the Act could not be again taxed in terms of Section 5-C. A , ·
In other words, where the goods had suffered tax on the actual sale cannot
attract levy of tax again. The Circular was issued under Section 3-A of the
Act read with Rule 6(4) of the Karnataka Sales Tax Rules, 1957. 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 5-C. On 1.04.2000,
Section 5-C was amended by insertion of a proviso which in essence reiterated
the view expressed in the Circular dated 12.04.1996.
B
Keeping in view the directions contained in the Circular of23.10.1999
reassessment proceedings were initiated and/or action in terms of Section C ,
21 for revision was initiated. Both these actions related to completed
assessments.
A Single Judge while dealing with the challenge to the Circular dated
23.10.1999 held that the Circular of 12.04.1996 did not indicate the correct
position in law and, therefore, there was no bar in the Circular dated D ,
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 1.04.1986 till 31.03.1996 the assessees
were not entitled to any relief.
E
The Division Bench held that the incorrect Circular did not bind the
revenue and that the law declared by this Court had a binding effect. Hence
theappeaL
On behalf of the appellant, it was contended that when two opinions were F .
expressed in the two Circulars it was nothing but a change in the opinion and
it was impermissible for the revenue to reopen the completed assessment on
the basis of the subsequent Circular.
Allowing the appeals, the Court
G.
HELD: 1.1. A bare reading of the Circular dated 23.10.1999 shows that
it was a review of the earlier Circular and that the Commissioner was of the
view that the position of law explained in the earlier Circular did not state the
correct position in law and, therefore, the revised instructions were issued.
There was a direction to the concerned Joint Commissioner to immediately H:
(
i '
800
SUPREME COURT REPORTS
[2007] 4 S.C.R.
A initiate action under Section 21 of the Kamataka Sales Tax Act, 1957 to revise
_..
\,
the assessment orders. It was further stated that any order passed under
Section 21 or appeal order under Section 20 was contrary to the instructions
issued, the same were to be referred to him for initiating action under Section
22-A of the Act. This leaves no manner of doubt that the subordinate officers
B
had no option but to comply with the directions given. [Para 24) [817-E-F]
1.2 The notices issued under Section 12-A of the Act initiating the
assessment proceedings clearly show that they were on t~e basis of the
--"'.
instructions issued. [Para 25) (817-G]
""
c
2.1. The issues can be looked at from a different angle. Undisputedly,
the 1996 Circular was binding on the revenue authorities as it spelt out in
12.04.1996 and 23.10.1999 Circulars. The assessments were completed on
the basis of the 12.04.1996 Circular. Merely because the Commissioner
changes flis view/option and according to him it was a review of the earlier
decision that cannot have any effect on any assessment which has been
D completed on the basis of the 1996 Circular. [Para 28] [821-F]
2.2. That being so, the question of reopening the assessment by mere.
change of opinion is entirely impermissible. [Para 29] [821-G)
...
Commissioner of Trade Tax, UP. v. Kajaria Ceramics Ltd [2005) 11 SCC
E 149 and Shetty Leasing India Pvt. Ltd v. Union of India, (1996) 100 STC
533 (Ban), referred to.
Addi. Commissioner (Legal) v. Jyoti Trades [1999] 2 SCC 77, held
inapplicable.
F
Ahmedahad Manufacturing & Calico Printing Co. Ltd v. S. G. Mehta
AIR [1963) SC 1436, cited.
2.3 Though these aspects need not be taken note of in view of the'
conclusion that the proviso was clarificatory in nature and operated with effect
from the date Section 5-C was amended i.e. 1.04.1986 yet this is an additional
G factor to set aside the High Court's judgment. [Para 30] [821-H]
3. It is stated by a long line of decisions that reopening of an assessment
is not permissible by mere change of the opinion of the assessing officer. ·
~
Here it has not been disputed that the Circular dated 23.10.1999 was on
H
account of change of opinion of the Commissioner and that too while reviewing
BINANI INDUSTRIES LTD"· ASSISTANT COMMNR. OF COMMERCIAL TAXES, VI CIRCLE, BANGALORE
801
>
-;.
the earlier Circular. It could not be brought to the notice of this Court as to A
which provision permitted the review. [Para 31] [822-A-B]
4.1. The normal function ofa proviso is to except something out of the
enactment or to qualify something enacted therein which but for the proviso
would be within the purview of the enactment [Para 16] [811-C-DJ
B
Zile Singh v. State of Haryana, (2004] 8 SCC 1, Mullins v. Treasurer of
Survey, [1880] 5 QBD, Shah Bhojraj Kuverji Oil Mills and Ginning Factory
,.,
v. Subhash Chandra Yograj Sinha, AIR (1961) SC 1596 and Calcutta
Tramways Co. Ltd v. Corporation of Calcutta, AIR (1965) SC 1728 and West
Derby Union v. Metropolitan Life Assurance Co. (1897) AC 647 HL, referred c
to.
