2013 (5) TMI 699 - HC - VAT and Sales Tax

Reassessment - Masala powder, turmeric powder, chilli powder and coriander powder - taxability - as pleaded by assessee that by virtue of G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998 and the clarification dated 9.12.2002 issued under Section 28-A of the TNGST Act, the goods continued to enjoy the exemption & would continue even under Act 32/2006 - Held that - As interpreting the word substitution to mean that the intention of the legislature was to replace the Old Serial No.18 of Part-B of Fourth Schedule with New Serial No.18 to have effect for the period 1.1.2007 and 31.3.2008. The understanding of the department prior to coming into force of Act 32/2006 and from 1.4.2008, the date of coming into force of Act 32/2008, to state the obvious, is that the powder form of chilly, turmeric and coriander continues to be exempted goods for all purposes. If during the interregnum period, namely from 1.1.2007 to 31.3.2008, there appears to be an omission, that omission is sought to be corrected by way of substitution. This Court clearly holds that substitution has the effect of replacing the old Serial No.18 of Part B of Fourth Schedule of Act 32/2006 and the substitution will therefore entail goods described in Serial No.18 of Part-B of Fourth Schedule of Amending Act 32/2008 the benefit of exemption as is applicable from the inception of Act 32/2006. The new replaces the old and that is substitution and as a consequence, exemption becomes inevitable. The department s plea that the exemption will not apply to the period from 1.1.2007 to 31.3.2008 cannot be accepted, as substitution in this case will have to relate back to 1.1.2007 itself, when Act 32/2006 came into force. It needs no further clarification to state that even in terms of the decision Namputhiris Pickle Industries v. State of Kerala and another 1998 (3) TMI 594 - SUPREME COURT OF INDIA the powder form of chilly continues to be one and the same item. This statement is made only to amplify that despite substitution by way of Act 32/2008, the petitioners are entitled to exemption in respect of the powder form of chilly, turmeric and coriander on the mere entry in Serial No.18 of Part-B of Fourth Schedule to Act 32/2006. When there is no differentiation between the two forms of the goods, the substitution is more in the nature of clarification of a pre-existing right which has accrued to the petitioners, that is to say that the powder form of chilly, turmeric and coriander are no different from chilly, turmeric and coriander. It is evident that the intention of the legislature under the TNGST Act as well as the Act 32/2008 is to treat chilly and chilly powder, coriander and coriander powder, and turmeric and turmeric powder as one and the same goods & continue to enjoy the benefit of exemption despite their being a specific omission of the powder form 1.1.2007 to 31.3.2008. The benefit of exemption granted based on returns filed is in order. As in this case returns were filed in terms of Section 22 of Act 32/2006 and accepted by the competent authority. The exemption was sought and granted. It is only thereafter that the proceedings were initiated under Section 27 of Act 32/2006 on the ground of escaped assessment for penalty. On the face of it, such a plea cannot be accepted because there is no question of escaped assessment or a false statement or misstatement, as all the records are already before the competent authority. In favour of assessee.

Summary

Issues Involved:
1. Alternative Remedy
2. Exemption and Goods
3. Effect of Substitution
4. Escaped Assessment

Detailed Analysis:

Alternative Remedy:
19.1 - 19.3: The court accepted the petitioners' plea against the alternative remedy of appeal, considering that the Division Bench had already ruled on the exemption's applicability starting from 1.4.2008. Pursuing an appeal would be futile as the competent authority would be bound by the earlier findings.

Exemption and Goods:
20.1 - 20.2: The court referenced the Full Bench of the Kerala High Court and the Supreme Court, which held that there is no difference between chilly and chilly powder, turmeric and turmeric powder, and coriander and coriander powder. The court noted that the Government had consistently treated these items as the same goods, evidenced by G.O.(D) No.383, dated 22.10.1998, and the clarification dated 9.12.2002.

Effect of Substitution:
21.1 - 21.13: The court analyzed whether the substitution in Serial No.18 of Part B of the Fourth Schedule by Act 32/2008 should be effective from 1.4.2008 or 1.1.2007. Relying on the Supreme Court's decisions, the court concluded that substitution has the effect of replacing the old entry with the new one from the inception of Act 32/2006 (i.e., 1.1.2007). The court emphasized that the Government's intention was always to treat the powder forms of chilly, turmeric, and coriander as exempt goods, and the substitution was merely a clarification of this intent.

Escaped Assessment:
22.1 - 22.3: The court referred to the Division Bench's decision in State of Tamil Nadu v. Arihant Plastic House, which held that once returns are filed and accepted, the question of revision for escaped assessment does not arise. The court found that the returns filed by the petitioners were accepted by the competent authority, and there was no basis for invoking Section 27 of Act 32/2006 for escaped assessment.

Conclusion:
23: The court concluded that the powder forms of chilly, turmeric, and coriander are the same as their whole forms and are entitled to exemption. The proceedings under Section 27 of Act 32/2006 were deemed without jurisdiction and contrary to law. The writ petitions were allowed, and the impugned orders were quashed.