2016 (10) TMI 602 - HC - VAT and Sales Tax

Demand of tax - printed digital photo albums - the issue had already been decided as per clarification issued by the Commissioner - non-consideration of clarification by the AO when considering the issue - whether the demand can be set aside by this Court bypassing the alternate remedy available under the statute? - order of demand passed without reference to the clarification sustainable? - Held that - it is apparent that when a clarification had been issued under Section 94 of the Act, the Officer is bound to comply with the same. Merely for the reason that the petitioner had submitted an application for compounding which had been allowed, does not deprive the right of the petitioner to take a contention based on a clarification issued by the Commissioner. Under such circumstances, the Assessing Officer had committed serious error of law in coming to the aforesaid finding and for that reason itself, the impugned order is liable to be set aside - demand of tax set aside - AO to consider the matter afresh after taking note of the consideration and after hearing the petitioner - petition disposed off - decided in favor of petitioner.

Summary

Issues:
Challenge to assessment order for the year 2013-14 regarding tax on printed digital photo albums. Whether Ext.P6 order can be set aside bypassing alternate remedy available under the statute.

Analysis:
The petitioner, engaged in trading photographic items, challenges Ext.P6 assessment order for the year 2013-14, specifically concerning the tax on printed digital photo albums. The petitioner relies on a clarification issued by the Commissioner in a related matter, stating that printed photographs in book form should be taxed at 5% under entry 100(5) of the Act. The petitioner contends that the Assessing Officer did not consider this clarification due to the offense already being compounded by the petitioner.

In previous penalty proceedings, the petitioner faced allegations of the printed photo albums being taxed at 14.5% under Entry 77(6). The petitioner applied for compounding, which was allowed, but later sought a refund based on the clarification issued in another case. However, the Assessing Officer issued Ext.P6 order without considering this clarification, leading to the current challenge.

During the hearing, the petitioner argued that Ext.P6 should be set aside as the Assessing Officer failed to consider the clarification, Ext.P2, issued under Section 94 of the Act. The Officer's reasoning in Ext.P6 order was based on the petitioner admitting the offense before compounding it, thus allegedly forfeiting the right to contest it later. However, the Court held that the Officer should have adhered to the clarification despite the compounding, as per Section 94. The Court found that the Officer's failure to consider the clarification constituted a serious legal error, warranting the setting aside of the impugned order.

The Court disposed of the writ petition by setting aside Ext.P6 and directing the Assessing Officer to reconsider the matter, taking into account the clarification, Ext.P2. The Officer was instructed to pass appropriate orders in accordance with the law after hearing the petitioner. This judgment highlights the importance of following statutory provisions and considering relevant clarifications in tax assessment matters.