2010 (4) TMI 1023 - HC - VAT and Sales Tax

Circular issued by the Commissioner of Commercial Taxes dated March 25, 2008, challenged Held that - In view of our finding that the circular dated March 25, 2008 was issued on a consideration of the merits of the claim made by the petitioner, we are of the view that no interference is called for in the order passed by the learned single judge in W.P. No. 11130 of 2008 which was challenged at the instance of another manufacturer. Accordingly, W.A. No. 1152 of 2008 is dismissed. No costs. However, we make it clear that we are not giving any finding as to whether the synthetic fibre and synthetic fabric are one and the same or different commodities. It is open to the appellant in W.A. No. 1152 of 2008 to raise all those points before the assessing authority and it is for the authority to decide the issue on the merits and as per law.

Issues Involved:
1. Validity of the circular dated March 25, 2008.
2. Retrospective cancellation of the circular dated May 31, 2007.
3. Taxability of synthetic tarpaulin under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act).
4. Binding nature of executive circulars.
5. Availability of alternative remedies under the TNVAT Act, 2006.

Issue-wise Detailed Analysis:

1. Validity of the circular dated March 25, 2008:
The petitioner challenged the circular dated March 25, 2008, issued by the Commissioner of Commercial Tax, which clarified that synthetic tarpaulin made of synthetic fibre is liable to tax at 12.5% under the residuary entry No. 69 of Part C of the First Schedule to the TNVAT Act, 2006. The court noted that the Commissioner, after considering the nature of the product and the relevant entries in the TNVAT Act, issued the clarification. The court found that the circular was specific to the product manufactured by the petitioner and was issued after a detailed consideration of the product's classification. Therefore, the court upheld the validity of the circular dated March 25, 2008.

2. Retrospective cancellation of the circular dated May 31, 2007:
The petitioner contended that the circular dated May 31, 2007, which exempted synthetic tarpaulin from tax, was canceled retrospectively by the circular dated March 25, 2008. The court observed that the earlier circular was general and did not specifically address the product manufactured by the petitioner. The court further noted that the cancellation of the earlier circular with retrospective effect was inconsequential to the petitioner since the earlier circular did not pertain to their product. Therefore, the court found no merit in the petitioner's challenge to the retrospective cancellation.

3. Taxability of synthetic tarpaulin under the TNVAT Act:
The petitioner argued that synthetic tarpaulin was exempt from tax based on the earlier circular dated May 31, 2007. The court examined the circular and found that it was issued in response to a query from an association of merchants and did not specifically address the petitioner's product. The court noted that the petitioner had been collecting tax at 12.5% prior to the issuance of the earlier circular and only stopped after the circular was issued. The court concluded that the petitioner's product was liable to tax at 12.5% under the residuary entry No. 69 of Part C of the First Schedule to the TNVAT Act, 2006.

4. Binding nature of executive circulars:
The petitioner argued that the circular dated May 31, 2007, had statutory force and could not be withdrawn retrospectively. The court noted that while circulars issued under statutory provisions are binding, the circular dated May 31, 2007, was not issued under any statutory provision of the TNVAT Act, 2006. The court further observed that the TNVAT Act did not empower the Commissioner to issue such circulars. Therefore, the court held that the earlier circular had no statutory force and could be withdrawn.

5. Availability of alternative remedies under the TNVAT Act, 2006:
The court noted that the petitioners in related writ petitions had an alternative remedy of filing revision petitions before the Deputy Commissioner under section 54 of the TNVAT Act, 2006. The court granted liberty to the petitioners to file revision petitions within fifteen days from the date of receipt of the order, and directed the statutory authority to consider the revision petitions on merits and in accordance with the law, without reference to the impugned circular dated March 25, 2008.

Conclusion:
The court dismissed W.A. No. 1152 of 2008 and W.P. No. 10011 of 2008, upholding the validity of the circular dated March 25, 2008, and finding no merit in the challenge to its retrospective effect. The court granted liberty to the petitioners in W.P. Nos. 10012 to 10029 of 2008 to file revision petitions before the Deputy Commissioner, who was directed to consider the petitions on merits and in accordance with the law.

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