2017 (8) TMI 805 - HC - VAT and Sales Tax

Revision of assessment - levy of tax - dyed polyester yarn - Held that - the Hon ble Division Bench of this Court in the case Popular Thread Factory Vs. Commercial Tax Officer Chennai 2001 (9) TMI 1081 - MADRAS HIGH COURT has allowed the case in favor of the dealer holding that Tribunal was wholly in error in holding that sewing thread is not cotton yarn and that the assessee can be subjected to tax by treating such sewing thread as not being declared goods - the basis for proposing to revise the petitioner s assessment pursuant to notice dated 13.06.2001 is no longer sustainable - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Revision of assessment under the Tamil Nadu General Sales Tax Act for the years 1998-1999, 1999-2000, and 2000-2001.
2. Challenge to the correctness of a decision before the court.
3. Impugned assessment orders based on the decision of the Tamil Nadu Taxation Special Tribunal.
4. Legal implications of dyeing polyester yarn and selling it as sewing thread.

Analysis:

1. The petitioner, a registered dealer under the Central Sales Tax Act and the Tamil Nadu General Sales Tax Act, is a Textile Mill involved in purchasing polyester yarn in bulk and selling it as such or after dyeing. The respondent Assessing Officer issued a notice proposing to revise the assessment for certain years based on a decision of the Tamil Nadu Taxation Special Tribunal.

2. The petitioner objected to the proposed revision, citing pending writ petitions challenging the decision relied upon by the respondent. Despite the objections, the respondent proceeded with the assessment orders, which are the subject of the writ petition.

3. The High Court referred to a previous case involving Popular Thread Factory, where it was held that dyeing cotton yarn and selling it as sewing thread does not change its character as cotton yarn. The court emphasized that sewing thread retains its identity and character as cotton yarn, even if it is sold for use as sewing thread.

4. In light of the precedent set by the Popular Thread Factory case, the court found that the basis for revising the petitioner's assessment was no longer valid. Consequently, the court allowed the writ petitions, set aside the impugned assessment orders, and closed the connected miscellaneous petitions without costs.