2013 (6) TMI 199 - HC - VAT and Sales Tax

Exemption on the sale of coriander powder and turmeric powder in view of Notification in G.O.Ms.No.36, CT & R (B1) dated 1.4.2008 - taxability - as per assessee 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 - 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. Thus in view of the finding of this Court that the coriander and turmeric are one and the same as their powder form, the understanding of the Government in G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998 the clarification issued on 9.12.2002 under Section 28-A of the TNGST Act and the reasoning of this Court on substitution, it is clear that exemption remained even during the period in question, namely from 1.1.2007 to 31.3.2008. This Court has no hesitation to hold that the proceedings under Section 27 of Act 32/2006, which are under challenge, are without jurisdiction and contrary to law. The said proceedings deserve to be set aside. - In favour of assessee.

Summary

Issues Involved:
1. Exemption of coriander powder and turmeric powder under Tamil Nadu Value Added Tax Act, 2006.
2. Validity of invoking Section 27 of the Tamil Nadu Value Added Tax Act, 2006 for assessment of escaped turnover.
3. Effect of substitution in the Fourth Schedule by Act 32/2008.
4. Maintainability of writ petitions despite alternative remedy.

Issue-wise Detailed Analysis:

1. Exemption of Coriander Powder and Turmeric Powder:
The petitioners argued that coriander powder and turmeric powder should be exempt from tax under the Tamil Nadu Value Added Tax Act, 2006 (Act 32/2006) based on historical treatment under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) and subsequent clarifications. The court noted that under the TNGST Act, these powders were treated as exempt goods, and this understanding was carried forward under Act 32/2006. The government, through G.O.(D) No.383 and a clarification dated 9.12.2002, had consistently treated the powders as the same goods as their whole counterparts, thus exempt from tax. The court held that there is no differentiation between turmeric and turmeric powder, and coriander and coriander powder, based on the Full Bench decision of the Kerala High Court in Namputhiris Pickle Industries v. State of Kerala, which was upheld by the Supreme Court. Therefore, the powders should continue to enjoy the benefit of exemption.

2. Validity of Invoking Section 27 for Assessment of Escaped Turnover:
The court addressed the petitioners' argument that no original assessment orders were passed, and therefore, invoking Section 27 of Act 32/2006 for escaped assessment was invalid. The court agreed, citing the Division Bench decision in M.Kandasami v. The Registrar, Tamil Nadu Taxation Special Tribunal, which held that escapement of assessment presupposes an original assessment. Since no original assessment was made, the proceedings under Section 27 were without jurisdiction and invalid.

3. Effect of Substitution in the Fourth Schedule by Act 32/2008:
The court examined whether the substitution of Serial No.18 in the Fourth Schedule by Act 32/2008 should have retrospective effect from 1.1.2007. The court relied on the Supreme Court decision in Government of India v. Indian Tobacco Association, which held that substitution should be interpreted as having retrospective effect, replacing the old entry from the inception of the Act. The court concluded that the substitution in Serial No.18 was intended to correct an omission and should be effective from 1.1.2007, thus maintaining the exemption for coriander and turmeric powders during the period from 1.1.2007 to 31.3.2008.

4. Maintainability of Writ Petitions Despite Alternative Remedy:
The court considered the preliminary objection regarding the availability of an alternative remedy by way of appeal. It held that since the impugned proceedings were without jurisdiction (due to the lack of original assessment), the plea of alternative remedy could be ignored. The court emphasized that when the challenge is to the jurisdiction of the authority itself, the writ petitions are maintainable.

Conclusion:
The court allowed the writ petitions, quashing the impugned orders and holding that the exemption for coriander powder and turmeric powder continued during the period from 1.1.2007 to 31.3.2008. The proceedings under Section 27 of Act 32/2006 were found to be without jurisdiction and were set aside.