JUDGMENT
P.V. Reddi, C.J.
1. These writ appeals are filed by the State (Commercial Taxes Department) against the common judgment in W.Ps. Nos. 3793-97 of 1999 [Kirloskar Ferrous Industries Limited v. Deputy Commissioner of Commercial Taxes (Assessment I) . Learned single Judge while holding against the assessee that the lumps purchased by the assessee are ore and shall be treated as such even for the period prior to April 1, 1996 (when the entry was amended), however, gave relief to the extent that, in accordance with the clarification given by the Commissioner of Commercial Taxes, the assessee was entitled to purchase lumps against form 37. Accordingly, the assessing authority was directed to modify the assessment order.
2. The respondent herein, filed writ petitions questioning the various assessment orders under the Karnataka and Central Sales Tax Acts for the assessment years 1993-94 to 1995-96 and a declaration was also sought that the iron ore lumps are not liable to purchase tax under entry 1 of the Third Schedule to the Act and also to declare that the clarification of the Commissioner is binding on the assessing authority till it was recalled. Further declaration is sought for to declare that Section 5-A of the Karnataka Sales Tax Act, 1957 permits purchase of industrial inputs with the concessional rate irrespective of the fact whether they are liable to tax at purchase point or sale point.
3. Goods liable to tax at the purchase point are set out in the Third Schedule as per Section 5(3)(b) of the KST Act in entry 1 of the Third Schedule as it stood at the relevant point of time reads as follows :
“Bauxite, chromite, iron, manganese and other ores.”
The words “including lumps and fines” were added by Act No. 5 of 1996 with effect from April 1, 1996, i.e., subsequent to assessment years for which the impugned assessments have been made. It is the contention of the respondent that before the said amendment, lumps do not fall under entry 1 of the Third Schedule. It is contended that lump is not ore and therefore, the assessee is not liable to pay purchase tax. This is one aspect of the controversy. The second aspect of the controversy is with reference to Section 5-A of the KST Act. It is the contention of the respondent that the iron ore lumps are only industrial inputs/raw materials which are used in the manufacture of other goods and therefore, the assessee is entitled to purchase the same from the mine owners by issuing form 37 which is a form prescribed under the Rules relatable to Section 5-A. By issuing such form 37, concessional rate of sales tax at 4 per cent could be availed of by the seller and consequentially, the assessee gets that benefit while bearing the incidence of tax.
4. The assessing authority held that the liability is fastened under Section 5(3)(b) read with entry 1 of the Third Schedule, the moment the lumps are purchased from the mine owners, because they answer the description of iron ore. Hence, he charged tax on the purchase turnover of iron ore lumps under Section 5(3)(b). As regards the second aspect, the assessing authority was of the view that Section 5-A does not apply and form 37 should not have been issued by the assessee. For the misuse of form 37, the assessing authority levied penalty.
5. The question whether the lumps and ore are distinct commodities and whether the commodity lumps falls under entry 1 of the Third Schedule need not be decided in the writ appeal, as the finding of the learned single Judge on this aspect has not been questioned by the assessee.
6. As regards the second aspect of the controversy, the clarification of the Commissioner of Taxes, reads as follows ;
“I am to clarify that, raw material/components used in the manufacture of other goods could be purchased against form 37 under Section 5-A of the KST Act, 1957. (If iron ore lumps, iron ore fines and red oxide fines are used as raw materials in the manufacture of other goods, you can purchase the same against form 37).”
The above clarification was given on February 5, 2001 in response to a query raised by a dealer by name Dalmia Minerals. It is not in dispute that the clarificatory communication of the Commissioner has received wide publicity. In fact, it is extracted in Karnataka Law Journal (Sales Tax). It is not the case of the appellants that the clarification given by the Commissioner was only between a particular dealer and the Commissioner and it was not in the nature of general instructions issued within the meaning of Section 3-A of the Act. This clarification together with several other clarifications issued between August 1, 1985 and May 28, 1996 were withdrawn only on February 26, 1997. It is the contention of the learned Government Advocate that this clarification of the Commissioner goes against the provisions of the statute, viz., Section 5-A. According to him, iron ore lumps purchased by the assessee cannot be regarded as industrial inputs used for manufacture of other goods for sale. Learned Government Advocate goes to the extent of contending that the Commissioner’s circular has no sanctity in the eye of law and cannot be given effect to. Such a stand taken by the department was emphatically refuted by the Supreme Court in a recent case of Commissioner of Sales Tax v. Indra Industries [2001] 122 STC 100 ; [2001] 248 ITR 338. The Supreme Court observed as follows ;
“A circular by tax authorities is not binding on the courts. It is not binding on the assessee. However, the interpretation that is thereby placed by the taxing authority on the law is binding on that taxing authority. In other words, the taxing authority cannot be heard to advance an argument that is contrary to that interpretation.”
Referring to the observation in Bengal Iron Corporation’s case [1993] 90 STC 47, the Supreme Court observed that they can apply, at best, only when a case of estoppel against a statute is made out.
7. The learned single Judge relied on the decision in Collector of Central Excise v. Usha Martin Industries . In that case, the instruction issued under Section 37-B of the Central Excises and Salt Act which provision is more or less equal to Section 3-B of the KST Act was considered by the Supreme Court. A question was posed at paragraph 19 as follows :
“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 ?”
At paragraph 21, it was observed :
“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 v. Jayant Dalal Private Ltd. , Ranadey Micronutrients v. Collector of Central Excise , Poulose and Mathen v. Collector of Central Excise , British Machinery Supplies Co. v. Union of India . 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.”
The Supreme Court then referred to the principle laid down in Poulose and Mathen v. Collector of Central Excise that the assessee should be given the benefit of doubt where two opinions are possible.
8. In the light of the three Judge Bench decisions of Supreme Court, no exception can be taken to the view expressed by the learned single Judge that the clarification given by the Commissioner is binding on the assessing authority and on that reasoning directing modification of the assessment. It may be stated that there is no dispute on the question that the lumps (treated as ore by the assessing authority) are used in manufacture of pig iron and cast iron. If so, the clarification of the Commissioner that could be legitimately traced to Section 3-A of the KST Act has to be given effect to.
The writ appeals are, therefore, dismissed. No costs.