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TMI Blog2014 (12) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the year 2002-03 - Similar notices were issued to all the three companies. In MOHAN BREWERIES AND DISTILLERIES LIMITED v. COMMERCIAL TAX OFFICER, PORUR ASSESSMENT CIRCLE, CHENNAI AND OTHERS [2004 (9) TMI 617 - MADRAS HIGH COURT] the Court examined the scope of the Circular issued u/s 28-A of the TNGST Act and held that the circular is binding on the authorities and even if the authorities want to withdraw the same, it could be done prospectively - the first ground for rejecting the petitioner's objection is held to be contrary to the decision which examined the very power of the first respondent to issue clarifications/circulars in exercise of power under section 28-A of the TNGST Act. Whether the impugned clarification dated 27.1.2003, is in consonance with Entry 9 of Eleventh Schedule of TNGST Act – Held that:- The petitioner's commodity being 'Wet Dates', falling within Part-D Entry 11 (2) of the First Schedule to the Act - Apart from that there were three other conditions to be fulfilled - It should have a foreign marking, it should not be sold in Indian brand name or trade mark and it should not be an item which had undergone any form of reprocessing, reassembling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 2003-04, and to quash the consequential order of rejection of the application for waiver as unjust, illegal and void ab initio, and refund the excess differential tax collected from the petitioners for the assessment year 2003-2004. 4(i) The petitioner is engaged in the business of purchasing , processing, packing and selling of 'Dates' and 'Date Syrups'. The petitioner is said to have been purchasing 'Dates' from dealers in other States, though the origin of the 'Dates' may be outside the Country. The petitioner on such purchase of 'Wet Dates', process, pack and sell the same under the registered brand name 'Lion Brand', which is a registered Trade Mark of the petitioner. (ii) The 'Wet Dates' fall under Entry 11(ii) of Part D of First Schedule to the Tamil Nadu General Sales Tax Act, and taxable at 12%. The petitioner filed the monthly returns and remitted tax at 12% and the assessments were completed without any query upto the assessment year 2001-02. (iii) The petitioner's case is that they do not directly import 'Wet Dates' from abroad, but purchase the same from dealers in Bombay as Inter-State sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the petitioner did not disclose that they were dealing with imported dates while they obtained the earlier Clarification dated 13.08.2002, is vague and unsustainable contention, since the petitioner clearly disclosed as to the nature of their business activity. Further, it is submitted that the impugned Circular is contrary to Clarification issued by the first respondent dated 24.5.2002, which clearly lays down guidelines for considering whether the goods are imported goods for the purpose of Entry 9 of Eleventh Schedule. It is submitted that the conditions except Condition No.1 that the commodity falls under Part D, the other three tests/conditions, which have been laid down in the Circular are not satisfied in the case of the commodity dealt by the petitioner and therefore the question of treating the goods which have been purchased as Inter-State Sale, cannot be treated as imported goods going by the Clarification issued by the first respondent. (vi) Even assuming that the first respondent was justified in issuing the impugned Clarification, such Clarification can only have prospective effect and cannot re-open past cases. Further, it is submitted that TNGST Act, defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MMISSIONER OF INCOME TAX [158 ITR page 102(1996) (SC)] and MOHAN BREWERIES AND DISTILLERIES LIMITED v. COMMERCIAL TAX OFFICER, PORUR ASSESSMENT CIRCLE, CHENNAI AND OTHERS [139 STC-page477 9DB) Madras]. (ix) To support the contention that the Revenue can withdraw clarification only prospectively and not retrospectively, the learned counsel placed reliance on the decision of the Hon'ble Division Bench of this Court in OM PLASTICS v. DEPUTY COMMERCIAL TAX OFFICER, KONGANUR ASSESSMENT CIRCLE, TIRUPUR AND ANOTHER [6 VST- PAGE 100 (DB) Madras]. The learned counsel further submitted that when there are two interpretations possible, invariably the Court would adopt the interpretation favourable to the assessee, more particularly in Taxation Statutes. In support of the said contention, reliance has been placed on the decision of the Hon'ble Supreme Court in the case of PRADIP J. METHA v. COMMISSIONER OF INCOME TAX, AHMEDABAD [2008(14) SCC- page 282]. Further, it is submitted that at no point of time, a transaction between the importer and the local buyer can be regarded as a sale in the course of import and to support the said contention, reliance was placed on the decisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to the TNGST Act, 1959. Aggrieved against this clarification, the petitioner filed an application before the first respondent seeking waiver of the difference of the tax i.e. (20% - 12%) 8% for the period from 27.3.2002 to 31.3.2002 on the first sales of wet dates of imported origin. While rejecting the waiver claim for differential tax of 8%, the first respondent has discussed in detail the contingencies that led to the issue of clarification of his order in K.Dis Drafting Cell 2/45119/2003, dated 30.09.2003. While seeking the clarification in letter dated 16.7.2002, the petitioners had sought clarification on 'wet dates' purchased directly from Bombay and hence the rate of tax was so clarified as 12%. Whether wet dates sold by the petitioner were of foreign origin or not was not at all disclosed by the petitioner in the letter seeking clarification. Further it is submitted that it is the bounden duty of the petitioner to furnish complete details while seeking a point of clarification. Subsequently, when in another case as to the liability of imported wet dates came up for examination, it was so clarified that wet dates of foreign origin whether purchased from oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be applicable to the goods specified in the application: Provided that no such application shall be entertained unless it is accompanied by proof of payment of such fee, paid in such manner, as may be prescribed. (2) The Commissioner of Commercial Taxes may, if he considers it necessary or expedient so to do, for the purpose of uniformity in the work of assessment and collection of tax, clarify any point concerning the rate of tax under this Act or the procedure relating to assessment and collection of tax as provided for under this Act. (3) All persons working under the control of Commissioner of Commercial Taxes shall observe and follow the clarification issued under sub-section (1) and sub-section (2). The Hon'ble Division Bench referred to the various Judgements of the Hon'ble Supreme Court, while construing the Circulars issued in various other enactments,which were para materia with Section 28 A of the Act, and held that the Circular were binding on the authorities till the concession given to the petitioner therein were withdrawn,which could be done only prospectively. The relevant portions of the Judgement are quoted herein below: 8.6.2. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department do not have a right to file an appeal against the correctness or binding nature of a circular; the Department's actions have to be consistent with the circulars; and that consistency and discipline are of far greater importance than winning or losing Court proceedings. 8.6.5. In UCO BANK v. C.I.T., [1999] 237 ITR 889, the Apex Court held that the circular issued by the revenue under Section 119 of the Income Tax Act are binding on the revenue and such circulars are meant for ensuring proper administration of the statute and they are designed to mitigate the rigours of the application of a particular provision of the statute in certain situations by applying a beneficial interpretation to the provision in question. 8.6.6. In COMMISSIONER OF SALES TAX, U.P. v. INDRA INDUSTRIES, [2001 ] 122 STC 100, the Apex Court held that a circular issued by the Sales Tax authorities is binding on the taxing authorities and the taxing authority cannot be heard to advance an argument that is contrary to that interpretation. 8.6.7. In COMMISSIONER OF INCOME TAX v. KELVINATOR OF INDIA LTD., [2 002] 256 ITR 1, it was held that the Board has power to issue circulars under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice to the petitioner stating that the clarification dated 13.8.2002 was on a wrong premise or erroneous. Further more, the clarification dated 13.8.2002, was not withdrawn and allowed to operate till the end of the assessment year. The petitioner filed the returns and paid tax at 12% and such return was accepted. It is only on 27.2.2003, the impugned clarification has been issued. 9. As pointed out earlier, the impugned clarification does not withdraw the clarification dated 13.8.2002, but states that earlier clarification is modified to the effect that 'Wet Dates' of foreign origin whether imported directly from other countries or purchased from other States are liable to be taxed at 2% in Entry 9 of Eleventh Schedule of TNGST Act. The modification on the impugned clarification was made without notice to the petitioner. Based on which notices were issued proposing to demand tax at 20%. The petitioner challenged the notices by filing W.P.Nos.35326 and 36621 of 2005 and those Writ Petitions were disposed of by order dated 6.3.2007, permitting the petitioner to approach the Assessing Officer with all relevant materials and the Assessing Officer was directed to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......... 2............... 3................ 4................ 5................. 6................ 7............... 8.................. 9. Imported cigarettes, medium density First 20 percent fibre boards, textiles and other items Sale falling in Parts D and E of the First Schedule. From the above it is seen that the products which are covered are imported cigarettes, medium density fibre boards, textiles and other imported items falling in Parts D and E of the First schedule are liable for tax at 20%. 14. Part D of First Schedule alone would be relevant for the purpose of this case and it reads as follows: S. No. Description of goods Point of levy State (1) (2) (3) PART-D Goods which are taxable at the rate of 12 percent [Effective from 27.3.2002] 11. (i) Dry fruits and nuts and kernal such as First Sale almond, pistha, dry grapes, figs, apricots, walnut, other than those specified elsewhere in this Schedule (ii) Wet Dates Note : Rate of tax reduced to four percent on the sale of wet dates by G.O.Ms.No.45 (CT) (B2) dated 12-2-2004 Notn. No.11(1) CT/12(A-1)/2004 Gazette dated 12-2-2004 Effective from 12.2.2004. It is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the commodity should be an item which has a specific mention in Part-D. It is no doubt true the petitioner's commodity being 'Wet Dates', falling within Part-D Entry 11 (2) of the First Schedule to the Act. Apart from that there were three other conditions to be fulfilled. It should have a foreign marking, it should not be sold in Indian brand name or trade mark and it should not be an item which had undergone any form of reprocessing, reassembling, re-constitution or repacking in India. Thus, going by the clarification issued by the first respondent, which is undoubtedly statutory, the commodities purchased by the petitioner by way of Inter-State sale could not be termed as imported goods. 17.That apart, the impugned clarification is beyond the scope of Entry 9 of the Eleventh Schedule. The impugned clarification states that foreign goods whether imported directly from other countries or purchased from other States, the expression purchase from other States is conspicuously absent in Entry 9 of Eleventh Schedule. Therefore, by virtue of clarification, the respondent cannot add any expression or phraseology, which is not contained in the Statute. Therefore, the im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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