4.2. Normally, a proviso does not travel beyond the provision to which it
is a proviso. It carves out an exception to the main provision to which it is a
proviso. It carves out an exception to the main provision to which it has been
enacted as a proviso and to no other. [Para 16] [811-G]
D
j
A. N. Sehgal v. Raje Ram Sheoram, AIR (1991) SC 1406, Tribhovandas
Haribhai Tamboli v. Gujrat Revenue Tribunal, AIR (1991) SC 1538 and Kera/a
State Housing Board v. Ramapriya Hotels (P) Ltd., [1994] 5 SCC 672,
referred to.
5. A proviso to a Section cannot be used to import into the enacting part E
something which is not there, but where the enacting part is susceptible to
several possible meanings it may be controlled by the proviso.
[Para 21) [812-D]
Ali M K. v. State of Kera/a, [2003] 11 SCC 632, Union of India v. Sanjay F
Kumar Jain, [2004] 6 SCC 708, Forbes v. Git, (1992) 1 AC 256, R v. Taunton,
St. James 9 B & C 836, In Re. Barker 25 QBD 285 and Jennings v. Kelly,
(1940) AC 206, referred to.
Coke upon Littleton 18th Edition 146, referred to.
G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1784 of 2007.
f
From the Final Judgment an.d Order dated 06.10.2005 of the High Court
of Karnataka at Bangalore in Writ Appeal Nos. 5271 & 5724 of2002.
WITH
H
' i
802
SUPREME COURT REPORTS
(2007] 4 S.C.R.
"'(
A
C.A. Nos. 1785-1794 of2007 and 1369 & 1370 of2006.
-'<
R.F. Nariman and Harish Chander, Sanjay Kumar, N.N. Keshwani, S.G.
Shivram, N.D.B. Raju, Bharathi Raju, Goodwill lndeevar, Kavin Gulati, Ruby
Singh Ahuja, Debmalya Banerje, Manu Agarwala, Manik Karanjawala, M.
~ .
Yogesh Kanna, V.N. Raghupathy, T.V. Ratnam, Atul K. Alur, Sanjay R. Hedge,
B Subramonium Prasad, Anant Bhushan Kanade, R.K. Gupta and Ariban
Guneshwar Sharma for the appearing parties.
The Judgment of the Court was delivered by
,.,
.....
c
DR. ARIJIT PASAYAT, J. !._Leave granted in special leave petitions.
2. Challenge in these appeals is to the legality of the judgment rendered
b)'.a Division Bench of the Karnataka High Court holding that the Circular
dated 23. l 0.1999 (Circular No.31/1999-2000) is valid and Circular No.5/1996-97
.
-
dated 12.4.1996 was inoperative.
D
3. Background facts in a nutshell are as follows:
4. Appellants are dealers registered under the Kamataka Sales Tax Act,
'>
·~
1957 (in short the 'Act'). Their business activities inter-alia include business
of leasing machinery, equipment and motor vehicles.
E
5. Section 5-C 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.
6. Originally the levy was on "taxable turnover". An amendment was
F
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 5-C was again amended with
retrospective effect restoring the original position i.e. substituting the expression
G "taxable turnover" for "total turnover". On 12.4.1996, a Circular was issued in
terms of Section 3-A 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
":lo.
H
under Section 3-A of the Act read with Rule 6(4) of the Kamataka Sales Tax
DINAN! INDUSTRIES LTD v. ASSIST ANT COMMNR. OF COMMERCIAL TAXES. VJ CIRCLE, BANGALORE (PASAY AT, J. I 803
-- -"'!-
Rules, 1957 (in short the 'Rules'). Subsequently, on 23.10.1999 another Circular A
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 5-C. On 1.4.2000 Section 5-C was amended by insertion of
a proviso which in essence re-iterated the view expressed in the Circular dated
12.4.1996.
