2008 (9) TMI 891 - HC - VAT and Sales Tax

Whether in the facts and in the circumstances of the case, the Sales Tax Appellate Tribunal is right in holding that a new commodity has emerged in the replacement of shell by merely tapping and heating? Held that - The petitioner being a public sector undertaking before filing an appeal against the Commercial Tax Department, we are of the view has to obtain clearance from the Committee of Disputes (CoD). In order to discharge that obligation, when we posed a question to the learned counsel as to whether such a clearance has been obtained from the CoD, he admitted that such a certificate from CoD has not been obtained. Hence, the revision is dismissed as not entertainable in the absence of the clearance, however, by giving liberty to the petitioner to move this court after obtaining clearance from CoD.

Summary

Issues:
Assessment of tax on job work undertaken by a public sector undertaking for co-operative sugar mills; Claim of exemption for replacement of parts during repair work; Applicability of Supreme Court decisions on new commodity emergence; Requirement of clearance from Committee of Disputes for public sector undertakings before appealing against Commercial Tax Department.

Analysis:
The case involved an appeal by a public sector undertaking against the order of the Tamil Nadu Taxation Appellate Tribunal regarding the assessment of tax on job work done for co-operative sugar mills. The petitioner contended that no new commercial commodity was transferred during the job work. The repairing work involved replacing worn-out parts with new ones purchased locally. The assessing officer levied tax, considering the replacement as the emergence of a new commercial commodity. The Appellate Assistant Commissioner and Sales Tax Appellate Tribunal upheld the assessment based on the Supreme Court decision in Bengal Iron Corporation v. Commercial Tax Officer, which stated that any process resulting in a new product loses its originality. The petitioner raised a substantial question of law regarding the emergence of a new commodity due to shell replacement during repair work.

The High Court considered the arguments presented by the petitioner's counsel and examined the materials on record. It noted that as a public sector undertaking, the petitioner was required to obtain clearance from the Committee of Disputes before appealing against the Commercial Tax Department. Referring to the Supreme Court's directions in various cases, including Oil and Natural Gas Corpn. v. City & Industrial Development Corporation, Maharashtra Ltd., the High Court emphasized the necessity of resolving disputes involving government entities through governmental committees rather than adjudicating in courts. The composition of such committees was outlined, involving officials from the Union and State Governments. The court highlighted the obligation of every court and Tribunal to demand clearance from the committee in case of interdepartmental disputes, failing which the proceedings would not proceed.

The petitioner admitted that they had not obtained clearance from the Committee of Disputes. Consequently, the High Court dismissed the revision as not entertainable due to the absence of clearance. However, it granted the petitioner the liberty to approach the court again after obtaining the required clearance. No costs were imposed in this regard.