2009 (11) TMI 826 - HC - VAT and Sales Tax

Whether the clarification by the first respondent is not a statutory clarification? Held that - Agreeing with the view expressed by this court holding that the clarification issued is without jurisdiction. Given the admitted fact that there is no legal authority on the respondents to issue the clarification and there being no statutory provisions to that effect, it being non est in the eye of law, no justification in the prayer seeking the quashing of the clarification as ultra vires the provisions of the Act. The clarification, whether it is in favour of the Department or the assessee can have no effect at all to have any binding effect on the assessing authority in the assessment proceedings. Consequently, the Assessing Authority has to assess the claim of the assessee independently on the basis of the materials produced before him. The petition seeking clarification and the clarification given by the first respondent have no legal sanction, hence, are of little significance and consequence as far as the assessment proceedings are concerned. Thus there exists no ground to grant the prayer in the writ petition by way of quashing the same and to hold that the item in question had to be assessed under a particular head.

Summary

Issues:
1. Classification of thermal insulation panel and rock wool/PU foam sandwiched panel under the Tamil Nadu Value Added Tax Act, 2006.
2. Authority of the second respondent and first respondent to issue clarifications.
3. Legality and binding effect of the clarification issued by the first respondent.
4. Jurisdiction of the court under Article 226 of the Constitution of India regarding the clarification.

Analysis:
1. The petitioner sought to classify the products under entry No. 69 of Part B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006. The first respondent classified them under the residuary category under Part C, taxable at 12.5%. The petitioner challenged this classification through a writ petition.

2. The petitioner argued that the second respondent forwarded the clarification request to the first respondent without issuing a statutory clarification. The court noted that the Act did not confer authority on either respondent to provide clarifications. The petitioner's contention that the clarification was ultra vires the Act was rejected as the authority to issue clarifications is a statutory power, not dependent on the applicant's wishes.

3. The court held that the clarification issued by the first respondent was without jurisdiction due to the absence of legal authority to issue such clarifications. The clarification had no binding effect on the assessing authority, who must independently assess the taxability of the item based on evidence presented. The court emphasized that the clarification lacked legal sanction and should not influence assessment proceedings.

4. The court dismissed the petitioner's plea for a mandamus to classify the product under a specific entry, stating that the jurisdiction of the court under Article 226 arises only when a statutory authority fails to perform its function. The court referenced a previous case where a similar clarification was deemed without jurisdiction. The court directed the assessing authority to evaluate the taxability of the item based on evidence, unaffected by the non-binding clarification.

In conclusion, the court disposed of the writ petition without costs, emphasizing that the clarification lacked legal authority and should not impact the independent assessment process. The court highlighted the need for assessing authorities to evaluate tax claims based on evidence, disregarding non-binding clarifications lacking statutory backing.