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TMI Blog2017 (12) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... s of yarn, that are packed in hank form are taxable at 5% and the statute does not make a further distinction regarding what is the type of hank yarn, that should be exempted but the exemption shall enure to hank yarn of all kind - Held that: - the Hank Yarn Packing Notification issued by the Government of India pertains to yarn made out of the cotton. Hence, the term ''hank yarn'' used in the Budget Speech shall be referable to only cotton yarn packed in hank form. The intent of the Central Government as well as the State Government is to protect the handloom Industries. Both the Central and the State Governments were concerned about the plight of the poor hand loom weavers, and their family members, and they need to be provided with adequate quantity of yarn in hank form, so that, they can earn their livelihood by operating the hand loom - to state that Entry 44 of Part-B of the fourth schedule to the TNVAT Act should be interpreted to mean any type of yarn, packed in hank form, is a plea, which would be unacceptable, and not the intention of the Government to grant exemption. Admittedly, the Government inserted hank yarn in Sl.No.44 only during 2006-07, and as rightly pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as a lead case, and it would suffice to note the facts stated thereunder :- 4.1) The petitioner is a registered dealer on the file of the second respondent/Assistant Commissioner (CT), Periya Agraharam Assessment Circle, Erode, and would state that, they were under the belief that the commodity dealt with by them, viz., staple fibre hank yarn, is exempt from taxation under Entry 44 of Part-B of the fourth schedule to the TNVAT Act, as they were informed that, some of the dealers had approached the Commissioner of Commercial Taxes during 2007, and sought for a clarification regarding the taxability of the commodity, called 'hank yarn', and to one such dealer, viz., Southern India Mills Association, Coimbatore, the Commissioner, by clarification, dated 29.03.2007, informed that, the term 'hank yarn', includes hemp yarn, which are manufactured using the raw materials other than cotton yarn also and exempted from tax under Entry 44 of Part-B of the fourth schedule to the TNVAT Act with effect from 01.01.2007. Whereas, when the other dealer, in their individual capacity, approached the Commissioner for similar clarification with regard to the taxability of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 14.02.2013 was reiterated. Aggrieved by the same, the petitioner and some of the dealers, who are petitioners in other Writ Petitions are before this Court. 5. Mrs. R. Hemalatha, the learned counsel appearing for the petitioners in some of the Writ Petitions submitted that, the petitioners have challenged the impugned clarification on the following grounds :- 5.1) Entry 44 of Part-B of the fourth schedule to the TNVAT Act mentions only hank yarn, and there is no distinction or specification to the texture of the yarn, and therefore, all categories of yarn, in hank form, are exempted from payment of VAT. Clause 3(a) of Part-B of the first schedule covers all types of yarn, except hank yarn, and are taxable at 5%. Thus, clause 3 (a) specifically excludes hank yarn, which is an exempted commodity. 5.2) The power conferred on the first respondent under Section 48-A of the TNVAT Act is to clarify the rate of tax on a particular commodity, and the first respondent has no power to interpret an entry in the schedules to the Act, which fixes the rate of tax for a particular commodity. Under the provisions of the Tamil Nadu General Sales Tax Act, 1959, a notification, prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts are made only with cotton hank yarn. In support of such contention, reliance was placed on the Circular issued by the Chairman of the Hand Loom Export Promotion Council, Ministry of Textiles, Government of India, dated 16.03.2013. As per the said Circular, the first respondent has no jurisdiction to invoke his power under Section 48 -A of the TNVAT Act, as there is no ambiguity in the Entry to the schedules under the TNVAT Act, and no clarification is required. 5.7) It is further submitted that the clarification issued, even assuming to be valid, can have only prospective effect. In support of such contention, reliance was placed on the decisions of this Court, in the case of i) Mohan Breweries and Distilleries Ltd., Vs. C.T.O. Porur Assessment Circle, Chennai and others, reported in [(2005) 139 STC 477 (Madras)] and ii) P.A.S. Industries Vs. Commissioner of Commercial Taxes, Chennai and another, reported in [(2007) 6 VST 671 (Madras)]. 5.8) It is further submitted that, the special entry, (viz., Entry 44 ) will exclude general entry, and therefore, the petitioners are justified in stating that, any yarn, packed in hank form, is liable to be exempted from VAT. In support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be resorted to, when there is no change in the statutory provision, and if two views are possible, then, one, which is favorable to the assessee has to be adopted. 