Heinz India Private Limited vs Commissioner of Commercial Taxes and Another

V. Dhanapalan J.

By consent of both sides, these writ petitions are taken up for final disposal. Since the issues involved in both the writ petitions are identical, they are decided by a common order.

The writ petition in W. P. No. 17012 of 2008 is filed for the issuance of a writ of mandamus for a direction to the second respondent herein to complete the final assessment of the petitioner for the assessment year 2007-08 u/s 22 of the Tamil Nadu Value Added Tax Act, 2006 without being influenced by any circular or clarification of the first respondent herein such as Lr. No. VAT. Cell/14548/2008 A1 dated June 6, 2008 and the writ petition in W. P. No. 17013 of 2008 is filed to quash the records on the file of the first respondent in Lr. No. VAT. Cell/14548/2008 A1 dated June 6, 2008 confirming the earlier circular in Lr. No. VAT. Cell/28171/07 (VCC 760) dated June 26, 2007.

According to the petitioner, they are a private limited company incorporated under the provisions of the Companies Act with their registered office at 7th and 8th Floor, D-Shivasagar Estate, Dr. Annie Besant Road, Worli, Mumbai 400 018. They have a factory at Manzurgarh, Aligarh, Uttar Pradesh and co-manufacturers at Ponta Sahib and Himachal Pradesh, in which they are involved in the activity of manufacture of a milk food sold under the brand name "Complan". It is their further case that the product had been originally manufactured by Glaxo India Limited and the Milk and Milk Products (Control) Order, 1992 has been issued u/s 3 of the Essential Commodities Act. The said Control Order regulates manufacture and sale of milk products. Accordingly, a certificate dated September 16, 1993 was issued by the Government of India, Ministry of Agriculture (Department of Animal Husbandry and Dairying), New Delhi to Glaxo India Limited, certifying that the product to be manufactured at their factory in Uttar Pradesh, viz., Complan was a milk product. After the taking over of the operations for the manufacture of Complan by the petitioner, an amended certificate dated March 14,1995 was issued in favour of the petitioner and thereby, the Government of India recognised the fact that the petitioner is involved in the manufacture of a milk product by name "Complan".

It is further stated by the petitioner that the cost of the milk solids as raw material comes to 65 per cent of the manufacturing cost in a package of 500 gram of Complan and that milk protein in their product Complan is 100 per cent milk protein. In terms of weight, Complan has approximately 52 per cent of milk solids in a package of 500 gram of the product and in order to obtain 52 per cent as milk solids, 3.06 litres of milk is necessary for manufacture of 500 gm of Complan finished product. To manufacture Complan, the petitioner processes approximately 85,000 tonnes of milk every year.

The Tamil Nadu value added tax has been implemented within the State of Tamil Nadu by the enactment of the Tamil Nadu Value Added Tax Act, 2006 (hereinafter referred to as, "the VAT Act") with effect from January 1, 2007. The products which fall under serial No. 82 of Part B to the First Schedule to the said Act are milk food and milk products (including flavoured milk, skimmed milk powder, tinned, bottled or packed), baby milk food, paneer, milk power and UHT milk. The products which fall under serial No. 69 of Part C to the First Schedule are other goods not specified in any of the Schedules. The petitioner submitted an application to the first respondent on May 8, 2007 seeking an advance ruling on the rate of tax of Complan. But, it was rejected by an order dated June 26, 2007 by merely stating that Complan could not be classified as a milk food since it contains other ingredients. A further application was presented seeking review of the earlier order dated June 26, 2007, which had again been rejected on June 6, 2008 staring that no new facts had been produced. Aggrieved by the above order, the petitioner has come before this Court by way of the present writ petitions.

On the other hand, the respondents have filed a common counter stating that the petitioner who is dealing with a product by name "Complan" is an assessee on the file of the second respondent. They had applied to the first respondent for a clarification on the rate of tax applicable for "Complan" under the VAT Act, and thereupon, the first respondent clarified in his letter No. VAT Cell/28171/2007 (VCC 760) dated June 26, 2007 that "Complan" is not a milk product as such and as it is made of milk along with the other ingredients, it is liable to be taxed at 12.5 per cent of Part C of the First Schedule to the VAT Act. Again, on a further review petition received from the petitioner, the first respondent in his Ref. Lr. No. VAT/Cell/14548/2008, dated June 6, 2008 reiterated his earlier stand by stating that no new and important facts had been produced. According to the respondents, as the clarification so issued by the first respondent was against availing of lesser rate of four per cent tax, the petitioner has directly approached this Court by way of the present writ petitions.

The respondents have further stated that the claim of the petitioner is that their product by name "Complan" would fall under the term "milk food and milk products" in entry 82 of Part B to the First Schedule of the VAT Act taxable at four per cent and not under the residuary entry as contained in entry 69 of Part C to the First Schedule of the VAT Act taxable at 12.5 per cent. When the petitioner approached the first respondent for clarification, they were clarified that the product is eligible to tax only at 12.5 per cent as residuary item under entry 69 of Part C of the First Schedule to the VAT Act. Even after clarification, the petitioner has filed the writ petitions by claiming that those products would be eligible to tax at four per cent only under entry No. 82 of Part B to the first Schedule to the VAT Act as "milk food or milk products" on the ground that a Division Bench of this Court in the case of State of Tamil Nadu v. Wander Ltd. reported in [1990] 79 STC 421 has held that Horlicks is a milk food as well as milk product.

