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2015 (7) TMI 387

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..... d for years is not a good decision and/or not in the interest of the revenue, the revenue is not remediless. However, as observed hereinabove, the Assessing Officer being lower in rank cannot be permitted to ignore and/or cannot be permitted to take a contrary view than the view taken by the higher forum, more particularly, when in the subsequent years, there are no change circumstances and the decision of the higher forum (in the present case, learned Tribunal), has been acted upon and implemented for the years. The impugned order passed by the Assessing Officer cannot be sustained, as the same is beyond the scope and ambit of the show cause notice dated 30.8.2012. It is required to be noted that by show cause notice dated 30.8.2012, the petitioner was called upon to show cause why “Maggi Noodles” shall not be treated as “Farsan and Eatables” (except sold in sealed container under a brand) falling under Entry 22 and liable to be taxed at 4%. However, by impugned order, the adjudicating authority has passed the impugned order holding that product “Maggi Noodles” would fall within Entry 87 (Residuary Entry) and liable to be taxed at 12.5% plus additional duty. Under the circumsta .....

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..... ation No.15842 of 2012 are considered and the said Special Civil Application No.15842 of 2012 is considered as lead matter. 3.1 The petitioner Nestle India Limited (formerly known as M/s Food Specialties Limited) is registered under the VAT Act as well as under the Central Sales Tax Act. The petitioner is carrying manufacture and sale of various food products including Noodles under various internationally acclaimed brands, such as MAGGI, NESCAFE and NESTLE. 3.2 It is the case on behalf of the petitioner that under section 5(1) of the VAT Act, the goods which are specified in Schedule I are exempt from tax. The case of the petitioner for its product Noodles is covered by Entry 9(3) of Schedule I to the VAT Act. The goods specified in Entry 48(iii)(c) of Schedule II would be liable to tax at 4% and the goods not specified in any of the Schedules would be liable to tax at 12.5% under the Residuary Entry being Entry No.87 of Schedule II to the VAT Act. 3.3 During the course of the assessment proceedings for the AY 2008-2009, a notice dated 30.8.2012 was issued by the Deputy Commissioner (Assessment), Ahmedabad to the petitioner to show cause why the petitioner should no .....

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..... 3.6 That upto the year 31.3.2006, the adjudicating authority/Assessing Officers in respect of Noodles sold by the petitioner accepted that the Noodles would fall under the category Sev made by wheat flour or maida and was not liable to tax under the Sales Tax Act. It is required to be noted that the relevant Entry came to be changed after 1.4.1992 under the Sales Tax Act. What was under Entry 1(d) of Schedule I prior to 1.4.1992, the said Entry was renumbered as Entry 10(3) w.e.f. 1.4.1992. However, there was no change in the wording of the above Entry under Sales Tax Act prior to 1.4.1992 and after 1.4.1992. 3.7 It appears that for the State of Gujarat, VAT Act came into force from 1.4.2006. However, under the VAT Act, relevant exemption for Sev being Entry 9(3) of Schedule I to the VAT Act remains the same as that of original Entry 10(3) of Schedule I to the Sales Tax Act i.e. Sev made out of wheat flour or maida and it has not undergone any change whatsoever. 3.8 That on or about 19.6.2010, the Assistant Commissioner of Commercial Tax, Unit No.21, Ahmedabad issued a notice upon the petitioner proposing to impose tax on sales of Maggi Noodles at the rate of 12.5% b .....