6.2) Further, it is submitted that, no opportunity of personal hearing was granted to the petitioners before the clarification, dated 14.02.2013 was issued, and in such situation, orders were set aside and the matters were heard afresh, in the case of Supreme Industries Ltd., Vs. Authority for Clarification and Advance Rulings, Chennai and another reported in [(2014) 68 VST 494 (Madras)]. 6.3) Referring to Entry 77 of Part-A of the fourth schedule to the TNVAT Act, it is submitted that, all categories of fabrics are exempted from tax. Thus, the end product has been exempted, and this is a clear indicator that all types of yarn, packed in hank form, are exempted. The entries seek to clarify the exemption, which has been specifically mentioned, and to illustrate the same, the learned counsel referred to Entry 22, which exempts cycle rickshaw without motor. However, there is no such clarification with regard to hand yarn, and therefore, all types of hank yarn are exempted. 7. Mr. Niranjan Rajagopalan, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon'ble Supreme Court, in the case of Cannanore Spining and Weaving Mills Ltd., Vs. Collector of Customs and Central Excise Cochin and others, [(1979) 2 SCR 830]. 9. Mrs. S. Narmadha Sampath, the learned Special Government Pleader appearing for the respondents submitted that, Section 48-A empowers the first respondent to clarify any point, concerning the rate of tax on an application by a registered dealer, and the impugned clarification concerns the rate of tax, which would include the powers to consider as to whether the exemption claimed from the payment of tax is justified nor not. Therefore, the first respondent was fully competent to decide whether the commodity is exempt from tax or not. 9.1) Referring to the Budget Speech given by the then Hon'ble Minister of Finance, Government of Tamil Nadu on 22.07.2006, it is submitted that the Government was aware that, there is going to be a revenue loss of ₹ 56 crore per annum, but decided to grant benefit, as it would benefit the lakhs of poor hand loom weavers, and the commodity, hank yarn, being the chief raw material for the manufacture of hand loom goods, such exemption was granted, and, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1964) S.C. 925. 9.6) It is submitted that, the petitioners cannot plead any equity in the matter of taxation, and equitable consideration are not relevant in interpreting the provisions of a taxing statute. In support of such contention, reliance was placed on the decisions of the Hon'ble Supreme Court, in the case of The Commissioner of Income Tax, Calcutta Vs. Central India Industries Ltd. reported in [(1972) AIR SC 397] and M/s. Murarilal Mahabir Prasad and others Vs. Shri .B. R. Vad and another reported in [(1975) 2 SCC 736]. 9.7) It is further submitted that, the object of the Government to grant exemption is to benefit the handloom industries and the Government had full knowledge of the revenue loss, which will occur due to the grant of such exemption, and in such situation, strict interpretation should be given to such exemption notification, and there is no room for any liberal interpretation to such exemption notification. In support of such plea, reliance was placed on the decision of the Hon'ble Supreme Court, in the case of (Novopan India Ltd., Hyderabad Vs. Collector of Central Excise and Customs, Hyderabad) reported in [(1994) supp (3) SCC 606]. On the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking under the control of the CCT. As a result of the binding nature of the clarification, dated 14.02.2013, the respective Assessing Officers of the petitioners issued notices for re-opening the assessments, which were completed by treating the transactions as an exempted transactions under Entry 44 of Part-B of the fourth schedule to the TNVAT Act. Challenging the same, some of the dealers had filed Writ Petitions before this Court, and ultimately, Review Petitions were filed by the petitioners and other dealers before the first respondent to review the clarification, dated 14.02.2013. The first respondent, by clarification, dated 29.06.2017 has taken decision on those Review Petitions, and reiterated the stand taken in the earlier clarification, dated 14.02.2013. This has been questioned in the present Writ Petitions. 13. The foremost contention raised by the petitioners is that, under Section 48 -A of the TNVAT Act, the first respondent has no power to interpret Entry in the schedules to the Act, and is entitled only to clarify regarding the rate of tax. As pointed out earlier, Section 48-A (1) empowers the Government to constitute a State Level Authority to clarify any poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs of hand loom weavers. The Government was conscious of the fact that this exemption will result in substantial financial loss to its exchequer, which was then, quantified at ₹ 56 crore per annum. Thus, it has to be seen as to what are the category of persons, which weighed in the minds of the Government to extend the benefit of exemption to the handloom Industries. 