2007 (7) TMI 655 - HC - VAT and Sales Tax

Classification of goods - liquid glucose - reopening of assessment - change of opinion - whether liquid glucose to be taxable as medicine?

Summary

Issues:
Challenge to notices for assessment years 1994-95 and 1995-96, validity of authorisation under Section 21(2) of the Act.

Analysis:
The petitioner challenged the notices issued by the Assistant Commissioner for assessment years 1994-95 and 1995-96, along with the authorisation granted by the Additional Commissioner under Section 21(2) of the Act. The petitioner argued that the decision of the Gujarat High Court cited for the authorisation was not applicable, and the authorisation was granted without proper consideration of the petitioner's reply, based on a mere change of opinion. The petitioner contended that previous tribunal decisions had already established the taxability of liquid glucose as a medicine, making any escapement of tax unlikely. The respondent, on the other hand, justified the proceedings based on the Supreme Court's decision regarding liquid glucose not being classified as a drug. The respondent also argued that re-assessment based on a change of opinion was permissible under the law.

The High Court analyzed the facts and legal arguments presented by both parties. It noted that the original assessment had taxed liquid glucose at 7.5%, following a tribunal decision from the previous year. The dismissal of the Special Leave Petition by the Supreme Court regarding the classification of liquid glucose as a drug was not considered a binding decision. The court cited precedents to explain that a dismissal at the Special Leave Petition stage does not constitute res judicata or imply a decision on the merits of the case. The court also emphasized the importance of assigning reasons for granting approval or sanction under Section 21(2) of the Act.

The court found that the Additional Commissioner had not provided any reasons for granting approval for re-assessment, as required by law. As a result, the authorisation and subsequent proceedings were set aside. The court directed the Additional Commissioner to issue a fresh order in compliance with the law and previous court directions. The writ petition was allowed, with no costs imposed.

In conclusion, the High Court ruled in favor of the petitioner, setting aside the notices for assessment and the authorisation for re-assessment due to the lack of reasons provided by the Additional Commissioner. The judgment emphasized the necessity of proper justification for granting approval under Section 21(2) of the Act and directed a fresh order to be issued in accordance with the law.