2019 (5) TMI 123 - HC - VAT and Sales Tax

Validity of assessment order - imposition of tax on cotton seeds - TNGST Act - HELD THAT - The Commissioner of Commercial Taxes, the First Respondent herein, has stated, in the letter dated 30.08.2005 that the request for amendment of entry 7 cannot be complied with and, in the Clarification dated 26.09.2005, that hybrid cotton seeds are taxable at the rate of 4% under entry 6(iii) of the II Schedule to the TNGST Act. The said Communication and Clarification do not contain any reasons. It also appears that proper opportunity was not provided to the Petitioner to state its case or its objections before the said Communication and Clarification were issued. Although Section 28 A of the TNGST 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on the rate of tax in response to a request from a registered dealer, the said communication and Clarification also do not cite any applicable provisions of law.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 Assessment Order dated 15.06.2006 was issued without waiting for the objections of the Petitioner and, therefore, the assessment order does not consider the submission that cotton seeds that are used only for seeding purposes are exempted under Entry 7 of Part -B of the III Schedule. Consequently, it is in the interest of justice that the Assessment Order dated 15.06.2006 under the TNGST Act be set aside. The Assessing Officer is directed to carry out fresh assessment after providing a reasonable opportunity to the Petitioner to submit objections and make its submissions. The said Assessing Officer shall make the assessment on an independent basis by disregarding Clarification No.147 dated 26.09.2005 or any other clarification and the communications dated 30.08.2005 and 13.10.2005 - petition allowed by way of remand.

Summary

Issues:
Challenge to Clarification No.147 of 2005 and Assessment Order in TNGST No.1780326/2003-04.

Analysis:
The Petitioner, a registered dealer in various seeds treated for sowing, argued that the seeds become inedible due to commercial treatment and are only suitable for sowing. Initially classified under specific entries, the III Schedule was amended, leading to confusion. The Commissioner rejected a request for further amendment, leading to the issuance of Clarification No.147 in 2005, taxing hybrid cotton seeds at 4%. The Petitioner cited a prior case where similar seeds were deemed non-edible and exempt from tax under a different entry. The Court set aside the initial order, directing a fresh assessment based on the correct schedule application.

The Respondents contended that the amended III Schedule did not include the exemption for certified seeds, arguing that all oil seeds are taxable under the II Schedule. Referring to past judgments, they emphasized that certain seeds, like groundnut, fall under the category of oil seeds for taxation purposes. The Respondents highlighted that the entry does not differentiate between oil seeds used for seeding and other purposes.

Upon review, the Court found that the Commissioner's decisions lacked proper reasoning and failed to provide the Petitioner with a fair opportunity to present objections. The Assessment Order was issued without considering the Petitioner's submissions, necessitating its cancellation. The Court directed a fresh assessment, instructing the Assessing Officer to disregard previous clarifications and communications. The Officer was tasked with independently determining the taxability of cotton seeds used exclusively for seeding within a specified timeframe, without influence from previous judgments.

In conclusion, the Writ Petition was disposed of with the directive for a fresh assessment, emphasizing fairness and independent evaluation. No costs were awarded, and the related Miscellaneous Petition was closed.