1998 (2) TMI 558 - HC - VAT and Sales Tax

Issues Involved:
1. Non-filing of "C" forms for inter-State sales.
2. Applicability of additional sales tax.
3. Interpretation of notifications under Section 8(5) of the Central Sales Tax Act (CSTA).
4. Relevance of Supreme Court decisions.
5. Authority of the Tribunal and Appellate Assistant Commissioner (AAC).
6. Clarification issued by the Commissioner of Commercial Taxes.
7. Applicability of the Tamil Nadu General Sales Tax (Sixth Amendment) Act, 1997.

Detailed Analysis:

1. Non-filing of "C" forms for inter-State sales:
The assessee-dealers did not file "C" forms for inter-State sales of cotton yarn amounting to Rs. 3,31,96,672 for the assessment year 1993-94. The assessing officer levied tax at 8% (double the rate of 4%) as per Section 8(2)(a) of the CSTA due to the absence of "C" forms.

2. Applicability of additional sales tax:
The Tribunal modified the AAC's order, stating the applicable tax rate for cotton yarn was 2% as per the notification dated March 19, 1976, plus an additional 2% sales tax due to the turnover exceeding one crore rupees. The Tribunal directed the tax rate to be 4% even without "C" forms. The assessee-dealers contended that the additional 2% sales tax was not sustainable in law, supported by Supreme Court decisions in Assistant Commissioner (Assessment), Sales Tax v. Janatha Expeller Co. [1992] 85 STC 105 and Deputy Commissioner of Sales Tax v. Aysha Hosiery Factory (P.) Ltd. [1992] 85 STC 106.

3. Interpretation of notifications under Section 8(5) of the CSTA:
The Special Government Pleader argued that the levy of 2% tax without "C" forms was impermissible, relying on the Supreme Court decision in State of Rajasthan v. Sarvotam Vegetables Products [1996] 101 STC 547. The Court examined whether the notification under Section 8(5) of the CSTA, which reduced the tax rate to 2%, required compliance with Section 8(4) conditions (i.e., furnishing "C" forms).

4. Relevance of Supreme Court decisions:
The Court analyzed the Supreme Court's decision in Sarvotam Vegetables Products, which held that notifications under Section 8(5) are not independent of the conditions in Section 8(4). However, the Court distinguished the present case, noting that the notification in question did not specify a requirement for "C" forms, thus allowing a lower tax rate of 2% without such forms.

5. Authority of the Tribunal and AAC:
The Tribunal, as an appellate authority, has the jurisdiction to modify assessments to align with the law and facts. The Court emphasized that tax appellate authorities are functionally similar to assessing authorities and can adjust assessments accordingly.

6. Clarification issued by the Commissioner of Commercial Taxes:
The Commissioner issued a clarification in 1997, stating that the Supreme Court's decision in Sarvotam Vegetables Products applied to all transactions under Section 8(5) notifications. However, this clarification was not binding as it was issued before the Tamil Nadu General Sales Tax (Sixth Amendment) Act, 1997, which granted statutory force to such clarifications.

7. Applicability of the Tamil Nadu General Sales Tax (Sixth Amendment) Act, 1997:
Section 28-A of the Amendment Act, effective from November 6, 1997, mandates adherence to clarifications issued by the Commissioner. However, the clarification in this case was issued prior to this date and thus lacked statutory binding force.

Conclusion:
The Court concluded that the Tribunal's imposition of additional 2% sales tax was not sustainable. The notification under Section 8(5) of the CSTA allowed a reduced tax rate of 2% without the need for "C" forms, distinguishing it from the Sarvotam Vegetables Products case. The modified order of the Tribunal was further modified to delete the additional 2% sales tax, and the Tax Case (Revision) was disposed of without costs.

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