2008 (8) TMI 870 - HC - VAT and Sales Tax

Summary

Issues involved:
Classification of handwoven druggets for tax purposes; Pre-assessment notice for inter-State sales; Appellate Assistant Commissioner's decision; Failure to consider earlier order for assessment; Writ petition under article 226 of the Constitution of India.

Classification of handwoven druggets for tax purposes:
The petitioner-firm, dealing in handwoven woollen druggets, faced a pre-assessment notice treating the commodity as "carpets" and imposing a 20% tax liability on inter-State sales. The petitioner contended that the druggets were exempted under the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959. The Appellate Assistant Commissioner, considering the merits and a certificate from the Khadi and Village Industries Commission, allowed the appeal, setting aside the assessment order. However, the respondent issued a notice for the subsequent year, failing to consider the earlier order and imposed tax without considering objections. The petitioner filed a writ petition seeking relief.

Pre-assessment notice for inter-State sales:
The petitioner received a pre-assessment notice for the year 1996-97, imposing tax liability on inter-State sales of handwoven druggets. Despite detailed objections, the respondent confirmed the proposal, classifying the druggets as "carpets" under entry 8 of Part G of the First Schedule, subjecting them to a 20% tax. The petitioner's appeal before the Appellate Assistant Commissioner was successful based on a certificate from the Khadi and Village Industries Commission.

Appellate Assistant Commissioner's decision:
The Appellate Assistant Commissioner, in A.P. 574 of 1998 in CST. No. 365604/9697, allowed the appeal filed by the petitioner-firm, setting aside the assessment order passed by the respondent. The decision was based on the certificate issued by the Khadi and Village Industries Commission, supporting the petitioner's claim that the handwoven druggets were exempted items.

Failure to consider earlier order for assessment:
Despite the Appellate Assistant Commissioner's decision in favor of the petitioner, the respondent issued a notice for the assessment year 1997-98, imposing tax without considering the earlier order and objections filed by the petitioner. This arbitrary assessment led the petitioner to file a writ petition under article 226 of the Constitution of India seeking relief from the court.

In conclusion, the High Court of Madras, after considering the submissions from both parties, quashed the impugned order of the respondent for the assessment year 1997-98 and remitted the matter back for fresh consideration. The court directed the respondent to pass appropriate orders after considering the objections submitted by the petitioner. The petitioner was allowed to make necessary objections within four weeks, and the respondent was directed to pass appropriate orders within twelve weeks thereafter. The writ petition was allowed with no costs.