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..... ssed by the respondent herein dated 12.10.2012 (Annexure A to the petition), by which it is held that on the product Maggi Noodles , the appellant is liable to pay VAT at the rate of 12.5% with 2.5% additional tax under Entry 87 of Schedule II to the VAT Act and the consequential notice for the amount assessed dated 12.10.2012 (Annexure AA), the petitioner has preferred the present Special Civil Application No.15842 of 2012 for the aforesaid reliefs. 4. Similar orders are passed with respect to different parties/assessment years, which are the subject matter of Special Civil Application Nos.5750 of 2014 and 6193 of 2014. 5.0 Shri SN Soparkar, learned Counsel appears with Shri Amar Bhatt, learned advocate appearing on behalf of the petitioner. 5.1 It is vehemently submitted by Shri Soparkar, learned Counsel that the impugned order passed by the respondent No.1 holding that product Maggi Noodles is liable to be taxed under Entry 87 of Schedule II to VAT Act at 12% with additional tax at 2.5% is absolutely illegal, most arbitrary and without jurisdiction and void ab initio and unreasonable 5.2 It is vehemently submitted by Shri Soparkar that their product Maggi Two Min .....

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..... the Noodles under Entry 87 of Schedule II to the VAT Act liable to be taxed at 12.5% plus 5% additional tax . It is submitted that therefore, the impugned decision of the respondent No.1 dated 12.10.2012 to treat and consider the product Noodles within Entry No.87 of Schedule I to VAT Act is not only absolutely illegal, without jurisdiction, but is contrary to the binding decision of the Sales Tax Tribunal dated 9.9.1986 in Appeal No.11 of 1984. It is submitted that the respondent No.1 as such being subordinate to the Sales Tax Tribunal is bound to follow the decision of the Tribunal. It is submitted that therefore, it was impermissible for the respondent to take a contrary view than that of the Tribunal in Appeal No.11 of 1984 not to treat the product Maggi Two Minutes Noodles as Sev and hold that the product Maggi Two Minutes Noodles would fall under Entry 87 of Schedule II to the VAT Act. It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioner that even, otherwise the impugned order passed by the respondent dated 12.10.2012 holding that the product Maggi Two Minutes Noodles would fall under Entry 87 and liable to be taxed at 12.5% .....

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..... nsidered by the respondent at all. 5.8 Shri Soparkar, learned Counsel appearing on behalf of the petitioner has vehemently submitted that while passing the impugned order, respondent No.1 has failed to appreciate that once the goods are covered by exemption, they cannot be taxed even if there is any other specific Entry in any other Schedule for taxable goods. In support of his above submissions, he has relied upon the decision of Hon'ble Supreme Court in case of Fenoplast Vs. State of A.P. And others reported in (1998) 8 SCC 185 as well as in the case of Kothari Products Ltd. Vs. Govt. of A.P. reported in (2000) 9 SCC 263. 5.9 It is submitted that without prejudice to the above, even the resort to the Residuary Entry has to be made only as a last resort. It is submitted that it is settled principles of law that in case of conflict between the specific Entry and the Residuary Entry, the specific Entry has to be preferred. In support of his above submission, Shri Soparkar, learned Counsel appearing on behalf of the petitioner has heavily relied upon the decision of the Hon'ble Supreme Court in case of Mayuri Yeast India Private Ltd. Vs. State of Uttar Pradesh and anoth .....

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..... ow and obey the decision of the Sales Tax Tribunal dated 9.9.1986 in Appeal No.11 of 1984, by which, in the case of the very petitioner and with respect to the very product, Maggi Two Minutes Noodles was held to be Sev under Sub Entry (d) of Entry 1 to Schedule I to the Sales Tax Act and was exempted from payment of tax. Shri Soparkar, learned Counsel appearing on behalf of the petitioner has also heavily relied upon the decision of the Hon'ble Supreme Court in the case of Union of India and others Vs. Kamlakshi Finance Corporation Ltd. reported in AIR 1992 SC 711 in support of his submissions that the respondent authority, as such, is/was bound to follow the binding decision of the Tribunal even while maintaining the judicial discipline. Making the above submissions and relying upon the above decision, it is requested to allow the present Special Civil Application and grant the relief, as prayed for. 6.0 Present petition is opposed by learned AGP Shri Jaimin Gandhi appearing on behalf of the respondent State. 6.1 It is vehemently submitted that against the impugned assessment order, alternative statutory remedy by way of appeal before the first appellate authority .....

