JUDGMENT
Rajes Kumar, J.
1. These five revisions under Section 11 of the U.P. Trade Tax Act (hereinafter referred to as “Act) are directed against the order of Tribunal dated 26.05.1998 for the assessment years 1985-86, 86-87, 87-88, 88-89 and 89-90.
2. Applicant is a unit of National Textile Corporation, which is an undertaking of Government of India, engaged in the business of manufacture and sale of cotton yam etc. During the aforesaid years, applicant had purchased lubricant oil and used in the machines required for manufacturing. Assessing authority raised a demand under Section 3-G(3) of the Act on the ground that under Section 3-G(2) of the Act. applicant could not use the lubricant oil purchased against Form 3-D in the manufacturing of goods. Applicant filed appeals for the aforesaid years. First appellate authority deleted the demand for the assessment years 1985-86, 86-87 and 89-90 but upheld the demand for the assessment years 1987-88 and 88-89. Against the orders of the first appellate authority, Commissioner of Trade fax filed appeals for the assessment years 1985-86, 86-87 and 89-90 and the applicant filed appeals for the assessment years 1987-88 and -88-89. Tribunal by the impugned orders dated 26.05.1998 rejected the appeals of the dealer for the assessment years 1987-88 and 88-89 and allowed the appeals of the Commissioner of Trade Tax for the assessment sears 1985-86. 86-87 and 89-90 and restored the order of the assessing authority demanding the tax under Section 3-G(3) of the Act.
3. Heard learned Counsel for the parties.
4. Learned Counsel for the absence submitted that use of lubricant oil in the machines does not come within the purview of use in the manufacturing of goods as contemplated under Section 3-G(2) of the Act. He further submitted that vide circular no.30/79 dated 06.02.1979 and circular no.66/82 dated 05.11.1982 lubricant oil used in the machines has been declared eligible for the benefit of concessional rate of tax under Section 3-G of the Act. He further submitted that circular No. 135/77 dated 03.08.1977 also permitted the benefit of concessional rate of tax under Section 3-G of the Act in respect of the goods used in the manufacturing and, therefore, the benefit can not be denied. He submitted that the aforesaid circulars have been considered by this Court in the case of Chandpur Sugar Company Ltd., Chandpur, Bijnor v. CST reported in 1992 U.P.T.C., 1326 and U.P. State Sugar Corporation Ltd., Amroha v. CS reported in 1992 U.P.T.C., 1344 and held that the circulars are binding on the revenue and the benefit of concessional rate of tax was available in respect of the goods used in the manufacturing of goods. He submitted that the aforesaid circulars have been withdrawn by circular dated 13.10.1987. Therefore, the benefit of concessional rate of tax under Section 3-G of the Act is available upto 30.10.1987, in view of the decision of this Court in the case of Kichha Sugar Company Ltd., Nainital v. CST reported in 1995 I.P.T.C., 1028 Learned standing Counsel submitted that the Division Bench of this Court in the case of Vam Organic Chemicals Ltd. v. State of U.P. and Ors. reported in 2003 U.P.T.C., 467 held that use of diesel oil in the generation of power used in the manufacturing was within the purview in the manufacturing of goods , therefore, in view of Section 3-G(2) of the Act, applicant is not entitled for the benefit of concessional rate of tax under Section 3-G(1) of the Act. He further submitted that since all the circulars have been withdrawn by the circular dated 13.10.1987, therefore, applicant is not entitled for the benefit of concessional rate of tax in view pf the circular nos.30/79, 66/82 and 135/77.
5. Heard learned Counsel for the parties.
6. I have perused the order of Tribunal and the authorities below.
7. Section 3-G (1), (2) and (3) of the Act reads as follows:
Section 3-G. Special rate of tax on certain sales-
(1) Notwithstanding anything contained in Section 3-A or Section 3-D or Section 3-F, and subject to the provisions of Sub-section (2) and such conditions and restrictions, if any, as may be specified by the. State Government by notification, the tax on the turnover of sales of gods to a department of the Central Government or of a State Government or to a Corporation or undertaking established or constituted by or under a Central Act or an Uttar Pradesh Act, or to a Government Company as defined in Section 617 of the companies Act, 1956 (not being a Nagar Mahapalica, Municipal Board, Zila Parishad, Town Area Committee, Notified Area Committee, Cantonment Board, a University or an educational institution or an institution managed for the time being by an authorized controller) shall, if the dealer furnishes to the Assessing Authority a declaration obtained from such Department, Corporation, Undertaking or Company in such form and manner, and within such period, as may be prescribed, be levied and paid at the rate for the time being specified in Sub-section (1) of Section 8 of the Central Sales Tax Act, 1956, or at such rate as the State Government may, by, notification, specify in relation to any sales, unless the goods are taxable under any other section of this Act at a rate lower than the said rate,
(2) The provisions of Sub-section (1) shall not apply to the sale of any goods which are purchased by such Department, Corporation, Undertaking or Company for re-sale or for use in the manufacture of packing of any goods, other than electrical energy, for sale, or if such Department, Corporation, Undertaking or company has no office or establishment situated in Uttar Pradesh.