B
7. Keeping in view the directions contained in the Circular of23.10.1999
re-assessment proceedings were initiated and/or action in terms of Section 21
..-.
for revision was initiated. Both these actions related to completed assessments.
8. A learned Single Judge while dealing with challenge to Circular dated Ci
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 D
f
i.e. from l.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.
9. Learned counsel for the appellants submitted that both the orders of E
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 reopening of the assessment because of mere change in opinion of the F
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.
10. 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 5-C was amended, G
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 reH
.. r.
i
(
804
SUPREME COURT REPORTS
(2007) 4 S.C.R.
--
A opening of complete assessment either by way of re-assessment proceedings
~
or by exercise of revisional powers.
11. 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.
B 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.
x
c'
12. It is stated that the Circular was not binding on the assessing
c
authorities and they could take their independent view.
13. At this juncture, it would be necessary to take note of Sections 5C, I2~A and 21. They read as follows:
......
"5-C. Levy of tax on the transfer of the right ,to use any goods:
D
Notwithstanding anything contained in su~-section (I) or sub-section
(3) of Section 5, but subject to sub-sections (5) and (6) of the said
Section, every dealer shall pay for each year a tax under this Act on
·~ ;...
his (taxable turnover in respect of t~e transfer of th~ right to use any
goods mentioned in .column (2) of the Seventh Schedule for ·any
'
.
purpose (whether or not for a specified period) at the rates specified
E
in the corresponding entries in column (3) of the said Schedule.
Provided that no tax shall be ·levied ~der this section ifthe goods
in respect of which the right to use is tra~sferred, have been subjected
to tax under section 5.
. '
F
12-A. Assessment of escaped turnover: -( 1) If the assessing authority
has reason to believe that the whole or any part of the turnover of
~
a dealer in respect of any period has escaped assessment to tax or has
been under-assessed or has been assessed at a rate lower than the
rate at which it is assessable under this Act or any deductions or
exemptions have been wrongly allowed in respect thereof, the assessing
G
·authority may, notwithstanding the fact that the whole or part of such
~
escaped turnover was already before the said authority at the time of
the original assessment or re-assessment but subject to the provisions
of sub-section (2), at any time within a period of eight years from the
•\i,,,
expiry of the year to which the tax relates, proceed to assess or reH
assess to the best of its judgment the tax payable by the dealer in
BINANI INDUSTIUES LIDv. ASSISTANTCOMMNR. OF COMMERCIAL TAXES, VI CIRCLE, BANGALORE (PASAYAT, J. J 805
,_
respect of such turnover after issuing a notice to the dealer and after A
........,
making such enquiry as it may consider necessary.
(I-A) In making an assessment under sub-section (l) the assessing
authority may, if it is satisfied that the escape from assessment is due
to wilful non-disclosure of assessable turnover by the dealer, direct
the dealer to pay, in addition to the tax assessed under sub section B
(I), a penalty not exceeding (an amourit equivalent to the tax due) the
tax so assessed:
,-.
Provided that no penalty under this sub-section shall be imposed
unless the dealer affected has had a reasonable opportunity of showing
cause against such imposition.
c
(2) In computing the period of limitation for assessment of the escaped
turnover under this Section, the time during which an assessment has
been deferred on account of any stay order granted by any Court or
other authority in any case, or by reason of the fact that an appeal D
or other proceeding is pending before the Appellate Tribunal or the
High Court or the Supreme Court, shall be excluded:
f
Provided that nothing contained in this Section limiting the time
within which any action may be taken or any order, assessment or reassessment may be made, shall apply to an assessment or re- E
assessment made on the assessee or any person in consequence of,
I
or to give effect to, any finding, direction or order made under Sections
20, 21 , 22, 22A, 23 or 24 or any judgment, or order made by the
Supreme Court, the High Court, or any other Court.
21. Revisional powers of Joint Commissioners.:
F
(1) The Deputy Commissioner may of his own motion call for and
-f
examine the record of any order passed or proceeding recorded under
the provisions of this Act by an Commercial Tax Officer subordinate
to him for the purpose of satisfying himself as to the legality or
propriety of such order or as to the regularity of such proceeding in G
so far as it is prejudicial to the interests of the revenue and may pass
such order with respect thereto as he thinks fit.
