2019 (5) TMI 1167 - HC - VAT and Sales Tax

Classification of goods - narrow woven fabric labels - classified under heading '58.06' of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 or not - exemption from sales tax under Entry 11 of Part A of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959 - case of the Respondent is that the exemption applies to narrow woven fabric, which is classified under heading 58.06 of the Additional Duties of Excise Act but not to woven labels, which are classifiable under heading 58.07 of the Central Excise Tariff Act, 1944. HELD THAT - On perusal of Entry 11 of the Part A of the Third Schedule of the Tamil Nadu General Sales Tax Act, it is clear that narrow woven fabrics of silk, wool, cotton or man-made textile materials (produced or manufactured in India) as described in column (3) against the heading '58.06' in column (1) of the First Schedule to the Additional Duties of Excise Act were exempted from sales tax. The position is confirmed by clarification dated 13.02.2001, where it was held the clarification already issued in this office reference D.Dis.Acts Cell II/65536/2000 dated 13.10.2000 and D.Dis.Acts cell II/76081/2000 dated 30.10.2000, treating the product as falling under Entry 67 in Part-D of the First Schedule to the TNGST Act, 1959, taxable at 11% is hereby cancelled - Thereafter, by the subsequent clarification dated 18.05.2001 read with erratum dated 29.10.2001, it was also clarified that both settled cases and pending cases, in respect of narrow woven fabric labels, would be decided as per the clarification dated 13.02.2001. The question arises as to whether the assessing officers are bound by the clarifications issued under Section 28A or whether they can deviate there from - The above question is no longer res integra and was decided in several judgments. For instance, in PAPER PRODUCTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 1999 (8) TMI 70 - SUPREME COURT , it was held that instructions/clarifications issued under Section 37B of the Central Excise Act, 1944, which is broadly similar to Section 28A of the TNGST Act, are binding on the assessing officer. In the instant case, it is evident that the re-assessment proceedings were initiated in disregard of the clarifications dated 13.02.2001 and 18.05.2001 read with the erratum thereto dated 29.10.2001. The text of clarification dated 13.02.2001 underscores the fact that earlier clarifications classifying the product under Entry 67 in Part D of the First Schedule to the TNGST Act were expressly cancelled whereas the assessing officer does precisely the converse. It is further evident that this was done largely on the basis of audit objections. Petition allowed.

Summary

Issues:
1. Interpretation of exemption under Entry 11 of Part A of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.
2. Validity of re-assessment order dated 28.02.2006 based on audit objections.
3. Binding nature of clarifications issued under Section 28A of the TNGST Act on assessing officers.
4. Imposition of penalty under Section 12(3)(b) of the TNGST Act.
5. Availability and exhaustion of alternative remedy before approaching the High Court.

Analysis:

1. The primary issue in this case revolves around the interpretation of the exemption provided under Entry 11 of Part A of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959. The Petitioner, a registered dealer, claimed exemption for narrow woven fabric labels under this entry, citing relevant clarifications issued by the authorities supporting their claim.

2. The validity of the re-assessment order dated 28.02.2006, which imposed tax and penalty on the Petitioner based on audit objections, is challenged. The Petitioner contends that the re-assessment was initiated contrary to the binding clarifications and assessments made earlier, leading to a conflict with the exemption provision.

3. The Court delves into the binding nature of clarifications issued under Section 28A of the TNGST Act on assessing officers. Citing precedents, it establishes that such clarifications are binding on tax authorities and cannot be modified or cancelled retrospectively. The Court emphasizes that assessing officers must adhere to these clarifications in making assessments.

4. The imposition of a penalty under Section 12(3)(b) of the TNGST Act is also scrutinized. The Court finds the penalty imposed in this case to be untenable given the factual and legal context surrounding the re-assessment. It highlights errors in the re-assessment order and the lack of definitive inferences from the evidence presented by the Petitioner.

5. Lastly, the Court addresses the availability and exhaustion of alternative remedies before approaching the High Court. While acknowledging the general principle of not interfering when alternative remedies exist, the Court finds the circumstances warrant its jurisdiction due to the inefficacy of the alternative remedy in this case. The Writ Petition is allowed, setting aside the impugned order dated 28.02.2006, with no costs awarded.

This detailed analysis of the judgment highlights the key legal issues, interpretations, and precedents considered by the Court in arriving at its decision to quash the re-assessment order.