(3) If after purchasing the goods against the declaration referral in Sub-section (1), any such Department, Corporation, Undertaking or Company uses or disposeses of the same in the manner mentioned in Sub-section (2), such Department, Corporation, Undertaking or Company shall, without prejudice to any other action, including the imposition of penalty, that may be taken under 6thsi act, be liable to pay an amount equal to the difference of tax inculated at the rate otherwise applicable to the purchase or sale of such goods under this Act, and that the applicable under Sub-section (1)
8. The word “required for use in the manufacturing” came up for consideration before the Division Bench of this Court in the case Vam Organic Chemicals Ltd. v. State of U.P. and Ors. (Supra). The Division Bench of this Court held as follows:
If the stand of the respondent is accepted then we will be adding the word ‘directly’ in Section 4-B (2) before the words ‘for use in the manufacture.’ This would be against the settled principle of interpretation referred to above. In our opinion, diesel oil is certainly fuel which is essential for operating the machinery in a continuous process industry like that of the petitioner. Hence in our opinion, diesel is clearly covered by Clause (a) of the Explanation to Section 4-B(2) of the U.P. Trade Tax Act. In the event of breakdown of power supply to the generating sets of the petitioner the production in the factory will come to a halt as there will be no electricity for use by the factory and there will be damage to the machinery. Hence diesel oil is certainly goods used by the petitioner for the manufacture in his factory.
9. Therefore, the argument of learned Counsel for the applicant that use of lubricant oil in the machines, which are used in the manufacturing of goods does not come within the purview of use in the manufacturing can not be accepted in view of the law laid down by the Division Bench of this Court referred hereinabove. However, I find some substance in the argument of learned Counsel for the applicant that in view of the circulars issued by Commissioner of Trade Tax the benefit of concessional rate of tax under Section 3-G(J) of the Act can not be denied up to the period 12.10.1987 till they have not been withdrawn by the circular dated 31.10.1987. In the case of Chandpur Sugar Company Ltd., Chandpur, Bijnor v. CST (Supra) and in the case of U.P. State Sugar Corporation Ltd., Amroha v. CST (Supra) Division Bench of this Court held that the circulars are binding upon the revenue and in view of the circular dated 03.08.1977 the plant and machinery used in the manufacturing does not come within the purview of Section 3-G(2) of the Act. In the case of Vam Organic Chemicals Ltd. v. State of U.P. and Ors. (Supra) this Court held that the circular dated 03.08.1977 remained enforce unless Commissioner issued another circular dated 13.10.1987 reversing the view taken in the aforesaid document. This Court relying upon the decision in the case of K.P.Varghese v. ITO, Ernakular and Anr. reported in 131 ITR, 597, Navneet Lal C.Javeri v. K.K. Sen, Appellate Assistant Commissioner, Income Tax, Bombay reported in 56 ITR, 198, Ellerman Lines Ltd. v. CIT, West Bengal reported in 87 ITR, 913 held that circulars which are in favour of the assessee are binding upon the revenue. In the case of CST v. Indra Industries reported in 2000 UPTC 472 Apex Court held that the circulars are binding upon the revenue even though they are contrary to the statute. It has been further held that it is not open to the revenue to take a contrary view. For the reasons stated above it is held that dealer is entitled for the benefit of concessional rate of tax up to 12,10.1987 till the date all the aforesaid circulars were valid and were in operation till they have reversed by the circular dated 13.10.1987.
10. In the result. revisions nos. (1653) and (1656) of 1998 relating to the assessment years 1985-86 and 86-87 are allowed. Order of the Tribunal is set aside and the order of Deputy Commissioner (Appeals) is restored. Revision nos. (1652) of 1998 relating to the assessment year 1987-88 is allowed in part Tribunal is directed to quantify the figure and allowed the exemption upto 12.10.1987. Revisions nos. (1654) and (1651) of 1998 relating to the assessment years 1988-89 and 89-90 are dismissed.