(2) the Joint Commissioner may of his own motion call for and examine
~
the record of any order passed or proceeding recorded under the
provisions of this Act by any officer not above the rank of a Deputy H
i
806
SUPREME COURT REPORTS
(2007) 4 S.C.R.
A
Commissioner, for the purpose of satisfying himself as to the legality
....
-'<'"
or propriety of such order or as to the regularity of such proceeding
in so far as it is prejudicial to the interests of the revenue and pass
such order with respect there to as he thinks fit.
-;
(3) In relation to an order of assessment passed under this Act, the
B
power under sub-sections (1) and (2) shall be exercisable only within
a period of four years from the date on which the order was passed.
(4) No order shall be passed under sub-section (1) or sub-section (2)
A
enhancing any assessment, unless an opportunity has been given to
....
c
the assessee to show cause against the proposed enhancement.
(5) The power under this Section shall not be exercisable in respect
. of matters subjected to· appeal under Section 20.
(6) Every order passed in revision under this Section shall subject to
the provisions of Sections 22 to 24 and 25-A be final.
D
Explanation: For the purposes of this section, 'record' shall include
all records relating to any proceedings under this Act available at the
'
time of examination by the Joint Commissioner."
'-....
14. A copy of the Budget speech introducing the amendment was
E placed on record by learned counsel for the parties. The Finance Minister's
spe~ch shows that the proviso was intended to provide additional benefit or
relief. The proviso appears to h&ve been introduced as a clarificatory measure.
There is no mention as to the date after which benefit can be granted in
respect of the goods which have suffered tax. Therefore, the assessment
F
period concerned as sought to be introduced by the revenue has no
foundation. The proviso clearly states that once the goods have suffered the
tax they would not be subject to tax again. As observed by this Court in Zile
Singh v. State of Haryana and Ors., [2004] 8 SCC 1 for the purpose of
determining that the proviso is clarificatory or not, the date when it is introduced
is relevant. Paras 11 to 21 of the judgment are relevant and they read as
G follows:
11. According to the appellant, the disqualification imposed by Section
13-A(l)(c) of the First Amendment remained in operation only for a
period of one year and would have in ordinary course ceased to
~
operate on the expiry of the period of one year from 5-4-1994. The
H
citizens were justified in arranging their affairs including the
BINANI INDUSlRIES L 1D v. ASSIST ANT COMMNI\. OF COMMERCIAL TAXES, VI CIRCLE, BANGALORE (PASAY AT. J. I 807
enlargement of their families keeping in view the provision of law as A
it stood. However, the Second Amendment Act effective from 4-101994 made a difference. On that day, the legislature specifically
provided that a person having more than two children on or after the
expiry of one year shall stand disqualified. This period of one year,
in the submission of the appellant, should be calculated from 4-101994 and not 5-4-1994 and if that be done the birth of the child on 13- B
8-1995 would not attract the disqualification.
12. This plea of the appellant raises a few interesting questions, such
as, the nature of the amendment i.e. whether it is at all retrospective
in operation, and if not, whether the provision as amended by the C
Second Amendment applies to the appellant.
13. It is a cardinal principle of construction that every statute is prima
facie prospective unless it is expressly or by necessary implication
made to have a retrospective operation. But the rule in general is
applicable where the object of the statute is to affect vested rights or D
to impose new burdens or to impair existing obligations. Unless there
are words in the statute sufficient to show the intention of the
legislature to affect existing rights, it is deemed to be prospective only
- "nova constitutio futuris formani imponere debet non praeteritis" a
new law ought to regulate what is to follow, not the past. (See
Principles of Statutory Interpretation by Justice G.P. Singh, 9th Edn., E
2004 at p. 438.) It is not necessary that an express provision be made
to make a statute retrospective and the presumption against
retrospectivity •. 1ay be rebutted by necessary implication especially in
a case where the new law is made to cure an acknowledged evil for
the benefit of the community as a whole (ibid., p. 440).
14. The presumption against retrospective operation is not applicable
to declaratory statutes ............. In determining, therefore, the nature of
the Act, regard must be had to the substance rather than to the form.
f.
