2021 (10) TMI 808 - HC - VAT and Sales Tax

Revision/reassessment order - escaped turnover / wrong availment of 'Input Tax Credit' (ITC) - Hans Chap Khaini - exempt from tax or not - Alternate remedy rule - HELD THAT - The matter turns on facts and Hans Chap Khaini is only a brand and it is not a product. Whether the product would qualify as 'Tobacco' is a matter which turns on facts and in the considered view of this Court, the reasoned impugned order does consider the principles qua earlier orders and the same stand distinguished. Alternate remedy rule - HELD THAT - In the case on hand, there is no disputation or disagreement that the impugned order is appealable. In other words, statutory appeal qua impugned order is available to the writ petitioner, which will be under Section 51 of TNVAT Act - the law is well settled that it is not an absolute rule and it is a discretionary rule. While holding it is not an absolute rule i.e., a discretionary rule and a self-imposed restraint qua writ jurisdiction. In the considered view of this Court, this is a case which has to be dealt with by Appellate Authority if the writ petitioner / dealer chooses to prefer an appeal as it turns heavily on facts. As already alluded to supra, 'Hans Chap Khaini' is a brand name and though the written submission talks about packets, it is understood that it is effectively sachets. The contents of sachets have to be necessarily gone into. One of the extracts from the impugned order makes it clear that the respondent in the impugned order has clearly gone into the ingredients and has even gone into process and making of 'nice tobacco'. Respondent has gone into and examined that products such as menthol, geru, lime an spices etc., are homogeneously mixed with the same either by a electric machine or by a manually operated machine. As all these details turn on facts, it would be appropriate that the Appellate Authority examines this if the writ petitioner chooses to file an appeal and therefore, this Court refrains itself from expressing any opinion on these aspects of the matter in this order. The writ petition is therefore dismissed albeit leaving a window open to the writ petitioner / dealer to file an appeal under Section of 51 of TNVAT Act if the writ petitioner chooses to do so.

Issues Involved:
1. Assailing the impugned order dated 14.07.2021 under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act).
2. Whether "Hans Chap Khaini" is exempt from tax or taxable at 12.5%.
3. Whether the impugned order disregarded higher authorities' orders.
4. Adequacy of opportunity provided to the petitioner for a personal hearing.
5. Applicability of the alternate remedy rule.

Detailed Analysis:

1. Assailing the Impugned Order:
The writ petition was filed challenging the order dated 14.07.2021, which was a revision/reassessment order under Section 27 of the TNVAT Act. The impugned order pertained to escaped turnover and wrong availment of Input Tax Credit (ITC).

2. Taxability of "Hans Chap Khaini":
The petitioner claimed that "Hans Chap Khaini" was non-taxable and exempted from tax. However, the impugned order concluded that "Hans Chap Khaini" is a taxable commodity at 12.5%, disallowing the exemption claimed on a turnover of ?1,65,79,000 for the year 2010-11. The reasoning included that "Hans Chap Khaini" is a processed product with ingredients such as tobacco, lime water, oil, menthol, mixed spices, and flavors, making it a different commodity from ordinary chewing tobacco, thus taxable.

3. Disregard of Higher Authorities' Orders:
The petitioner argued that the impugned order disregarded orders from higher authorities, including the Commissioner (CT) and previous court orders. However, the court found that the impugned order had considered these principles and distinguished them based on facts. The impugned order referenced relevant case law, such as the Supreme Court decision in Kesarwani Zarda Bhandar Vs. State of UP, which discussed the transformation of raw tobacco into a new product through processing, thus making it taxable.

4. Adequacy of Opportunity for Personal Hearing:
The respondent provided ample opportunity to the petitioner for a personal hearing, even though it was not statutorily imperative. The court noted that personal hearings were granted, and the petitioner's contentions were considered in the impugned order. The court referenced the State Bank of India officers case law, which clarified that personal hearings are not mandatory for revisional orders under Section 27 of the TNVAT Act but can be given based on the complexity of the case.

5. Applicability of the Alternate Remedy Rule:
The court emphasized the alternate remedy rule, stating that the impugned order is appealable under Section 51 of the TNVAT Act. The court cited several Supreme Court decisions, including Dunlop India, Satyawati Tondon, and K.C. Mathew, which held that the alternate remedy rule must be applied rigorously in fiscal statutes. The court found that the case did not fall under any exceptions to the alternate remedy rule, such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute.

Conclusion:
The writ petition was dismissed, with the court leaving a window open for the petitioner to file an appeal under Section 51 of the TNVAT Act. The appellate authority was directed to deal with the appeal on its own merits and in accordance with law, uninfluenced by the observations made in this order. No costs were ordered.

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