2019 (5) TMI 124 - 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on the rate of tax in response to a request from a registered dealer, the said communication and Clarification also do not cite any applicable provisions of law.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, Assessment Order in CST No. 411164/2003-04, Assessment Order in TNGST No. 3140455/2003-04.

Analysis:
The Petitioner, a registered dealer in specific seeds, argued that after commercial treatment, the seeds were inedible and only suitable for sowing. The seeds were initially classified under specific entries of the TNGST Act but were later affected by an amendment. The Commissioner of Commercial Taxes rejected a modification request to the classification, leading to the issuance of Clarification No.147 in 2005, stating that hybrid cotton seeds were taxable at 4%. The subsequent assessment orders imposed tax on cotton seeds as oil seeds, leading to legal challenges in Writ Petitions.

The court referenced previous cases where similar issues were raised, emphasizing the need for a fair assessment applying the relevant tax schedules. The Petitioner argued that the clarification issued lacked jurisdiction and violated principles of natural justice. Referring to past judgments, the Petitioner sought to quash Clarification No.147 and requested a fresh assessment with due process.

The Respondents contended that post-amendment, the exemption for specific seeds was removed, making all oil seeds taxable under the II Schedule. They cited legal precedents to support their stance that oil seeds, including groundnut, were taxable without distinction for seeding purposes. The Respondents referred to a Division Bench judgment reinforcing the taxability of groundnut as an oil seed.

Upon review, the court found that the Commissioner's communication lacked reasoning and proper opportunity for the Petitioner to present objections. The Assessment Orders did not consider the exemption under Entry 7 for seeds used solely for seeding. Consequently, the court set aside the Assessment Orders related to cotton seeds used for seeding and directed a fresh assessment within a specified timeframe, excluding previous clarifications.

In conclusion, the court disposed of the Writ Petitions by setting aside the Assessment Orders regarding the taxability of cotton seeds for seeding purposes. The Assessing Officer was instructed to conduct a fresh assessment independently, disregarding previous clarifications, within a stipulated timeframe. The court clarified that the fresh assessment would not impact other aspects of the orders, and the decision on taxability would be made without considering the court's observations on the dispute's merits.