2019 (4) TMI 1641 - HC - VAT and Sales Tax

Classification of goods - seeds becoming inedible and are capable of being used only for sowing purposes by farmers - whether classified under entry 17, 18, 19 and 20 of Part-B of the Third Schedule of the Tamil Nadu General Sales Tax Act, 1959 or otherwise? - HELD THAT - Although Section 28 A of the TNGST Act empowers the Commissioner of Commercial Taxes to issue a clarification on the rate of tax in response to a request from a registered dealer, the said communication and Clarification also do not cite any applicable provisions of law. Further, the returns filed by the respective Petitioners were rejected and it is proposed by the pre-assessment notices to impose tax and penalty on the assumption that cotton seeds that are used only for seeding purposes are taxable under entry 6(iii) of the II Schedule to the TNGST Act and that such seeds are not exempted under Entry 7 of Part -B of the III Schedule. Thus, it is in the interest of justice that the Assessing Officer is directed to carry out assessment by examining the taxability of cotton seeds that are used exclusively for seeding purposes after providing a reasonable opportunity to the Petitioner to submit objections and make its submissions. Petition allowed.

Summary

Issues:
Challenge to Clarification No.147 of 2005 in D.Dis Acts Cell II/39022/05 and Assessment Proceedings in CST No. CST No.676352/2004-05, CST No.676427/2004-05, and CST No.676384/2004-05.

Analysis:
The Petitioner, a registered dealer in various seeds, argued that seeds treated with chemicals become inedible and are only suitable for sowing. The seeds were initially classified under specific entries in the TNGST Act but later replaced by a broader entry 7, causing confusion. The Commissioner of Commercial Taxes rejected a request to modify the entry, leading to the issuance of Clarification No.147 in 2005, taxing hybrid cotton seeds at 4%. The Petitioner challenged this tax imposition through Writ Petitions, supported by precedents highlighting similar disputes. The court set aside the tax imposition, directing a fresh assessment based on the TNGST Act's provisions within six weeks.

In another case, the court held that the Commissioner lacked authority to issue clarifications suo moto under the TN Value Added Tax Act, supporting the Petitioner's argument to quash Clarification No.147. The Respondents contended that the amended III Schedule did not exempt seeds for seeding purposes, making all oil seeds taxable under the II Schedule. Referring to past judgments, they argued that oil seeds, including groundnut, are taxable under the II Schedule, emphasizing the lack of distinction for seeds used exclusively for seeding.

Upon review, the court found procedural lapses in the tax imposition process, noting the lack of reasons in the communication and clarification issued by the Commissioner. It highlighted the denial of proper opportunity for the Petitioner to present objections. The court directed the Assessing Officer to conduct a fresh assessment disregarding previous clarifications, providing a fair opportunity for the Petitioner to present objections. The assessment should be completed within four months independently, without considering the court's observations on the dispute's merits.

In conclusion, the Writ Petitions were disposed of, with no costs awarded. The court emphasized a fair assessment process based on the TNGST Act's provisions, ensuring procedural fairness and independent decision-making by the Assessing Officer.