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TMI Blog2005 (2) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Commissioner of Commercial Taxes under Section 28-A of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as 'the Act'). 4. The Tribunal dismissed both the petitions for assessment years 1999-2000 and 2000-2001 on the ground that the clarifications are binding on the parties, and alternatively it was open to the petitioner to challenge the correctness of the clarification before the statutory authorities under the Act. 5. Writ Appeal No. 3995 of 2004 has been filed against the impugned order of the learned single Judge dismissing W.P. No. 6266 of 2004 on the ground of alternative remedy under the Act. It has been pointed out in the writ appeal that the learned single Judge was wrong in dismissing the writ petition on the ground of alternative remedy, since the assessment order has been passed on the basis of the clarification dated 26-6-2003 under Section 28-A of the Act and the said clarification issued by the first respondent is the subject matter of challenge before this Court in W.P. Nos. 36203 & 36204 of 2003. 6. The facts of the case are that the petitioner is a private limited company and runs a chain of fast food restaurants under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stalls and any other eating houses other than those falling under item 20 of PART-C of the First Schedule, shall pay tax at the rate of 2 per cent on the taxable turnover. Explanation. - For the purpose of computing the total turnover under the sub-section, the purchase turnover liable to tax under Section 7-A shall be added to the sales turnover." 8. The contention of the petitioner was that before 1-4-2002, Section 3D made no distinction between branded and unbranded food and drinks. Sale of all types of food and drinks in hotels and restaurants would be taxed only at 2% of the taxable turnover, except star hotels. Therefore, it would not be proper to levy sales tax at 16% on pizza by treating them as branded goods under Entry 4 (iii), Part-E of the First Schedule. 9. The petitioner also pointed out that Section 3D was drastically amended on 1-4-2002, and after the amendment, it read as:- "Section 3-D. Payment of tax by hotels, restaurants and sweet stalls: - (1) Notwithstanding anything contained in sub-section (1) of Section 3, every dealer whose total turnover is not less than ten lakhs of rupees for the year shall pay tax at the rate of two per cent on the first poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the clarification issued under Section 23-A of the TNGST Act could be challenged before the assessing authority. The Tribunal held that even if the assessing authority passed an order against the assessee, the same should be assailed only in the appeal. The Tribunal referred to its own Full Bench decision in O.P. Nos. 1334 and 1336, dated 25-1-2001, which stated that whatever be the clarification issued, it would bind the parties who had sought for the clarification. The Tribunal also referred to an earlier decision of the Division Bench of this Court in W.P. No. 10709 of 1999 which stated that a clarification issued under Section 28A of the TNGST Act could be assailed in appeal as well as before the assessing officer on the basis of proper evidence. Therefore, without going into the merits of the clarification, the Tribunal declined to interfere and dismissed the petitions. 14. Learned senior Counsel for the petitioner Mr. Arvind Datar submitted that the impugned clarification is contrary to the statutory provisions of Section 3D of the Act as applicable prior to 1-4-2002, and the section, as extracted above, levied a flat rate of tax of 2% on the sale of all food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the writ petition against a circular ought not to be entertained. The Supreme Court held that once a circular is issued, any objection to the same before a subordinate officer would be a futile attempt. It was further held that the impugned circular could not have been challenged before the departmental authorities as they would be bound by it, and accordingly, the High Court, was entitled to entertain the writ petition challenging the circular under Article 226 of the Constitution of India. Even though the above said decision was rendered in the context of the Central Excise Act, in our opinion the same principle would apply to the petitioner's case. 19. Similarly, in Vam Organic Chemicals Ltd. v. State of Uttar Pradesh, (2003) 132 STC 8 the Allahabad High Court held that when the subordinate authorities are bound by a circular, no purpose will be served by asking the petitioner to appear before the assessing authority who will feel bound by the circular issued by the Government of Uttar Pradesh. 20. In Sri Rajarajeswari Parboiled Rice Industry v. CTO, (1999) 115 STC 99, the Andhra Pradesh High Court held that a circular which is binding on the assessing authority will als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (l) The Commissioner of Commercial Taxes on an application by a registered dealer, may clarify any point concerning the rate of tax under the Act. Such clarification shall 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)". Amendment to the above Act was inserted from 6-11-1997 by the Tamil Nadu General Sales Tax (6th Amendment) Act, 1977. 25. A perusal of the above provision shows that the Commissioner can clarify any point concerning the rate of tax under the Act, and in view of sub-section (3) all persons working und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A are not binding when he is functioning in a judicial capacity, and they are only binding on him when he is functioning in an administrative capacity, when initially rising the rate of tax on a specific commodity. 29. In Kerala Financial Corporation v. CIT, (1994) 210 ITR 129, the Supreme Court held that the circulars issued by the Central Board of Direct Taxes under Section 119 of the Income-tax Act, 1961, could not override or detract from the provisions of the Act, as that would be destructive of all known principles of law and would be giving a power to the executive authority to amend the provisions of the Act. In our opinion, the same principle will apply to Section 28-A of the Act also. The Commissioner cannot take a view which is contrary to the provisions of the Act or rules made thereunder as interpreted by the Courts or the statutory authorities under the Act when they are performing judicial or quasi judicial functions [Vide Sales Tax Officer v. Shree Durga Oil Mills Ltd, 1998 (97) E.L.T. 202 (S.C.)]. 30. In our opinion, though the circular issued by the Commissioner under Section 28-A is not binding on the assessing authority or appellate authority, yet we cannot ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or the clarification before the assessing officer or the appellate authority. In the impugned order of the Tribunal, reference was also made to a decision of a Division Bench of this Court in W.P. No. 10709 of 1999, dated 24-6-1999. The Division Bench had held that a clarification issued under Section 28-A was not an adjudication and the clarification could be assailed before the assessing officer and before the appellate authority. In our opinion, the attention of the Full Bench of the Tribunal and the Division Bench of this High Court was not drawn to the various decisions of the Supreme Court referred to above. It has been repeatedly held in those decisions that a clarification or a circular can be challenged under Article 226. It has been pointed out therein that once a clarification or circular is issued by a superior authority, it would be an exercise in futility to ask the assessee to raise an objection to the circular before an inferior authority, vide the Constitution Bench decision of the Supreme Court in Filterco v. CST (supra). Subsequently, it was also held by the Supreme Court that clarifications or circulars could be challenged before the High Court under Article ..... X X X X Extracts X X X X X X X X Extracts X X X X
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