17. The budget speech given by the then Hon'ble Minister of Finance, mentions about the commodity hank yarn as the chief raw material for handloom goods. Three important things have to be borne in mind, which formed the basis for granting such exemption. One is that, hank yarn is the chief raw material for the manufacture of hand loom goods. Secondly, the Government wanted to encourage lakhs of hand loom Industries, and third intention being that, the Government wanted the benefit to reach the hand loom weavers. Thus, the term 'hank yarn' used in the budget speech cannot be read in isolation, but has to be read conjointly, which would mean yarn, which is the chief raw material for hand loom goods. If the afore mentioned three factors were the intention of the Government, can it be stated that the V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/spun wholly out of cotton or its waste but does not include a) hosiery yarn, sewing thread, industrial yarns, like tyre cord, multiple yarn, mixed yarn of various counts reeled off from cop bottoms and yarn comprising single count yarn reeled off from cop bottoms having loose ends or knots at short lengths. 20. Thus, the Hank Yarn Packing Notification issued by the Government of India pertains to yarn made out of the cotton. Hence, the term ''hank yarn'' used in the Budget Speech shall be referable to only cotton yarn packed in hank form. The intent of the Central Government as well as the State Government is to protect the handloom Industries. Both the Central and the State Governments were concerned about the plight of the poor hand loom weavers, and their family members, and they need to be provided with adequate quantity of yarn in hank form, so that, they can earn their livelihood by operating the hand loom. 21. Therefore, to state that Entry 44 of Part-B of the fourth schedule to the TNVAT Act should be interpreted to mean any type of yarn, packed in hank form, is a plea, which would be unacceptable, and not the intention of the Government to grant exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication, the commodity, in relation to which, the clarification or advance ruling was sought, and on all officers working under the CCT. Therefore, the decision of the STAT cannot act as a fetter for exercise of power by the first respondent. Furthermore, the embargo under Section 48-A (2) (i) is only with regard to pending Appeals/Revisions, but not cases, which have been disposed of. Thus, the petitioners, having voluntarily gone before the first respondent and sought for reviewing the earlier clarification, dated 14.02.2013 estopped from now contending that the first respondent lacks jurisdiction to decide the matter. 26. It was argued by some of the counsel for the petitioners that the clarification issued under Section 48-A can have only prospective effect, and to support such contention, reliance was placed on the decisions of Mohan Breweries and Distilleries Ltd. (supra) and ii) P.A.S. Industries (supra). Though, at the first blush, it appears that the clarification is sought to be used for, to re-open past assessments. It is not a typical case, where, clarification obtained by the some of the dealers or a third party dealer is used against other dealers to reopen their a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ''popular sense'', that sense which people conversant with the subject matter with which the statute is dealing would attribute to it.' Applying the said decision to the facts and circumstances case, in popular sense, which the people conversant with the subject matter, referred to hank yarn as containing cotton yarn packed in hank form. Therefore, it is incorrect on the part of the petitioners to state that, in the popular sense, cotton yarn packed in hank form is cotton hank yarn and VSF yarn packed in hank form is VSF hank yarn. If this interpretation is accepted, it would militate against the statutory context of the exemption granted by virtue of the Entry No.44of Part-B of the fourth schedule to the TNVAT Act. 30. The Hon'ble Supreme Court, in the case of A.I.R. (1967) S.C. 1454, held that, 'while interpreting items in statutes like sales tax, resort should not be made to scientific or technical meaning to such terms but their popular meaning or attached to them by those dealing in that is to say their commercial sense, that is to say, construction of words is to adopt the fitness to the matter of the statute'. If such is interpretation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute. 34. The Commissioner of Commercial Taxes, in the counter affidavit has set out the history behind the purpose of the exemption to state that, it was to promote the artisans involved in base functioning of handloom sector, and who had at no point of time would be in a position to own such huge machinery, required to manufacture the viscose and other such yarn material, and hence, the notification for exemption was issued for uplifting the livelihood of struggling artisans. In para No.9 of the counter affidavit, flow chart has been given, showing the process involved in the manufacture of combed cotton yarn, from which, it could be inferred that the product manufactured by the petitioners would not fall within the said frame work. 35. It has been further stated the yarn is a long continuous length of interlocked fibers. The staple length of cotton determines the thickness of yarn spunned, and this is referred to as 'yarn count'. Standard measure for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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