In the counter, the respondents have also stated that the petitioner had applied to the first respondent for clarification under Rule 26A of the erstwhile Tamil Nadu General Sales Tax Rules, 1959 and that rule having been replaced by the present VAT Act, Section 28A under the then Act which gave power to the first respondent to issue clarification is also no longer in existence. Under the VAT Act, there is no provision similar to the then Section 28A and therefore there is no statutory power for the first respondent to issue any clarification regarding rate of tax under the VAT Act. As the main provision, namely, Section 28A itself is not in existence, Rule 26A which was framed solely for the purpose of facilitating Section 28A has no independent existence at all and, therefore, Rule 26A of the TNGST Rules, 1959 read with Section 88 of the VAT Act is not maintainable. As the first respondent has no statutory authority conferred upon him by the VAT Act to issue any clarification regarding VAT Act, the clarification dated June 26, 2007 issued by him has no legal force and therefore the assessing officers are legally not bound to act on such clarification.

Heard Mr. N. Prasad, learned Counsel for the petitioner and Mr. A. C. Manibharathi, learned Government Advocate (Taxes).

Learned Counsel for the petitioner would contend that the impugned order dated June 6, 2008 indicates complete non-application of mind, despite the petitioner having placed on record relevant evidence to show that milk products predominate in Complan. He would also contend that the first respondent ought to have seen that Complan has been recognised to be a milk food even by the Government of India while issuing a certificate dated September 16,1993 under the provisions of the Milk and Milk Products (Control) Order, 1992. To support his case, learned Counsel for the petitioner has relied on a decision of this Court in State of Tamil Nadu v. Wander ltd. reported in [1990] 79 STC 421 (Horlick''s case), wherein it is held that the product "Horlicks" predominated in milk both in terms of weight and cost and the same was liable to be classified only as milk food. The said decision of this Court was upheld by the Supreme Court.

Per contra, learned Government Advocate (Taxes) for the respondents would contend that instead of filing objections and contesting the matter before the assessing authority, the petitioner has hastened to come before this Court by filing writ petitions under Article 226 of the Constitution of India, which cannot be maintainable. It is also contended by the learned Government Advocate that the decision of this Court in Horlick''s case [State of Tamil Nadu v. Wander ltd. reported in [1990] 79 STC 421 Mad.] cannot be made applicable to the case on hand, as the products in both the cases are different and that the product "Complan" contains other ingredients.

It is seen that the petitioner is a company involved in the manufacture of milk food sold under the brand name Complan. Originally, the product had been manufactured by Glaxo India Limited. As per the certificate dated September 16, 1993 issued by the Government of India, Ministry of Agriculture (Department of Animal Husbandry and Dairying), New Delhi to Glaxo India Limited, the product "Complan" was certified as a milk product. After the taking over of the operations for the manufacture of Complan by the petitioner, an amended certificate dated March 14, 1995 was issued in favour of the petitioner, recognising the fact that the petitioner is involved in the manufacture of a milk product by name "Complan". As per the decision rendered in Horlick''s case [State of Tamil Nadu v. Wander ltd. reported in [1990] 79 STC 421 Mad], the product "Horlicks" was classified as a milk product. Based on the said decision, the petitioner claims that their product "Complan" is a milk product and they also gain support to their claim from the amended certificate dated March 14, 1995 issued by the Government of India. No doubt, the claim of the petitioner based on the decision rendered by this Court and the material evidence to prove that the product "Complan" is a milk product is the matter for consideration before the competent authority.

The main question to be decided now is whether the notice in question calling for objection fixing the rate of VAT is payable at four per cent or 12.5 per cent in respect of the sale of the product "Complan". The notice of objection called for by the assessing authority on the scrutiny of returns for rectifying certain defects based on the petitioner''s returns from January 2008 to March 2008 is a matter for consideration before the competent assessing authority after filing of objections by the petitioner. Instead of filing objections, the petitioner has hastened to rush to this Court by way of the present writ petitions.

This court is of the view that the petitioner has got every right to place all the material evidence before the competent authority to prove their claim by filing objections. On a reading of the proceedings issued by the first respondent, this Court does not find any infirmity or illegality in it. Though the petitioner claims that they have sufficient evidence to prove their claim, their prayer in W. P. No. 17013 of 2008 cannot be answered at this stage, as the said writ petition is not maintainable in the absence of any objection filed by the petitioner. Accordingly, this Court holds that the writ petition in W. P. No. 17013 of 2008 is not maintainable at this stage. However, the petitioner is directed to approach the competent assessing authority and contest the matter by filing objections, agitating all the issues contended before this Court within a period of two (2) weeks from the date of receipt of a copy of this order. On receipt of such objections, the assessing authority is directed to consider the same for the assessment year 2007-08 u/s 22 of the VAT Act and pass final assessment orders in accordance with law within a period of four (4) weeks.

In fine, W.P. No. 17013 of 2008 is dismissed and W.P. No. 17012 of 2008 is disposed of on the above terms. No costs. Consequently, connected M.P. Nos. 1 and 2 of 2008 in W.P. Nos. 17013 of 2008 are closed.