If a new Act is "to explain" an earlier Act, it would be without object
unless construed retrospectively. An explanatory Act is generally G
passed to supply an obvious omission or to clear up doubts as to the
meaning of the previous Act. It is well settled that if a statute is
curative or merely declaratory of the previous law retrospective
operation is generally intended .... An amending Act may be purely
declaratory to clear a meaning of a provision of the principal Act
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SUPREME COURT REPORTS
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which was already implicit. A clarificatory amendment of this nature
will have retrospective effect (ibid., pp. 468-69).
15. Though retrospectivity is not to be presumed and rather there is
presumption against retrospectivity, according to Craies (Statute Law,
7th Edn.), it is open for the legislature to enact laws having
retrospective operation. This can be achieved by express enactment
or by necessary implication from the langu<>ge employed. If it is a
necessary implication from the language employed that the legislature
intended a particular section t~ have a retrospective operation, the
courts will give it such an operation. In the absence of a retrospective
ope~ation hav.ing been expressly given, the courts may be called upon
to construe the provisions and ans.wer the question whether the
legislature had sufficiently expressed that intention giving the statute
retrospectivity. Four factors are suggested as relevant: (i) general
scope and purview of the statute; (ii) the remedy sought to be applied;
(iii) the fonner state of the law; and (iv) what it was the legislature
contemplated. (p. 388) The rule against retrospectivity does not extend
to protect from the effect of a repeal, a privilege which did not amount
to accrued right. (p. 392)
16. Where a statute is passed for the purpose of supplying an obvious
omission in a fonner statute or to "explain a fonner statute, the
subsequent statute has relation back to the time when the prior Act
was passed. The rule against retrospectivity is inapplicable to such
legislations as are explanatory and declaratory in nature. A classic
illustration is the case ofAttorney General v. Pougett, (Price at p.
392). By a Customs Act of 1873 (53 Geo. 3, c. 33) a duty was imposed
upon hides of 9s 4d, but the Act omitted to state that it was to be
9s 4d per cwt., and to remedy this omission another Customs Act (53
Geo. 3, c .. 105) was passed later in the same year. Between the passing
of these two Acts some hides were exported, and it was contended
that they were not liable to pay the duty of 9s 4d per cwt., but
Thomson, C.B., in giving judgment for the Attorney General, said: (ER
·p. 134)
"The duty in this instance was, in fact, imposed by the first Act;
but the gross mistake of the ornissiori of the weight, for which
the sum expressed was to have been payable. occasioned the
amendment made by the subsequent Act: but that had reference
-.·•
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BlNANl INDUSTRIES LTD v. ASSIST ANT COMMNR. OF COMMERCIAL TAXES, VI CIRCLE, BANGALORE (PASA Y AT, I. ) 809
~·
to the former statute as soon as it passed, and they must be A
taken together as if they were one and the same Act:" (Price at
p. 392)
17. Max.well states in his work on Interpretation of Statutes (12th Edn.)
that the rule against retrospective operation is a presumption only,
and as such it "may be overcome, not only by express words in the B
Act but also by circumstances sufficiently strong to displace it" (p.
225), if the dominant intention of the legislature can be clearly and
doubtlessly spelt out, the inhibition contained in the rule against
perpetuity becomes of doubtful applicability as the "inhibition of the
rule" is a matter of degree which would "vary secundum materiam" (p. C
226). Sometimes, where the sense of the statute demands it or where
there has been an obvious mistake in drafting, a court will be prepared
to substitute another word or phrase for that which actually appears
in the text of the Act (p. 231 ).
18. In a recent decision of this Court in National Agricultural Coop. D
Marketing Federation of India Ltd v. Union of India: [2003] 5 SCC
23, it has been held:
"that there is no fixed formula for the expression of legislative intent
to give retrospectivity to an enactment. Every legislation whether
prospective or retrospective has to he subjected to the question E
of legislative competence. The retrospectivity is liable to be
decided on a few touchstones such as: (i) the words used must
expressly provide or clearly imply retrospective operation; (ii)
the retrospectivity must be reasonable and not excessive or
harsh, otherwise it runs the risk of being struck down as
unconstitutional: (iii) where the legislation is introduced to F
overcome a judicial decision, the power cannot be used to subvert
the deCision without removing the statutory basis of the
decision. There is no fixed formula for the expression of legislative
intent to give retrospectivity to an enactment. A validating clause
coupled with a substantive statutory change is only one gf the
methods to leave actions unsustainable under the un-amended G
statute, undisturbed. Consequently, the absence of a validating
clause would not by itself affect the retrospective operation of
the statutory provision, if such retrospectivity is otherwise
apparent".
