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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 ..... , it will always be open to question the same under Article 226 of the Constitution of India. The petitioner was served with a pre-revision notice on the basis of a circular issued on 18-3-2002, which stipulated that branded pizza could be taxed at 16%. Accordingly the assessments which had been initially completed and which levied a tax of 2% u/s 3D of the Act were sought to be revised and tax at 16% was proposed to be levied. A plain reading of Section 3D, as it existed prior to 1-4-2002, indicates that it levies a tax on all foods and drinks sold in hotels and restaurants having a total turnover of not less than Rs. 25 lakhs at a flat rate of 2%. The section made no distinction as to whether the food and drink that was sold was branded or unbranded. Section 3D introduced the concept of sale of unbranded good and drink only in the amended provisions, which came into effect on 1-4-2002. Hence, in our opinion, it was clearly not permissible for the Commissioner of Commercial Taxes to issue a clarification that branded pizza would be taxed at 16%. As pointed out by the Supreme Court in the Kerala Financial Corporation Ltd. case [ 1994 (5) TMI 2 - SUPREME COURT] this would really tan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ader ORDER Markandey Katju, C.J. 1. Heard the learned Counsel for the parties. 2. Writ Petition No. 36203 of 2003 has been filed for a writ of certiorari to quash the impugned order passed by the first respondent, the Tamil Nadu Taxation Special Tribunal, Chennai in O.P. No. 918 of 2003, dated 24-11-2003. 3. Writ Petition No. 36204 of 2004 has been filed for a writ of certiorari to quash the impugned order passed by the first respondent in O.P. No. 1347 of 2003, dated 24-11-2003. The Tribunal has passed common order in both the above cases. Before the Tribunal, the petitioner sought to quash the impugned clarification No. 156 of 2003 in D.Dis.Acts. Cell-II/31073/2003, dated 26-6-2003 issued 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fications dated 16-3-2002 and 20-12-2002, the petitioner sought for a clarification from the second respondent under Section 28-A of the Act, as to the proper rate of tax. The request for clarification was filed in terms of Form XIV under Rule 26A of the Tamil Nadu General Sales Tax Act Rules. In the said application, the petitioner pointed out that until 1-4-2002, Section 3D of the Act read: - "Section 3D. 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 twenty-five lakhs of rupees for the year on the first point of sale of food and drinks in hotels, restaurants, sweet 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r products under Trade and Merchandise Marks Act, 1958 for pizza, pie preparations made from cereals, for food for human consumption. Therefore, sale of the branded products registered under TMM Act, such as pizza, etc. falls outside the ambit of Section 3D of the Act, and is, therefore, taxable at 16% under Entry No. 3 (1) in Part-E of the First Schedule to the TNGST Act, 1959. For the period prior to 1-4-2002 also, the liability is under Entry No. 4 (iii) of Part-E of the First Schedule to the TNGST Act, 1959, taxable at 16%." 13. The petitioner aggrieved by this clarification filed O.P. Nos. 918 and 1347 of 2003 before the Tribunal to quash the above clarification no. 156 of 2003. The Tribunal dismissed the petitions on the 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 sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities except the appellate authority. In that case, the High Court dismissed the writ petition on the ground that the assessee had an alternate remedy by way of appeal under the Act. The Supreme Court held that the High Court ought not have dismissed the writ petition in such a case. It observed that the order passed by the Commissioner would be binding on the assessing authorities, and although technically it would be open to the assessee to file an appeal, it would be a mere exercise in futility when a superior officer like the Commissioner passed an order determining the rate of tax. 18. In Union of India v. Ahmedabad Electricity Company Ltd., 2003 (158) E.L.T. 3 (S.C.) = (2003) 134 STC 24 an objection was raised that 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 Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout reference to the circular. This Court held that such a direction or disposal would not do any real or effective justice to the parties who have approached the Court, and the threat imposed by such circulars was real and substantial and had the consequence and effect of a constrained influence on the authorities functioning under the Act. This Court further held that having regard to the authority which issued the circular and the source of power, the threat could not be completely erased except by quashing and setting aside the circular. 24. Before dealing with the questions involved in these cases, we may refer to Section 28-A of the Act, which states: - "Power to issue clarification by Commissioner of Commercial Taxes: - (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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities are fixing the rate of tax in their executive capacity, they shall follow the circular of the Commissioner under Section 28-A. However, when the sales tax authorities are acting in a judicial or quasi judicial capacity, in our opinion, they cannot be bound by the order of the Commissioner, because to take a contrary view would mean interference by the executive in a judicial function. When the assessing authority under the Sales Tax Act (or the appellate authority) decides a case, he is functioning in a judicial capacity (even though he may be a sales tax authority). Hence, when he is acting in a judicial capacity, he should not feel bound by any clarification issued by the Commissioner, as such clarifications under Section 28-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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) this would really tantamount to amending the TNGST Act itself by a clarification issued under Section 28-A. A direction to levy tax at 16% when the charging section prescribes a flat rate of 2% is, in our opinion, not permissible. The impugned clarification is clearly contrary to the provisions of Section 3D as it stood prior to 1-4-2002. Therefore, the impugned clarification no. 156/2003, dated 26-6-2003 is liable to be quashed. 33. In the present case, the Tribunal has referred to a decision of its own Full Bench in O.P. Nos. 1334 to 1336 of 2000, dated 25-1-2001. In that case, it was held that the clarification would bind the party which sought for it, but at the same time it would be open to the assessee to canvass the correctness 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 opi ..... 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