1991 (8) TMI 305 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of ammonium nitrate under the Tamil Nadu General Sales Tax Act, 1959.
2. Interpretation of entry 21 and entry 138 of the First Schedule to the Act.
3. Correct tax rate applicable to the turnover of ammonium nitrate.

Analysis:
The High Court of Madras addressed the controversy in a tax revision concerning the classification of ammonium nitrate under the Tamil Nadu General Sales Tax Act, 1959. The main issue was whether ammonium nitrate should be taxed at 3½ per cent under entry 21 or at 8 per cent under entry 138 of the First Schedule to the Act for the assessment year 1978-79. The assessing officer and the Appellate Assistant Commissioner considered it taxable at 8 per cent under entry 138, while the assessee argued for 3½ per cent under entry 21. The Tribunal sided with the assessee's view.

The Court examined the historical evolution of entry 21 in the First Schedule, noting that "ammonium nitrate" was originally listed under "chemical fertilisers" but was later deleted from the entry. The Tribunal's error lay in failing to distinguish between "ammonium nitrate" and "calcium ammonium nitrate," which were classified as separate items in the original entry. As "ammonium nitrate" was not specifically included in entry 21 at the relevant time, it could not be taxed at 3½ per cent under that entry.

Regarding entry 138 of the First Schedule, which encompassed "dyes and chemicals other than those specifically mentioned," the Court found that "ammonium nitrate" fell under this entry as it was only a chemical and was not explicitly mentioned in the Schedule after being deleted from entry 21. Consequently, the assessing authority's decision to tax "ammonium nitrate" at 8 per cent under entry 138 was deemed appropriate.

In conclusion, the Court held that "ammonium nitrate" should be classified under entry 138 of the First Schedule and not under entry 21. Therefore, the Tribunal's order was set aside, and the decision of the assessing authority and the appellate authority was reinstated. As there was no representation from the respondent, no costs were awarded.