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19. The Constitution Bench in Shyam Sunder v. Ram Kumar, (2001]
,,,.,,
8 SCC 24, has held: [SCC p. 49, Pira 39]
"Ordinarily when an enactment declares the previous law, it
requires to be given retroactive effect. The function of a
declaratory statute is to supply an omission or· to explain a
B
previous statute and when such an Act is passed, it comes into
effect when the previous enactment v::is passed. The legislative
power to ~nact law includes the power to declare what was the
A
previous law and when such a declaratory Act is passed,
invariably it has been held to be retrospective. Mere absence of
c
use of the word 'declaration' in an Act explaining what was the
law before may not appear to be a declaratory Act but if the
court finds an Act as declaratory or explanatory, it has to be
construed as retrospective." [P. 2487].
20. In Bengal Immunity Co. Ltd v. State of Bihar, [1955] 2 SCR 603,
D
Reydon case was cited with approval. Their Lordships have said:
(SCR pp. 632-33)
"It is a sound rule of construction of a statute firmly established in
\.
England as far back as 1584 when Reydon case was decided that-
' ... for the sure and true interpretation of all statutes in general
E
(be they penal or beneficial, restrictive or enlarging of the coinmon
law) four things are to be discerned and considered1st What was the common law before the making of the Act.
2nd. What was the mischief and defect for which the common
F
law did not provide.
3rd. What remedy Parliament hath resolved and appointed to
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cure the disease of the Commonwealth, and
4th. The true reason of the remedy; and then the office of all the
judges is always to make such construction as shall suppress
G
the mischief, and advance the remedy, and to suppress subtle
inventions and evasions for continuance of the mischief, and
pro privato commodo and to add force and life to the cure and
remedy, according to the true intent of the makers of the Act,
pro bono publico' ."
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21. In Allied Motors (P) Ltd v. CIT, (1997] 3 SCC 472 certain unintended
BINANllNDUSTRIES LTD v. ASSIST ANT COMMNR. OF COMMERCIAL TAXES, VI CIRCLE, BANGALORE (PASAY AT, J. I 811
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consequences flowed from a provision enacted by Parliament. There A
was an obvious omission. In order to cure the defect, a proviso was
sought to be introduced through an amendment. The Court held that
literal construction was liable to be avoided if it defeated the manifest
object and purpose of the Act. The rule of reasonable interpretation
should apply.
B
"A proviso which is inserted to remedy unintended consequences
,,.
and to make the provision workable, a proviso which supplies an
_ ...
obvious omission in the section and is required to be read into the
section to give the section a reasonable interpretation, requires to be
treated as retrospective in operation so that a reasonable interpretation c
can be given to the section as a whole." (SCC pp. 479-80, para 13)
15. The Budget Speech speaks of the goods "already been subjected
to tax under the Act" and does not even by implication state that in order
to be entitled to the benefit the goods ought to have been taxed after a
particular date. It is purely on the event of goods having suffered tax once D
or in other words the taxable event having taken place once.
-r
,;
16. The normal function ofa proviso is to except something out of the
enactment or to qualify something enacted therein which but for the proviso
would be within the purview of the enactment. As was stated in Mullins v.
Treasurer of Survey, (1880) 5 QBD 170, referred to in Shah Bhojraj Kuverji Oil E
Mills and Ginning Factory v. Subhash Chandra Yograj Sinha, AIR (1961)
SC 1596 and Calcutta Tramways Co. Ltd v. Corporation of Calcutta, AIR
( 1965) SC 1728; when one finds a proviso to a section the natural presumption
is that, but for the proviso, the enacting part of the section would have
included the subject matter of the proviso. The proper function of a proviso F
is to except and to deal with a case which would otherwise fall within the
general language of the main enactment and its effect is confmed to that case.
It is a qualification of the preceding enactment which is expressed in terms
too general to be quite accurate. As a general rule, a proviso is added to an
enactment to qualify or create an exception to what is in the enactment and
ordinarily, a proviso is not interpreted as stating a general rule. "If the G
language of the enacting part of the statute does not contain the provisions
which are said to occur in it you cannot derive these provisions by implication
from a proviso." Said Lord Watson in West Derby Union v. Metropolitan Life
).
