2007 (11) TMI 570 - HC - VAT and Sales Tax

Discretion exercised by the Commissioner of Commercial Taxes - Held that - Where statute provides that an individual should be given a reasonable opportunity before any decision is taken, then the decision taken by the authority can be termed as quasi-judicial. In the absence of any specific provision laying down a procedure of affording an opportunity, there is no need to provide personal hearing before deciding an application under section 28A of the Act. The decision of the Commissioner of the Commercial Taxes, dated July 24, 2006 cannot be termed as arbitrary or unjust. Therefore, in the absence of any procedural violation, the discretion exercised by the Commissioner of Commercial Taxes, is reasonable, fair and in conformity with section 28A of the Act, do not find that any valid reasons to hold that the impugned clarification is arbitrary and illegal.

Summary

Issues Involved:
1. Validity of the clarification issued by the Commissioner of Commercial Taxes.
2. Applicability of concessional tax rate to diesel generating sets.
3. Alleged violation of principles of natural justice.
4. Requirement of expert opinion for technical matters.
5. Nature of the Commissioner's function under Section 28A of the TNGST Act.

Issue-Wise Detailed Analysis:

1. Validity of the clarification issued by the Commissioner of Commercial Taxes:
The petitioner challenged the clarification issued by the Commissioner of Commercial Taxes, which stated that "diesel generating sets" are not eligible for the concessional tax rate under Notification No. II(1)/CT/19(b17)/2002-GO Ms. No. 32CT(B2), dated March 27, 2002. The court upheld the clarification, stating that the goods sold by the petitioner, i.e., diesel generating sets, are distinct from the items listed in the notification, which pertain to electronic systems and telecom-related equipment.

2. Applicability of concessional tax rate to diesel generating sets:
The petitioner argued that diesel generating sets should be considered part of the "power supply based power plant for telecom application" and thus eligible for the concessional tax rate. The court rejected this argument, noting that the notification specifically mentions electronic items and cables used for telecom applications, and diesel generating sets do not fall within this category. The court emphasized that "diesel generating sets" are classified under entry 5(i) of Part "E" of the First Schedule to the TNGST Act and are taxable at 16 percent on the first sale.

3. Alleged violation of principles of natural justice:
The petitioner contended that the Commissioner violated the principles of natural justice by not providing an opportunity to be heard before issuing the clarification. The court found that personal hearing is not mandated under the Tamil Nadu General Sales Tax Rules, 1959, for applications seeking clarification on tax rates. The court concluded that the Commissioner's function in issuing clarifications under Section 28A of the TNGST Act is administrative, not quasi-judicial, and thus does not require a personal hearing.

4. Requirement of expert opinion for technical matters:
The petitioner argued that the Commissioner, not being a technical expert, should have sought an expert opinion or accepted the opinion provided by BSNL, which classified diesel generating sets as part of the power supply based power plant for telecom applications. The court held that the Commissioner is empowered to independently determine the rate of tax based on the materials provided and is not obligated to seek or accept external expert opinions. The court emphasized that the opinion of BSNL is not binding on the Commissioner.

5. Nature of the Commissioner's function under Section 28A of the TNGST Act:
The court analyzed whether the Commissioner's function under Section 28A is administrative or quasi-judicial. It concluded that the function is administrative, as it involves providing clarifications to maintain uniformity in tax assessment and collection, without adjudicating any disputes or rights. The court referenced Supreme Court judgments to support its view that the absence of a requirement for a personal hearing and the discretionary nature of the clarification process indicate an administrative function.

Conclusion:
The court dismissed the writ petition, upholding the clarification issued by the Commissioner of Commercial Taxes. It found no violation of principles of natural justice or procedural irregularities in the Commissioner's decision-making process. The court affirmed that diesel generating sets are not eligible for the concessional tax rate under the relevant notification and that the Commissioner's function in issuing clarifications is administrative in nature.