2009 (11) TMI 851 - HC - VAT and Sales Tax

Branded chips - whether taxable at 12.5 per cent under Part C of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006? Held that - As far as the present case is concerned, once a clarification is given by the Commissioner of Commercial Taxes, that will bind the subordinate assessing authorities and one cannot expect a different order from the assessing officers. In these circumstances, no fruitful purpose would be served by directing the appellant to go for an assessment and for that reason, not to entertain the writ petition. That apart, in the present case, for the very branded products, there is a well reasoned Division Bench judgment of another High Court in Pepsico India Holdings Pvt. Ltd. v. State of Assam 2009 (4) TMI 853 - GAUHATI HIGH COURT . It is a settled proposition that in tax matters, when there is a Division Bench judgment of another High Court on a similar provision, it has to be treated with due respect and in the instant case, since the Guwahati High Court has taken a view that the potato chips sold by the appellant under the same brand name Lays and Uncle Chips are held to be classifiable as processed vegetables and not to come under a residuary entry which is according to us also otherwise correct, there is no reason for us to take a different view.

Summary

Issues:
1. Challenge to the order passed by the learned single judge dismissing the writ petition.
2. Classification of branded potato chips for tax purposes under the Tamil Nadu Value Added Tax Act, 2006.

Issue 1: Challenge to the order passed by the learned single judge dismissing the writ petition.
The appellant, a manufacturer of potato chips sold under brand names "Lays" and "Uncle Chips," filed a writ petition seeking to quash a clarification by the Commissioner of Commercial Taxes, Tamil Nadu, regarding the taxability of branded chips at 12.5%. The appellant argued that their products should be classified as processed vegetables under entry 107 of Part B, taxed at 4%, rather than under the residuary entry 69 of Part C, taxed at 12.5%. The appellant contended that specific entries should be followed over the residuary item, citing relevant case law. The High Court considered judgments from the apex court and Guwahati High Court, which supported the appellant's position. The court found the Commissioner's clarification erroneous and allowed the appeal, quashing the single judge's order and granting the relief sought in the writ petition.

Issue 2: Classification of branded potato chips for tax purposes under the Tamil Nadu Value Added Tax Act, 2006.
The appellant argued that their potato chips fall under processed vegetables, taxed at 4%, rather than the residuary entry taxed at 12.5%. The court analyzed the term "processing" to include frying, supporting the appellant's classification. The Special Government Pleader suggested pursuing an alternative remedy of assessment, citing a judgment from the Punjab and Haryana High Court involving the same appellant. However, the court held that the Commissioner's clarification binds assessing authorities, and since a Division Bench of the Guwahati High Court had already classified similar products as processed vegetables, the appellant's appeal was allowed. The court quashed the single judge's order, granted the relief sought in the writ petition, and closed the matter without costs.