2016 (12) TMI 464 - HC - VAT and Sales Tax

Classification of goods - welded wire mesh - falls under commodity code 2041 or under code 301? - Held that - taking note of the fact that the clarification dated 10.7.2007 is said to have been followed by the other Assessing Officers, this Court is of the view that while dismissing the writ petitions at the very threshold, to meet the ends of justice and at the same time, protect the interest of the Revenue, the petitioners are granted liberty to move the Principal Secretary and Commissioner of Commercial Taxes seeking clarification as regards the rate of tax payable on the sale of the product manufactured by them namely welded wire mesh - petition dismissed.

Summary

Issues:
Classification of goods for tax purposes under the Tamil Nadu Value Added Tax Act, 2006.

Analysis:
The High Court of Madras considered a batch of cases involving the classification of goods for tax assessment under the Tamil Nadu Value Added Tax Act, 2006. The primary issue revolved around the tax rate applicable to the sale of welded wire mesh by two dealers registered under the State Act. The assessment orders for the years 2007-08 to 2015-16 were challenged in the writ petitions, with specific reference to an assessment order dated 31.10.2016 for the year 2007-08.

The Respondent proposed revising the assessment to tax the turnover of welded wire mesh at a higher rate of 12.5% instead of the 4% initially applied by the Petitioner. The Petitioner objected to the proposed revision, citing clarifications issued by the Commissioner of Commercial Taxes in favor of other entities. The Respondent, after affording a personal hearing to the Petitioner, upheld the higher tax rate based on the distinction between welded wire mesh and wire links, concluding that the clarification issued was contrary to the Statute.

The Court acknowledged the Petitioner's reliance on the clarifications but emphasized the independence of the Assessing Officer in interpreting the law. Referring to legal precedents, the Court upheld the Respondent's decision to tax the welded wire mesh at 12.5%, emphasizing the Assessing Officer's duty to follow the Statute over conflicting clarifications.

The Court found the Respondent's interpretation legally sound, highlighting the distinct commercial identities and uses of welded wire mesh and wire links. Despite the Petitioner's argument that the clarification should bind the Assessing Officer, the Court was not convinced and dismissed the writ petitions. However, to ensure justice and protect the Revenue's interest, the Petitioners were granted liberty to seek clarification from the Principal Secretary and Commissioner of Commercial Taxes regarding the tax rate applicable to their product.

Considering the potential impact on the Petitioners' business, the Court directed that the impugned orders would not be enforced for six weeks to allow time for obtaining clarification. Depending on the clarification received, the Petitioners were granted the right to appeal or file an application under the State Act accordingly, with the limitation period adjusted to account for the granted time extension.