Tvl. Venkateswara Industries vs The Special Commissioner

Mr T.S. Sivagnanam, J.—Heard Mr.N.Murali, learned counsel appearing for the petitioner, Mr.V.Haribabu, learned Additional Government Pleader for the respondents and perused the materials placed on record, including the written instructions given by the Commercial Tax Officer, Vadapalani Assessment Circle I, Chennai, to the learned Special Government Pleader, dated 28.03.2008.

The petitioner, in all these writ petitions, is a dealer engaged in the manufacturing of Bitumen Emulsion and registered under the provisions of erstwhile Tamil Nadu General Sales Tax Act, 1959, (hereinafter will be referred to as "the TNGST Act") and also under the Central Sales Tax Act, 1956 on the file of the respondents.

In W.P.No.5510 of 2008, the petitioner challenged Clarification No.195/2005, dated 15.11.2005 in and by which the first respondent issued a clarification stating that Bitumen Emulsion is taxable at 16% under Entry No.7(v) of Part-E of First Schedule to the TNGST Act, 1959 and if imported, it is taxable at 20% under Entry No.9 of Eleventh Schedule to the TNGST Act, 1959.

In W.P.Nos.5511 to 5513 of 2008, the petitioner has challenged the assessment orders for the assessment years 2003-04, 2004-05 and 2005-06, which had been finalized solely based on the impugned clarifications.

The first issue to be taken note of is that, the clarification issued by the Commissioner, in exercise of his powers under Section 28-A of the TNGST Act, is not at the instance of the petitioner, therefore, such clarification cannot be automatically made applicable to the petitioner, that too, proposing to revise the already finalized assessment. Therefore, the action of the Assessing Officer, namely, the second respondent, is unsustainable in law.

Coming to the clarification, the Commissioner has stated that the rate of duty to be collected for Bitumen Emulsion is 16%. But, the clarification does not spell out as to under what circumstances the clarification was issued and what was the necessity to issue such a clarification and the effect of its ramification. These questions were never been considered by the Assessing Officer nor it is apparent on the face of the clarification. When revision notices were issued based on the clarification, the petitioner explained the manufacturing activity and contended that the product is purely water base containing 50 to 57% of water and the Commissioner had earlier issued a clarification, dated 13.02.2002, which stated that ''Bitumen Emulsion'', though a petroleum product, is not specified in the Eleventh Schedule. Therefore, it is clarified that Bitumen Emulsion sold by the petitioner is taxable at 12% under residuary Entry No.40 of Part-D of First Schedule to the TNGST Act. It was further pointed out that there is contravention between the clarification issued on 13.02.2002 and 15.11.2005 for the same commodity. Further, it was pointed out that their assessment year was 2003-2004 and hence the clarification dated 13.11.2005 i.e., issued during the year 2001-2002 will bind and in this regard, it was brought to the notice of the second respondent that in respect of another company, manufacturing the same products, namely, Hindustan Golas Limited, Irrungattukottai, Kancheepuram District, a joint-venture of Hindustan Petroleum Corporation Limited, is being taxed at 12% and a copy of the invoice was also enclosed with objection. Further, it was stated that Bitumen Emulsion is also not specified elsewhere in any of the schedules and hence, it is taxable at 12% under Entry-40 of Part-D of I Schedule.

A decision of this Court in the case of M/s. Pizzeria Fast Food Restaurant (Madras) Pvt. Ltd., Chennai v. The Commissioner of Commercial Taxes, Chennai, in Writ Appeal No.3995 of 2004, dated 15.02.2005 was referred to substantiate the contention of the petitioner that there is no power for the Commissioner to override the provisions of the rules and such clarifications are not binding on the Authorities, when they are functioning in quash-judicial capacity. Therefore, it was emphatically stated that the impugned clarification would not apply to the cases of the petitioner for the relevant assessment years and therefore, the petitioner request for dropping the proceedings.

The Assessing Officer merely recorded the objections given by the petitioner in a single line stating that the dealer has filed their contentions and the contention was carefully examined and found not accepted. Therefore, the Assessing Officer was purely guided by the clarification issued and the manner in which the Assessing Officer has proceeded to confirm the proposal is untenable in law.

In the written instructions given by the Assessing Officer, it has been admitted that the Assessing Officer has to ultimately take an independent decision and it will always open to the dealer to canvass before the Assessing Officer and the Assessing Officer has to consider the materials placed before him and all matters can be canvassed before the Assessing Officer and he will arrive at an independent decision.

Further more, in the written instructions, the justification for issuing such a clarification has not been brought out. Neither the person at whose instance the clarification was issued nor what are the materials, which was the basis for issuing such a clarification, has been disclosed. Hence, it has to be held that the impugned clarification has been mechanically applied to the cases of the petitioner, de hors the factual position.

In the light of the above finding, there is no necessity for quashing the impugned clarification, in so far as the petitioner is concerned, and it is suffice to observe that the clarification could be the sole basis for reopening or revising the assessment of the petitioner. Accordingly, Writ Petition No.5510 of 2008 is disposed of.

In the light of the above discussions, the impugned orders of assessment in TNGST 1462528/2003-04; TNGST 1462528/2004-05, dated 31.12.2007; and TNGST 1462528/2005-06, which was challenged in W.P.Nos.5511 to 5513 of 2008, are held to be bad in law. Accordingly, the same are quashed and W.P. Nos.5511 to 5513 of 2008 are allowed. No costs. Consequently, the connected MPs are also closed.