2009 (7) TMI 1195 - HC - VAT and Sales Tax

Enhancement of the rate of tax to 16 per cent from ten per cent for the paper based laminated sheets - Held that - It is an admitted fact that there was ambiguity/doubt with regard to the collection of tax on paper based laminated sheets to the respondents, i.e., whether tax is leviable at ten per cent or 16 per cent. Till May 30, 2008, the tax leviable was only ten per cent even according to the respondents and the petitioners have also paid the said rate of tax for their sales turnovers. Since the respondents were not firm in their view with regard to collection of tax, viz., percentage of tax, the benefit of doubt should be extended to the assessees, particularly when it is pleaded by the petitioners before this court that they have not collected more than ten per cent of tax while selling the paper based laminated sheets.It is also well-settled that if there is ambiguity with regard to the rate of tax to be collected, the benefit should go to the assessee. The contention of the learned counsel for the respondents that the writ petitions filed challenging the reassessment notice to reopen the assessment is not maintainable as the writ petitions are premature in nature, cannot be sustained. Similarly, the revised orders passed are also bad in law. Admittedly, the second respondent issued the notice to reopen the assessments already finalised based on the clarification of the first respondent dated May 30, 2008. Once the clarification itself is found untenable and also found not having any retrospective effect, the second respondent is not justified in issuing the impugned notices to the petitioner for reopening the already finalised assessments as well as to pass reassessment orders. In view of the said findings the objections raised by the respondents to maintain the writ petition challenging the notices are also untenable.The writ petitions are allowed.

Issues Involved:
1. Validity of the Commissioner's clarification enhancing the tax rate from 10% to 16%.
2. Jurisdiction of the Commissioner in issuing the clarification.
3. Applicability of the Supreme Court's interpretation under the Central Excise Tariff Act to the TNGST Act.
4. Retrospective application of the clarification.
5. Maintainability of writ petitions challenging show-cause notices and reassessment orders.

Detailed Analysis:

1. Validity of the Commissioner's Clarification Enhancing the Tax Rate:
The petitioners challenged the clarification issued by the Commissioner of Commercial Taxes on May 30, 2008, which enhanced the tax rate on paper-based laminated sheets from 10% to 16%. The petitioners argued that the actual rate of tax on such goods is 10%, as previously clarified by the Commissioner on March 23, 2006, based on the Tamil Nadu Taxation Special Tribunal's order in Balaji Timber Corporation v. State of Tamil Nadu [1997] 105 STC 213. The court noted that the first respondent's clarification dated April 7, 2007, and May 30, 2008, relied on Supreme Court judgments under the Central Excise Tariff Act, 1985, which cannot be applied to the TNGST Act, 1959, without amending the relevant entries in the TNGST Act.

2. Jurisdiction of the Commissioner in Issuing the Clarification:
The petitioners contested the jurisdiction of the Commissioner in issuing the clarification, arguing that the Special Tribunal's order from April 12, 1996, was final and accepted by the Department. The court held that the Commissioner is not empowered to take a different view when the assessments were completed and the tax was paid at 10%. The court emphasized that the respondents were bound by the Tribunal's order and the clarifications issued on November 12, 1998, and March 23, 2006.

3. Applicability of the Supreme Court's Interpretation under the Central Excise Tariff Act to the TNGST Act:
The court examined whether the interpretation given by the Supreme Court under the Central Excise Tariff Act could be applied to the TNGST Act. The court referred to the judgments in Associated Agencies v. State of Tamil Nadu [1993] 89 STC 447 and Neoluxe India Private Limited v. Commissioner of Sales Tax, Vikrikar Bhavan, Bombay [2008] 13 VST 157, which held that interpretations under one statute cannot be applied to another statute without express amendments. The court concluded that the Supreme Court's interpretation under the Central Excise Tariff Act could not be relied upon to issue the impugned circular under the TNGST Act.

4. Retrospective Application of the Clarification:
The petitioners argued that the clarification could not be applied retrospectively, as they had already paid 10% tax on their sales. The court agreed, citing the Supreme Court's decisions in Government of India v. Indian Tobacco Association [2005] 187 ELT 162 and Commissioner of Customs v. Spice Telecom [2006] 10 SCC 704, which held that clarifications or notifications cannot have retrospective effect unless explicitly stated. The court found that the clarification issued by the first respondent did not have retrospective effect and could not be applied to reopen completed assessments.

5. Maintainability of Writ Petitions Challenging Show-Cause Notices and Reassessment Orders:
The respondents argued that the writ petitions challenging show-cause notices were not maintainable, as the petitioners had remedies to file objections or appeals. The court rejected this argument, noting that the reassessment notices and orders were based on an untenable clarification. The court held that the second respondent was not justified in issuing notices to reopen finalized assessments based on the invalid clarification.

Conclusion:
The court held that the impugned clarification issued by the first respondent and the consequential show-cause notices/orders passed in reassessment by the second respondent were unsustainable. The writ petitions were allowed, and the court ordered that no costs be imposed, with connected miscellaneous petitions closed.

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