M. KATJU, J.

This revision and the connected revisions have been filed against the impugned order of the Sales Tax Tribunal, Agra Bench, dated December 25, 1991. These revisions relate to assessment years 1983-84, 1984-85, 1985-86 and 1986-87 and are being disposed of by a common judgment.

The applicant is a manufacturer of dal and has obtained an eligibility certificate under section 4-A of the U.P. Sales Tax Act, 1948 from January 29, 1983 for four years. Penalty was imposed on the assessee under section 3-B of the U.P. Sales Tax Act for the relevant assessment years and the penalty order has been upheld by the Tribunal in the impugned order. The applicant effects his sales through commission agents and there is a circular of the Commissioner dated January 19, 1991 (annexure 9 to the revision) which states that such sales are also to be included in the assessees turnover.

I have already held in S.T.R. No. 1236 of 1992, U.P. Ceramics and Potteries Ltd. v. Commissioner of Sales Tax that the said circular is binding on the department. Since the applicant held eligibility certificate in the relevant assessment years its sale was not taxable. Consequently the penalty should also not be imposed under section 3-B of the U.P. Sales Tax Act on the assessee on the ground that forms 3-C(2), 3-C(5) were issued to the selling commission agent. The revision is allowed and the impugned order dated December 25, 1991 is set aside.

No order as to costs.

The department preferred appeals to the Supreme Court.

Order

The High Court decided against the sales tax authorities basing itself upon a circular addressed by the Commissioner of Sales Tax to all Assistant Commissioners (Tax Assessment). The sales tax authorities challenge the High Courts decision by special leave. On behalf of the sales tax authorities, it is contended that the said circular is contrary to the law and that, therefore, the High Court should have decided the matter without reference to it. Reliance was placed upon the judgment of two learned Judges of this Court in Bengal Iron Corporation v. Commercial Tax Officer 1993 SC 883 [LQ/SC/1992/778] . In paragraph 18, (page 56 of STC), it was said :

"So far as clarifications/circulars issued by the Central Government and/or State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law." *

It was submitted on behalf of the sales tax authorities that notwithstanding the said circular, they were entitled to recover the concerned tax from the respondent.

The said circular issued on January 19, 1991, by the Commissioner of Sales Tax remains in effect till date. It has not been shown that it has been withdrawn. It is, therefore, very remarkable that it should be contended on behalf of the very Sales Tax Department whose Commissioner issued that circular that it is erroneous. It is very remarkable that the sales tax authorities should instruct their Assistant Commissioners who deal with tax assessments in a manner which is, according to them, contrary to the law.

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.

The observations in paragraph 18, (page 56 of STC) of the judgment in Bengal Iron Corporation 1993 SC 883 [LQ/SC/1992/778] can, at best, apply only when a case of estoppel against a statute is made out.

The civil appeals are dismissed with costs.