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2014 (12) TMI 1025 - HC - VAT and Sales TaxClassification and rate of tax on Dates and Date Syrups - Validity of clarification issued in Clarification No.40/2003 dated 27.01.2003 Clarification is prospective or retrospective - Held that - Section 28 A of TNGST Act empowers the Commissioner to issue Circulars and Clarifications concerning the rate of tax under the Act - The impugned clarification does not withdraw the clarification dated 13.8.2002, but states that earlier clarification is modified to the effect that Wet Dates of foreign origin whether imported directly from other countries or purchased from other States are liable to be taxed at 2% in Entry 9 of Eleventh Schedule of TNGST Act - The modification on the impugned clarification was made without notice to the petitioner - Based on which notices were issued proposing to demand tax at 20% - the AO received the petitioner s objection as well as the request for waiver and called upon the petitioner to explain as to why tax should not be levied at 20% on first sale of imported Wet Dates as per Entry 9 of Eleventh Schedule for the year 2002-03 - Similar notices were issued to all the three companies. In MOHAN BREWERIES AND DISTILLERIES LIMITED v. COMMERCIAL TAX OFFICER, PORUR ASSESSMENT CIRCLE, CHENNAI AND OTHERS 2004 (9) TMI 617 - MADRAS HIGH COURT the Court examined the scope of the Circular issued u/s 28-A of the TNGST Act and held that the circular is binding on the authorities and even if the authorities want to withdraw the same, it could be done prospectively - the first ground for rejecting the petitioner s objection is held to be contrary to the decision which examined the very power of the first respondent to issue clarifications/circulars in exercise of power under section 28-A of the TNGST Act. Whether the impugned clarification dated 27.1.2003, is in consonance with Entry 9 of Eleventh Schedule of TNGST Act Held that - The petitioner s commodity being Wet Dates , falling within Part-D Entry 11 (2) of the First Schedule to the Act - Apart from that there were three other conditions to be fulfilled - It should have a foreign marking, it should not be sold in Indian brand name or trade mark and it should not be an item which had undergone any form of reprocessing, reassembling, re-constitution or repacking in India - Thus, going by the clarification issued by the first respondent, which is undoubtedly statutory, the commodities purchased by the petitioner by way of Inter-State sale could not be termed as imported goods. The clarification is beyond the scope of Entry 9 of the Eleventh Schedule - The clarification states that foreign goods whether imported directly from other countries or purchased from other States, the expression purchase from other States is conspicuously absent in Entry 9 of Eleventh Schedule - Therefore, by virtue of clarification, the respondent cannot add any expression or phraseology, which is not contained in the Statute - Therefore, the impugned clarification has to be necessarily held to be bad in law the Clarification cannot be given retrospective effect, which is precisely what the respondents have done in the case of the petitioners - Therefore, such retrospective application of the clarification was also illegal thus, the impugned clarification is illegal, unsustainable and contrary to the settled legal principles as stated above and accordingly, the same is quashed Decided in favour of petitioner.
Issues Involved:
1. Prospective vs. Retrospective Application of Clarifications 2. Validity and Binding Nature of Clarifications Issued by Revenue Authorities 3. Definition and Taxation of Imported Goods under TNGST Act 4. Legality of Assessments Based on Revised Clarifications 5. Refund of Excess Differential Tax Issue-wise Detailed Analysis: 1. Prospective vs. Retrospective Application of Clarifications: The petitioners contended that the clarification issued by the first respondent (Clarification No. 40/2003 dated 27.01.2003) should be applied prospectively from the assessment year 2003-04 and not retrospectively. They argued that the clarification could not reopen past cases and that the TNGST Act does not define "imported goods," thus the term should be interpreted in consonance with Section 5(2) of the CST Act. The court agreed, noting that the clarification dated 13.08.2002 was not withdrawn and was allowed to operate until the end of the assessment year. The court held that the retrospective application of the clarification was illegal. 2. Validity and Binding Nature of Clarifications Issued by Revenue Authorities: The court examined the power of the Commissioner to issue clarifications under Section 28A of the TNGST Act. It referred to several judgments, including the Hon'ble Supreme Court's decisions, which established that such clarifications are binding on the authorities and can only be withdrawn prospectively. The court concluded that the first respondent's clarification was binding until it was withdrawn prospectively. 3. Definition and Taxation of Imported Goods under TNGST Act: The petitioners argued that they purchased 'Wet Dates' through inter-state sales from Bombay, not directly importing them, and hence should not be taxed as imported goods. The court noted that the impugned clarification attempted to include inter-state purchases under the definition of imported goods, which was not supported by the statute. The court emphasized that the clarification could not add terms not present in the statute and held that the commodities purchased by the petitioner could not be termed as imported goods. 4. Legality of Assessments Based on Revised Clarifications: The court found that the assessments based on the revised clarification were illegal. The first respondent had modified the earlier clarification without notice to the petitioner, which was against the principles of natural justice. The court held that the impugned clarification was beyond the scope of Entry 9 of the Eleventh Schedule and was thus unsustainable. 5. Refund of Excess Differential Tax: The petitioners sought a refund of the excess differential tax collected. The court directed the respondents to consider the petitioners' applications for waiver and grant admissible waivers in accordance with the law. The court quashed the impugned clarification and the consequential assessment orders, thereby allowing the writ petitions and closing the connected miscellaneous petitions. Conclusion: The court held that the impugned clarification was illegal, unsustainable, and contrary to settled legal principles. It quashed the clarification and the consequential assessment orders, directing the respondents to consider the waiver applications and grant admissible waivers within eight weeks. The writ petitions were allowed, and no costs were imposed.
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