2023 (7) TMI 191 - SC - VAT and Sales Tax

Scope of clarification issued by the Revenue Department - To be retrospective or prospective - Applicability of Exemption Entry No. 8 on maize starch - overriding effect of Taxation Entry No. 61 - recovery of taxes retrospectively is a mere change of opinion or not - HELD THAT - The Exemption Notification was erroneously held by the High Court not to have statutory backing. Recital thereof shows the source of power. Exercise of power was in terms of Section 17 of the Act, which appears to be the repository of the State Government s power to exempt payment of tax. However, nothing really turns on it in view of the several Amendment Acts by which the Schedules were amended from time to time - Indeed, the Act was amended further with effect from 27th March, 2002 by Act No.18 of 2002, i.e., the Tamil Nadu General Sales Tax (Fourth Amendment) Act, 2002, but the same being a post-millennium event is admittedly beyond the period under consideration, i.e., 1998-99; hence, we need not be too concerned with the latter amendment. It would appear from the conspectus of the statutory provisions as delineated above that there were two entries in the field at or about the period of the relevant assessment year, i.e., sago and starch of any kind in Schedule I, referred by us as Taxation Entry No.61, and products of millets (rice, flour, brokens and brans of cholam, cumbu, ragi, thinai, varagu, samai, kudiraivali, milo and maize) in Schedule III which we are referring to as Exemption Entry No.8. Law is well settled that if in any statutory rule or statutory notification two expressions are used - one in general words and the other in special terms - under the rules of interpretation, it has to be understood that the special terms were not meant to be included in the general expression; alternatively, it can be said that where a statute contains both a general provision as well as a specific provision, the latter must prevail - it is thus emerged that Taxation Entry No.61 is relatable to starch of any kind whereas Exemption Entry No.8 relates to products of millet . The clarification vide Circular dated 8th October, 1998 was issued in exercise of power conferred by the statute (i.e., Section 28-A of the Act). Whenever a clarification pursuant to an application made by a registered dealer as to the applicable rate of tax is issued under sub-section (1), or the Commissioner on his own clarifies any point concerning the rate of tax under the Act, or the procedure relating to assessment and collection of tax as provided for under the Act is issued under sub-section (2), the object is to make the rate of tax explicit what is otherwise implicit - What the clarification provided by the Commissioner does is to clear the meaning of the two entries which was already implicit but had given rise to a confusion. A clarification of this nature, therefore, is bound to be retrospective. The impugned judgment is upheld albeit for reasons not assigned by the High Court. Finding no merit in the appeals, the same is dismissed.

Summary

Issues Involved:
1. Classification of maize starch under the Tamil Nadu General Sales Tax Act, 1959.
2. Validity and applicability of the Circular dated 8th October, 1998.
3. Retrospective effect of the Circular dated 8th October, 1998.

Summary:

Classification of Maize Starch:
The appellant, registered under the Tamil Nadu General Sales Tax Act, 1959, deals in maize starch since 1975. The classification of maize starch under the Act is the subject of dispute. The Government of Tamil Nadu issued an Exemption Notification in 1970 exempting products of millets, including maize, from tax. However, subsequent amendments to the Act introduced a tax on "sago and starch of any kind" and moved it to different entries with varying tax rates. The appellant argued that maize starch should be classified as a product of millet and thus be exempt from tax, while the respondents contended that maize starch falls under the taxable entry for "sago and starch of any kind."

Validity and Applicability of the Circular:
The Commissioner issued a Circular on 23rd June, 1998, clarifying that Exemption Entry No. 8 does not encompass maize starch, which is distinct from maize flour. This Circular was later canceled and replaced by another Circular on 8th October, 1998, which clarified that maize starch is taxable from 1st April, 1994, under the specific entry for "sago and starch of any kind" at a 4% tax rate. The appellant's representation against this clarification was rejected, leading to litigation.

Retrospective Effect of the Circular:
The appellant challenged the Circular dated 8th October, 1998, arguing that it should not have retrospective effect. However, the Supreme Court held that the clarification issued by the Commissioner was to make the rate of tax explicit and was bound to be retrospective to clear the existing confusion. The Court found no merit in the appellant's contention that the Circular should only apply prospectively.

Analysis and Findings:
The Supreme Court agreed with the High Court's ultimate conclusion but provided its own reasoning. The Court noted that the Exemption Notification did have statutory backing but was superseded by subsequent amendments to the Act. The Court held that maize starch, being a processed product, does not qualify as a product of millet under Exemption Entry No. 8. Instead, it falls under the taxable entry for "sago and starch of any kind." The Court emphasized that the legislative intent was clear, and maize starch should be taxed accordingly.

Conclusions:
The Supreme Court upheld the impugned judgment, dismissing the appeals and ruling that maize starch is taxable under the entry for "sago and starch of any kind." The Circular dated 8th October, 1998, was found to be valid and applicable retrospectively. The appeals were dismissed, and parties were ordered to bear their own costs.