2008 (11) TMI 617 - HC - VAT and Sales Tax

Complan - whether would fall under the term milk food and milk products in entry 82 of Part B to the First Schedule of the VAT Act taxable at four per cent and not under the residuary entry as contained in entry 69 of Part C to the First Schedule of the VAT Act taxable at 12.5 per cent? Held that - The notice of objection called for by the assessing authority on the scrutiny of returns for rectifying ertain defects based on the petitioner s returns from January 2008 to March 2008 is a matter for consideration before the competent assessing authority after filing of objections by the petitioner. Instead of filing objections, the petitioner has hastened to rush to this court by way of the present writ petitions. This court is of the view that the petitioner has got every right to place all the material evidence before the competent authority to prove their claim by filing objections. On a reading of the proceedings issued by the first respondent, this court does not find any infirmity or illegality in it. Though the petitioner claims that they have sufficient evidence to prove their claim, their prayer in W.P. No. 17013 of 2008 cannot be answered at this stage, as the said writ petition is not maintainable in the absence of any objection filed by the petitioner. Accordingly, this court holds that the writ petition in W.P. No. 17013 of 2008 is not maintainable at this stage.

Summary

Issues Involved:
1. Interpretation of the term "milk food and milk products" under the Tamil Nadu Value Added Tax Act, 2006.
2. Validity of the clarification issued by the first respondent regarding the tax rate applicable to the product "Complan."
3. Maintainability of writ petitions under Article 226 of the Constitution of India without exhausting administrative remedies.

Analysis:

Issue 1: Interpretation of the term "milk food and milk products"
The petitioner, a company manufacturing a product named "Complan," claimed that their product falls under the category of "milk food and milk products" taxable at a lower rate of four percent under entry 82 of Part B to the First Schedule of the VAT Act. They argued that their product predominantly consists of milk solids and should be classified as a milk product based on precedents like the Horlicks case. The respondents, however, contended that "Complan" contains other ingredients besides milk, making it liable to be taxed at 12.5 percent under the residuary entry in Part C of the First Schedule. The court observed that the petitioner's claim should be presented before the assessing authority by filing objections for proper consideration based on material evidence.

Issue 2: Validity of the clarification issued by the first respondent
The first respondent had issued a clarification stating that "Complan" does not qualify as a milk product and should be taxed at 12.5 percent under Part C of the First Schedule. The petitioner challenged this clarification, arguing that it lacked proper application of mind and highlighted the recognition of "Complan" as a milk product by the Government of India. The court found no illegality in the proceedings issued by the first respondent and directed the petitioner to address their objections to the competent assessing authority for a thorough consideration and final assessment under the VAT Act.

Issue 3: Maintainability of writ petitions under Article 226
The court addressed the maintainability of the writ petitions filed by the petitioner under Article 226 without exhausting administrative remedies by filing objections before the assessing authority. While dismissing one writ petition as not maintainable at that stage, the court directed the petitioner to approach the competent authority, file objections within two weeks, and allowed for a final assessment within four weeks in accordance with the law.

In conclusion, the court dismissed one writ petition, directed the petitioner to file objections before the assessing authority, and emphasized the importance of following due process in challenging tax assessments under the VAT Act.