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TMI Blog2010 (4) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... ned circular dated March 25, 2008. Since the main issue to be decided in the writ appeal as well as in the writ petition pertains to the circular issued by the Commissioner of Commercial Taxes dated March 25, 2008, the facts as noted in W.P. No. 10011 of 2008 is taken to narrate the background facts. W.P. No. 10011 of 2008: The facts: The petitioner challenges the circular dated March 25, 2008 issued by the Commissioner of Commercial Tax, Chennai, informing them that tarpaulin made of synthetic fibre is liable to tax at 12.5 per cent under the residuary entry No. 69 of Part C of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006 and cancelling the earlier circular dated May 31, 2007, with retrospective effect. In the affidavit filed in support of the writ petition, the petitioner contended thus: (a) The petitioner is a registered dealer under the Tamil Nadu Value Added Tax Act, 2006 (hereinafter referred to as , "the Act") on the file of the Commercial Tax Officer, Manali Assessment Circle, Chennai. The petitioner is engaged in the manufacture and sale of tipped nylon tyre cord fabric, coated fabric and synthetic tarpaulin. The petitioner has classified the synthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing authority has taxed the sales of synthetic tarpaulin at 12.5 per cent in accordance with the clarification issued by the second respondent on March 25, 2008. Since the assessment order was made only on the basis of the circular dated March 25, 2008, the petitioner has challenged the said circular. In the connected writ petitions, the challenge was to the assessment order passed for the months of June 2007 to February, 2008. The very same circular dated March 25, 2008 was challenged by another dealer in W.P. No. 11130 of 2008. When the said writ petition was taken up by the learned single judge, the learned Government Pleader submitted that the clarification issued by the Commissioner of Commercial Tax dated May 31, 2007 was relating to synthetic fabric. However, the impugned clarification dated March 25, 2008 relates to synthetic fibre and therefore, it was altogether a different commodity. The learned single judge was of the view that the clarification relating to synthetic fabric and synthetic fibre cannot be equated and as such, the second clarification dated March 2008 stands on a different footing. Accordingly, the writ petition was dismissed. The said order is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular dated March, 25, 2008. Analysis: The petitioner is a manufacturer of tipped nylon tyre cord fabric, coated fabric and synthetic tarpaulin. The petitioner has classified the synthetic tarpaulin sold by them as falling under Part C of the First Schedule to the TNVAT Act and accordingly, they have been collecting tax at 12.5 per cent. The said position continued up to May 2007. According to the petitioner, after seeing the circular dated May 31, 2007 they were convinced that it was not necessary to collect tax at 12.5 per cent as the product was an exempted commodity. Accordingly, tax was not collected from the customers with effect from January 1, 2007. Since the claim of the petitioner was based on the circular dated May 31, 2007, it is necessary to consider the scope and ambit of the said circular. The circular reads thus: "Sir, Sub : TNVAT Act, 2006-Rate of tax clarification under TNVAT Act, 2006 for tarpaulin-requested-regarding. Ref : Lr. Dated April 4, 2007 from Tvl. Tamil Nadu Cotton Canvas Tarpaulin Merchants Association, Chennai 3. Tvl. Tamil Nadu Cotton Canvas Tarpaulin Merchants Association, Chennai-3, have requested rate of tax clarification under the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aulin was not reduced by Government by G.O. Ms. No. 79, CT&R (B2) Department dated March 23, 2007. It was only in such circumstances, the Commissioner clarified the position that tarpaulin made of synthetic fibre was liable to tax at 12.5 per cent under the residuary entry No. 69 in Part C of the First Schedule to TNVAT Act, 2006. It is true that as per the very same circular, the earlier circular dated May 31, 2007 was cancelled by giving retrospective effect. On a comparison of the circular dated May 31, 2007 as well as the impugned circular dated March 25, 2008, one thing would be clear. The circular dated May 31, 2007 was not on the basis of a detailed consideration of the product. There was no reasoning given in the circular dated May 31, 2007. The dealers in respect of whom the earlier circular was issued were not the manufacturers of tarpaulin made of synthetic fibre. Therefore, no specific query was made to the Commissioner as to whether tarpaulin made of synthetic fibre was liable to tax and if so, what would be the rate. It was only when the petitioner made a specific request to clarify the position, the issue was considered by the Commissioner in the light of the report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tamil Nadu General Sales Tax Act permits the Commissioner to issue a clarification in respect of any point concerning the rate of tax under the Act. Therefore, the circular issued under section 28 of the Tamil Nadu General Sales Tax Act has got statutory force. However, there is no corresponding provision in the Tamil Nadu Value Added Tax Act, 2006, empowering Commissioner to issue such circulars. The Tamil Nadu Value Added Tax Act has come into force with effect from January 1, 2007. The first circular was issued by the Commissioner on May 31, 2007. Therefore, as on the date on which the circular was issued, the Commissioner was not having the statutory powers to issue such circulars. The net result is that the circular have no statutory force. When the petitioner approached the Commissioner, Commercial Taxes, with an application to clarify the position with respect to the payment of tax for tarpaulin products and the rate of tax, the matter was considered by the Commissioner on the merits. The nature of product manufactured by the petitioner was examined for the purpose of determining the actual rate of sales tax. The Commissioner found that it was not an exempted category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute for issuing such circulars has also to be considered. The Supreme Court in Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries [2008] 13 SCALE 353, held that a circular which is contrary to the statutory provisions has really no existence in law. Since the Commissioner has not issued any clarification earlier in respect of the product manufactured by the petitioner the Commissioner was justified in clarifying the position later at the instance of the petitioner. In any case, the impugned clarification was no merits, correctness of which is a matter to be decided in appropriate proceedings. Since the legality and correctness of the finding recorded by the Commissioner is not under challenge in this writ petition, such contentions could be raised before the assessing authority and as such, we are not expressing any opinion on such matters. The impugned circular was not issued on the basis of a statutory provision. Similar is the case of the earlier circular. Therefore, neither the earlier circular nor the subsequent circular has any validity in the eye of law. Therefore, we are of the opinion that no interference is called for in the impugned cir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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