2021 (7) TMI 519 - HC - VAT and Sales Tax

Exemption from sales tax - Viscose Staple Fibre (VSF) - Hank Yarn - Exemption under Entry 44 of the Fourth Schedule to the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - The issue of exemption of VSF and PFA Hank yarn has now been settled by a Hon'ble Division Bench of this Court in the case of M/S. AAKAVI SPINNING MILLS (P) LTD. VERSUS THE AUTHORITY FOR CLARIFICATION AND ADVANCE RULING REP. BY THE COMMISSIONER OF COMMERCIAL TAXES EZHILAGAM, CHEPAUK CHENNAI, THE ASSISTANT COMMISSIONER (CT) 2020 (2) TMI 370 - MADRAS HIGH COURT , whereby, the Hon'ble Division Bench had held that Cotton Hank yarn continuous to be exempted in Entry 44 and so also, VSF and PFA. The proposal in the impugned notice for levy of taxes on sale of VSF Hank yarn cannot be sustained - However, if there are any other issues with regard to proposal of levy tax, it would be appropriate to grant liberty to the assessee to give their reply to the same. The impugned notice, the proposal of levy of sales tax on VSF Hank Yarn, is hereby set aside - Petition disposed off.

Summary

Issues:
1. Quashing of proceedings dated 14.02.2013 issued by the 2nd respondent.
2. Assessment of sale of Viscose Staple Fibre (VSF) Hank Yarn under Entry 44 of the TNVAT Act.
3. Interpretation of exemption under Entry 44 for VSF and PFA Hank yarn.
4. Granting liberty to the assessee to reply to any other tax levy proposals.

Analysis:
1. The judgment primarily deals with the quashing of proceedings dated 14.02.2013 issued by the 2nd respondent. The impugned notice proposed to assess the sale of Viscose Staple Fibre (VSF) Hank Yarn, alleging wrongful exemption claimed under Entry 44 of the TNVAT Act. However, a previous decision by a Division Bench of the High Court clarified that both Cotton Hank yarn and other types of yarn in hank form, including VSF and PFA, are entitled to exemption under Entry 44. Consequently, the proposal for levying taxes on the sale of VSF Hank yarn was deemed unsustainable based on this interpretation.

2. The Court emphasized that there was no intention to restrict the exemption of Hank yarn solely to cotton hank yarn, and all types of yarn in hank form were eligible for exemption under Entry 44. The judgment highlighted that the Court cannot alter the plain language of the statute or draw inferences contrary to the legislative intent. Therefore, the proposal to levy sales tax on VSF Hank Yarn was set aside in light of the previous ruling.

3. While the proposal regarding VSF Hank yarn was rejected, the Court granted liberty to the assessee to respond to any other issues related to tax levy within 30 days, excluding the matter concerning Cotton Hank yarn. This provision ensured that the assessee had the opportunity to address any additional tax-related concerns raised in the impugned notice, apart from the specific issue of VSF Hank yarn exemption under Entry 44.

4. Ultimately, the Writ Petition was disposed of with no costs imposed, and the impugned notice proposing the levy of sales tax on VSF Hank Yarn was set aside. The judgment provided clarity on the interpretation of exemption under Entry 44 of the TNVAT Act, particularly concerning the eligibility of various types of yarn in hank form for exemption, based on the earlier decision of the Division Bench.