Assurance Co., (1897) AC 647 (HL). Normally, a proviso does not travel
beyond the provision to which it is a proviso. It carves out an exception to
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the main provision to which it has been enacted as a proviso and to no other.
812
SUPREME COURT REPORTS
(2007] 4 S.C.R.
A (See A.N. Sehgal and Ors. v. Raje Ram Sheoram and Ors., AIR (1991) SC
1406), Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal and
Ors., AIR (1991) SC 1538 and Kera/a State Housing Board and Ors: v.A
Ramapriya Hotels (P)Ltd and Ors., [1994] 5 SCC 672.
17. "This word (proviso) hath divers operations. Sometime it worketh a
B qualification or limitation; sometime a condition; and sometime a covenant"
(Coke upon Littleton 18th Edition, 146)
18. "If in a deed an earlier clause is followed by a later clause which
destroys altogether the obligation created by the earlier clause, the later
clause is to be rejected as repugnant, and the earlier clause prevails .... But if
C the later clause does not destroy but only qualifies the earlier, then the two
are to be re~d together and effect is to be given to the intention of the parties
as disclosed by the deed as a whole" (Per Lord Wrenbury in Forbes v. Git,
(1922) IA.C. 256).
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19. A statutory proviso "is something engrafted on a preceding
enactment" (R. v. Taunton, St James, 9 B. & C. 836).
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20. "The ordinary and proper function of a proviso coming after a
\..
general enactment is to limit that general enactment in certain instances" (per
Lord Esher in Re Barker, 25 Q.B.D. 285).
21. A proviso to a section cannot be used to import into the enacting
part something which is not there, but where the enacting part is susceptible
to several possible meanings it niay be controlled by the proviso (See Jennings
v. Kelly, (1940) A.C. 206).
F
22. The above position was highlighted in Ali MK. & Ors. v. State of
Kera/a and Ors., [2003] 11 SCC 632 and Union of India v. Sanjay Kumar Jain,
[2004J 6sec10s.
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23. The stand of the revenue does not appear to be very consistent.
Though in the counter affidavit before the High Court it was stated that the
G Circular is not binding on ~he authorities, it is conceded by learned counsel
for the State Government that it is in fact binding on the dep~ent officials.
The Circulars read as follows:
"COMMISSIONER OF COMMERCIAL TAXES CIRCULAR No. 5/96-
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97 dated 12.4.1996
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BINANI INDUSTRIES L TO v. ASSIST ANT COMMNR. OF COMMERCIAL TAXES, VI CIRCLE. BANGALORE [PASAY AT. J. I 813
Sub: Salient features of the Amendments effective from 1.4.1996- reg. A
Ref:- I.Govt. Notification No. DPAL 15 LGN 96, Dated 21.3.1996
published in Karnataka Gazatte Extraordinary Part IV Section 2B, dated
21.3.1996.
2. Govt. Notifications No. FD35 CSL 96 (1 to 25) dated 30.03.96
B
3. Govt. Notifications No. FD 85 CET 96 (1 to 3) dated 30.03.96.
4. Govt. Notifications No. FD 4 CRC 96 dated 30.03.96
As per the Kamataka Taxation laws (Second Amendment) Act,
1996, amendments are effected to provisions of the below mentioned C
Acts;
(i) Kamataka Tax on Luxuries Act, 1979.
(ii) Kamataka Tax on Professions, Trades, Callings and Employments
Act, 1976.
(iii) Karnataka Entertainments Tax Act, 1958.
(iv) Kamataka Agricultural Income Tax Act, 1957.
(v) Karnataka Sales Tax Act, 1957.
2. Salient features of the amendments are explained hereunder for
guidance and compliance. (Specific mention is made about the
amendments which are introduced with retrospective effect and in all
other cases, the amendments take prospective effect, i.e., w.e.f. 1.4.1996):
:ia<:
xx
xx xx
Amendment of Section 5-C- Levy of tax on the transfer of the right
to use any goods.
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16. Section 5-C in force prior to this amendment prescribed 'total
turnover" as the basis for levy of tax. The High Court of Karnataka
in the judgment rendered in the case of Mis Shetty Leasing (India) G
Ltd. v. Union of India, 100 STC 533, had struck down Section 5-C as
beyond the competence of State Legislature. The amendment now
introduced substitutes the whole of Section 5-C with retrospective
effect from 01.4.86 so as to overcome the aforesaid judgment.