2011 (1) TMI 1278 - HC - VAT and Sales Tax

Whether the impugned order is totally arbitrary and amount to colourable exercise of power, as the learned Special Commissioner and Commissioner of Commercial Taxes, has given no reason to arrive at a decision, though he was to act as quasi-judicial authority while deciding a question under section 28-A of the Tamil Nadu General Sales Tax Act? Whether the textile machine clearer roller cleaner is an item, which can only be used in textile machinery, and for no other purpose? Held that - The textile machine clearer roller cleaner can only be used in textile machinery and no other machinery. Learned counsel for the petitioner, therefore, is correct in contending that the impugned order, passed by the Special Commissioner and Commissioner of Commercial Taxes, cannot be sustained in law. The contention of the learned counsel for the petitioner that the impugned order is arbitrary and non-speaking, also deserves to be accepted, for the reasons that even though the power exercised by the Special Commissioner and Commissioner of Commercial Taxes, was under section 28A, i.e., statutory power, but order is totally silent, with regard to reasons for coming to the conclusion, especially when with regard to other two items of similar nature, were held to be part of textile machinery. Consequently, the writ petition is allowed. The impugned order is set aside and the respondents are directed to treat the textile machine clearer roller cleaner, be a part of textile machinery, assessable to four per cent tax

Issues Involved:
1. Validity of the impugned order dated May 22, 2008.
2. Classification of "textile machine clearer roller cleaner" for tax purposes.
3. Maintainability of the writ petition.
4. Adequacy of reasons provided in the impugned order.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order Dated May 22, 2008:
The petitioner challenged the order dated May 22, 2008, issued by the Special Commissioner and Commissioner of Commercial Taxes under section 28-A of the Tamil Nadu General Sales Tax Act, 1959. The petitioner contended that the order was arbitrary and amounted to a colorable exercise of power, as it lacked reasoning and did not consider the quasi-judicial nature of the authority's role.

2. Classification of "Textile Machine Clearer Roller Cleaner" for Tax Purposes:
The core issue was whether the "textile machine clearer roller cleaner" should be taxed at 12% under entry No.20 in Part D of the First Schedule or at 4% as part of textile machinery. The petitioner argued that this item is exclusively used in textile machinery and should not be classified under the general category. The petitioner cited previous clarifications and judgments, including the case of State of Tamil Nadu v. Premier Polytronics Ltd., which supported the classification of specialized machinery parts under specific entries rather than general ones.

3. Maintainability of the Writ Petition:
The Government Advocate contended that the writ petition was premature since only a notice of assessment had been issued. However, the court found this argument misconceived, noting that the clarification issued under section 28-A is binding on all assessing authorities and thus constitutes a final order.

4. Adequacy of Reasons Provided in the Impugned Order:
The court agreed with the petitioner that the impugned order was arbitrary and non-speaking. It lacked reasoning, especially given that similar items had previously been classified as parts of textile machinery. The court emphasized the need for the Special Commissioner and Commissioner of Commercial Taxes to provide reasons for their decisions, particularly when exercising statutory powers under section 28-A.

Conclusion:
The court found in favor of the petitioner, holding that the "textile machine clearer roller cleaner" could only be used in textile machinery and should not be classified under the general category. The impugned order was set aside, and the respondents were directed to treat the item as part of textile machinery, taxable at 4%. The writ petition was allowed, and no costs were awarded.

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