2011 (8) TMI 1173 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of 'Boom Flower' for tax purposes.
2. Validity of the impugned clarification and assessment order.
3. Applicability of judicial precedents.

Summary:

1. Classification of 'Boom Flower' for tax purposes:
The petitioner, engaged in the business of manufacturing and selling 'Boom Flower', contended that their product should be classified as a chemical fertilizer under Entry 14 of Part B of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, and taxed at 4%. However, the Enforcement Wing Officials informed them that 'Boom Flower' is liable to tax at 12% under the Residuary entry, being a micro-nutrient.

2. Validity of the impugned clarification and assessment order:
The petitioners sought clarification from the respondent No.1 u/s 28(a) of the Act, which reiterated that 'Boom Flower' is taxable at 12% under the Residuary entry. The petitioners challenged this clarification and the subsequent assessment order, arguing that their product falls under Entry 14 of Part B, which includes Zinc Sulphate and Urea Ammonium Phosphate, and should not be treated under the Residuary entry.

3. Applicability of judicial precedents:
The petitioners cited the case of Transelektra Domestic Products P. Ltd. vs. C.T.O, 1993 (90) STC 436, where it was held that the product should be classified based on its general description rather than specific percentages of its components. The respondent relied on the judgments in State of Tamil Nadu vs. Rallis India Ltd., 1974 (34) STC 532 and Shaw Wallance & Co. Ltd. vs. State of Tamil Nadu, 1976 (37) STC 522(SC), which dealt with whether a new product formed by mixing two products should be taxed or exempted.

The court found that the respondent No.1 erred in relying on these judgments to classify 'Boom Flower' under the Residuary entry. The court held that the product should be classified based on its general description and not specific percentages of its components, as per the precedent set in Transelektra Domestic Products P. Ltd. vs. C.T.O.

Conclusion:
The court allowed all the writ petitions, setting aside the impugned orders and clarifications. The product 'Boom Flower' was held to fall under Entry 14 of Part B, taxable at 4%, and not under the Residuary entry. The court emphasized that if two interpretations are possible, the one favoring the assessee should be followed. Connected Miscellaneous Petitions were closed with no costs.