2006 (11) TMI 571 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of inter-State sales of watery coconuts to sales tax under the Central Sales Tax Act, 1956.
2. Binding nature and enforceability of circulars issued by the Commissioner of Commercial Taxes.
3. Classification of watery coconuts under the relevant entries of the Second and Third Schedules to the Tamil Nadu General Sales Tax Act, 1959.
4. Nature of exemption under sections 8(2A) and 8(2)(c) of the Central Sales Tax Act.

Detailed Analysis:

1. Liability of inter-State Sales of Watery Coconuts to Sales Tax:
The primary question for consideration was whether inter-State sales of watery coconuts are liable to sales tax under the Central Sales Tax Act, 1956. The court examined various provisions, including Section 6, Section 8(2-A), Section 8(2)(C), Section 14, and Section 15 of the Central Sales Tax Act, along with relevant entries in the Second and Third Schedules of the Tamil Nadu General Sales Tax Act, 1959. The court concluded that the transactions are liable to tax under the Central Act, as the exemption granted under the Third Schedule is not general but conditional.

2. Binding Nature and Enforceability of Circulars:
The court addressed the contention regarding the binding nature of circulars issued by the Commissioner of Commercial Taxes. It was argued that adverse circulars are not binding on the assessee, while beneficial circulars can be enforced by the assessee. The court referred to several Supreme Court decisions, including *Collector of Central Excise, Vadodara v. Dhiren Chemical Industries* and *Kalyani Packaging Industry v. Union of India*, to clarify that circulars cannot prevail over the law laid down by the Supreme Court. The court held that the circular dated March 12, 1999, does not help the assessees to avoid statutory liability.

3. Classification of Watery Coconuts:
The court examined whether watery coconuts fall under the taxable entry in the Second Schedule of the Tamil Nadu General Sales Tax Act, 1959. The court referred to the Supreme Court's decision in *Commissioner of Sales Tax, Madhya Pradesh v. Popular Trading Co.*, which held that watery coconuts are considered oil seeds. The court concluded that the entry in the Second Schedule is comprehensive enough to include all varieties of coconuts except tender coconuts.

4. Nature of Exemption under Sections 8(2A) and 8(2)(c):
The court analyzed whether the exemption under sections 8(2A) and 8(2)(c) of the Central Sales Tax Act applies to watery coconuts. The court referred to the Supreme Court's decision in *Commissioner of Sales Tax, Jammu and Kashmir v. Pine Chemicals Ltd.*, which held that a general exemption means that goods should be totally exempt from tax. Since the exemption in the Third Schedule is conditional and not general, it cannot be availed of by the petitioners. Therefore, the inter-State sale of watery coconuts is taxable under the Central Act.

Conclusion:
The court dismissed all writ petitions except W.P. No. 4883 of 2005, holding that the inter-State sales of watery coconuts are liable to sales tax under the Central Sales Tax Act. The court directed the petitioner in W.P. No. 4883 of 2005 to file a statutory appeal within 30 days if they have any grievance against the impugned order. The respondents were instructed not to give effect to the impugned order of assessment until the expiry of the time granted for filing the appeal.

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