2007 (11) TMI 585 - HC - VAT and Sales Tax

Statutory remedy of appeal available before the appellate authority - Maintainability - Whether the respondents are entitled to demand increased sales tax at the rate of 16 per cent, by way of second clarification, after the assessment is completed? Held that - On account of the pre-conclusion by the superior authority, namely the first respondent, there cannot be any efficacious alternative remedy and hence, we are of the considered view that the writ petitions are legally maintainable. Subsequent clarification withdrawing concessions, which was given earlier could be done only prospectively and not with retrospective effect. In the instant case, admittedly, as per the clarifications made by the respondents for the assessment year 2002-03, for the aforesaid items sales tax at four per cent was made and the same was completed during October 2003, as clarified by the respondents herein. By subsequent clarification, dated May 18, 2004, made by the first respondent, the second respondent had issued the impugned order, dated March 4, 2005 to the petitioners, demanding the tax at 16 per cent. In fact, the demand made by the respondents is nothing, but an order imposing additional burden of indirect tax on the petitioners with retrospective effect, which is not legally sustainable. Thus to meet the ends of justice, all the writ appeals have to be allowed, setting aside the impugned orders passed by the respondents.

Summary

Issues Involved:
1. Maintainability of writ petitions under Article 226 when an alternative statutory remedy is available.
2. Legality of demanding increased sales tax at 16% through a subsequent clarification after the assessment was completed.

Issue-wise Detailed Analysis:

1. Maintainability of Writ Petitions under Article 226:
The primary contention by the appellants was that the writ petitions under Article 226 of the Constitution are maintainable despite the availability of a statutory remedy of appeal. The appellants argued that the appellate authority had already pre-concluded the issue by issuing a subsequent clarification letter, which directed a higher sales tax rate, making the appeal process futile. The court noted that the Supreme Court in Union of India v. Ahmedabad Electricity Co. Ltd. held that when a circular issued by a superior authority binds the subordinate officers, challenging the circular before the Departmental authorities would be futile. This principle applies to the present case, allowing the High Court to entertain the writ petitions under Article 226 despite the alternative remedy.

2. Legality of Demanding Increased Sales Tax:
The appellants argued that they were initially informed that the sales tax for bajji, bonda mix, and ginger coriander mix was only 4% as per various clarifications and government orders. However, a subsequent clarification demanded a 16% tax rate, which was challenged. The court observed that the original assessment for the year 2002-03 was completed based on the 4% tax rate, and the subsequent demand for 16% tax was based on a clarification issued after the assessment period. The court referred to several precedents, including the Supreme Court's decision in Kerala Financial Corporation v. Commissioner of Income-tax, which held that a revised assessment tantamount to amending the Act by way of clarification is not permissible. The court concluded that the subsequent clarification demanding a higher tax rate could not be applied retrospectively, as it would impose an additional burden on the appellants.

Conclusion:
The court allowed the writ appeals, setting aside the impugned orders passed by the respondents. It was held that the writ petitions under Article 226 were maintainable, and the subsequent clarification demanding a higher tax rate was not legally sustainable. The court emphasized that the subordinate authorities are bound by the initial clarifications and cannot impose additional tax burdens retrospectively based on later clarifications. No costs were ordered.