Circulars issued by tax authorities cannot undermine the discretionary powers of assessing officers and must align with judicial precedents to ensure fair adjudication.

ORDER :

1. This writ petition has been filed to declare the Circular issued by the Commissioner of Commercial Taxes, Enforcement Wing, A.P., Hyderabad, in CCT’s Ref.ENFT.No.B3/17/AC-III/2007-08, dated 03.01.2008 as illegal, void and consequently set aside the same.

2. The writ petitioner is a Company registered under the Companies Act, 1956 and is a registered dealer on the rolls of Commercial Tax Officer, Srinagar Colony Circle, Hyderabad with TIN No.28590179366 and engaged in the business of execution of civil works, including construction of buildings – residential and commercial, roads, bridges, dams, electrical installation etc., throughout the country.

3. It is the contention of the learned counsel for petitioner that as per the amended provision, the dealer is exigible to pay CST @2% on his turnover provided the sale is effected to registered dealer against ‘C’ form and however, if the goods are sold other than the registered dealer, the sale is exigible to tax at the rate prescribed in the corresponding goods under the local Act and under the scheme of Section 8 (3) of the Central Sales Tax Act, 1956 (for short, ‘Act, 1956’), it is only the registered dealer that are equipped and made eligible to make purchase against ‘C’ forms. The writ petitioner further contended that they are the works contractors and in pursuit of its activity, they buy raw-material like cement, steel etc., and after introduction of Article 366 (29-A) of the Constitution of India, the material used in execution of works contract should also be treated as deemed sale for the purposes of levy of sales-tax under Entry 54 of List-II of VII Schedule of the Constitution of India and in the course of said business, the Commercial Tax Department has been permitting the dealers to incorporate not only the material required for execution of works contract, but also capital goods used in execution of such works contract in the Certificate of Registration and permit buying of such goods against ‘C’ form. However, it is contended by the writ petitioner that the Commissioner (CT) in Circular, dated 03.01.2008, has issued clarification that the purchase of capital goods cannot be made on the strength of ‘C’ forms though such capital goods are being used in the execution of works contract, is illegal and arbitrary. It is contended that the Commissioner (CT) has issued said Circular, which is in violation of principles of law laid down by the Hon’ble Supreme Court in J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur and another, (1965) 16 STC 563 (SC) and in view of the said Circular, the Commercial Taxes Authorities are insisting deletion of capital goods from the Certificate of Registration and threatening to impose penalty for issuing of ‘C’ forms in the context of purchase of capital goods. It is contended that instructions issued by the Commissioner (CT) are impeding the discretionary powers of the assessing authorities, more particularly, the Commercial Taxes Officers/Assessing Authorities to examine the facts of each case on its own merit are simply rejecting the cases of the dealers solely basing upon the Circular issued by the Commissioner (CT) dated 03.01.2008. It is contended that the said Circular is in gross violation of due procedure of law and is ousting the discretionary powers of the statutory authorities and thus, is violative of orders of the Hon’ble Supreme Court. Further, it is contended that the said circular is ex facie illegal, arbitrary and highhanded and is liable to be quashed.

4. It is also contended that though the Commissioner has power to issue such circulars under Section 77 of the ANDHRA PRADESH VALUE ADDED TAX ACT , 2005, which are not inconsistent with the provisions of the Act or the Rules made there under to his subordinate officers for the proper administration of the Act. The said Section also contemplates that such circulars cannot oust the discretionary powers of the appellate authority and, by necessa