Case Note & Summary
The petitioners, Prism Cement Limited and its shareholder/director, filed a writ petition challenging three trade circulars issued by the Commissioner of Sales Tax, Mumbai, on 27 May 2002, 20 July 2002, and 8 February 2007, and various notices issued by the Deputy Commissioner of Sales Tax in February 2009 under Section 38 of the Bombay Sales Tax Act, 1959 (BST Act) for revising assessments for Assessment Years 2002-2003 to 2004-2005. The trade circulars clarified that under Section 8(5) of the Central Sales Tax Act, 1956 (CST Act), as amended by the Finance Act 2002 with effect from 11 May 2002, the State Government is empowered to grant exemption only in respect of inter-State sales to registered dealers, not to unregistered dealers. The petitioners contended that the circulars were ultra vires the CST Act and that the revision notices were without jurisdiction. The court, after hearing arguments from senior advocates for both sides, held that the trade circulars are merely clarificatory and valid, as the amendment clearly restricts the exemption power. The revision notices under Section 38 of the BST Act were also held to be maintainable because the assessments were made based on the pre-amendment understanding, and the amendment applies retrospectively. The court dismissed the writ petition, upholding the circulars and notices.
Headnote
A) Central Sales Tax - Exemption under Section 8(5) - Amendment by Finance Act 2002 - The Commissioner issued trade circulars clarifying that after the amendment, the State Government can grant exemption only for inter-State sales to registered dealers, not to unregistered dealers. The court held that the circulars are merely clarificatory and not ultra vires, as the amendment restricts the power of exemption. (Paras 1-10) B) Bombay Sales Tax Act - Revision of Assessments - Section 38 - Notices issued for revising assessments for A.Y. 2002-2003 to 2004-2005 were challenged. The court held that the notices are maintainable as the assessments were made under the pre-amendment position and the amendment applies retrospectively. (Paras 11-15) C) Constitutional Law - Ultra Vires - Delegated Legislation - The petitioners argued that the circulars are ultra vires the CST Act. The court rejected this, holding that the circulars are administrative instructions and do not exceed the powers under the Act. (Paras 16-20)
Issue of Consideration
Whether the trade circulars issued by the Commissioner of Sales Tax, which state that under Section 8(5) of the CST Act as amended, the State Government can grant exemption only for inter-State sales to registered dealers, are valid; and whether the notices under Section 38 of the BST Act for revising assessments are maintainable.
Final Decision
Writ petition dismissed. Trade circulars and revision notices upheld.
Law Points
- Section 8(5) of Central Sales Tax Act
- 1956
- as amended by Finance Act 2002
- empowers State Government to grant exemption only in respect of inter-State sales to registered dealers
- not to unregistered dealers
- Trade circulars clarifying the amendment are valid and not ultra vires
- Notices under Section 38 of Bombay Sales Tax Act
- 1959 for revision of assessments are maintainable.