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..... 5. 49 ITR 137(SC), New Jahangir Vakil Milks Ltd. 6. 257 ITR 242(DEL), CIT V. Sohanlal 7. 119 Taxmann 1 (MP), Lachhiram Puranmal 8. 161 ITR 234(BOM), Baijnath Brijmohan and Sons Pvt. Ltd. V. CIT 9. (1992) 60 Taxmann 248, Radhasoami Satsang Vs. CIT 6.4 It is vehemently submitted that as observed by the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra), there cannot be a wide application of the rule of consistency. It is submitted that in the aforesaid decision of the Hon'ble Supreme Court, it acknowledged that there is no res judicata as regards assessment years and assessments for one year may not bind the officer for the next year. It is further submitted that erroneous or mistaken views cannot fetter the authorities into repeating them by application of rule, such as estoppel, for the reason that being an equitable principle, it is to be yield to the mandate of law. It is submitted that blind adherence to the rule of consistency would lead to enormous results, for the reason that it would endanger the unequal application of laws and direct various authorities to adopt varied interpretations to suit individual assessee. 6.5 It is further s .....

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..... 6.9 It is further submitted by Shri Gandhi, learned AGP that even on merits also, the petitioner has no case and Noodles will not fall under Entry 9(3) of Schedule I. It is submitted that even on production of Maggi Noodles , the petitioner shall not be entitled to exemption from payment of tax. It is submitted that as per the speech of the Hon'ble Finance Minister at the relevant time, providing the exemption to Sev , the purpose of exemption to Sev was to provide employment to women in Gujarat. It is submitted that here the manufacturing of Noodles neither takes place in Gujarat nor it provides employment to women. It is submitted that the aforesaid relevant aspect either was not brought to the notice of the learned Tribunal at the time of deciding Appeal No.11 of 1984 nor the same has been considered by the learned Tribunal while deciding Appeal No.11 of 1984. Relying upon the decision of the Andhra Pradesh High Court in the case of CIT V. Ampro Food Products reported in 215 ITR 904 as well as the decision of the Bombay High Court in the case of B.R. Sounds N Music V. O.P. Bharadwaj reported in 173 ITR 904, it is vehemently submitted that speech of the Hon'ble .....

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..... d to be interfered with by this Court in exercise of powers under Article 226 of the Constitution of India. Making above submissions and relying upon the above decisions, it is requested to dismiss the present petition. 7.0 Heard learned advocates appearing on behalf of the respective parties at length. 8.0 Now, so far as the first contention on behalf of the respondent State and the submissions of Shri Gandhi, learned AGP not to entertain the present petition against the impugned order of assessment passed by the learned Assessing Officer and to relegate the petitioner to prefer the statutory appeal before the first appellate authority and/or the learned Tribunal is concerned, at the outset, it is required to be noted that while admitting the present Special Civil Application, which came to be admitted after hearing the learned AGP, the Division Bench, as such, overruled the said objection and has admitted the present Special Civil Application by observing that several issues purely on legal consideration arise and therefore, the petitioner may not prefer appellate remedy. Under the circumstances, when after considering the objection with respect to maintainability of the pr .....

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..... ment may by notification in the Official Gazette, specify for the purpose of this Entry. Note:-(1) refer-Noti.No.(GHN- 15)VAT-2006/CH-I(22)(1) TH dtd 29.3.2006 (2) Sales or purchases of mamra and pauva (II/87) are exempt from whole of tax by Entry 19 of Noti.(No.GHN-44-u/s5(2)(3) w.e.f. 29.4.2006 Except when sold in sealed containers under a brand. [Explanation:- The word brand means any goods sole under a trade mark registered under the trade marks act, 1999(47) of 1999]. 87 All goods other than those specified in [schedule I or Schedule III] in the preceding entries of this Schedule. Note: As per proviso of Sec 7(1A)(i) two and half paise in the rupee levied an additional tax on the turn over of sales of goods w.e.f. 1-4-08. 8.4 From the above entries, it appears that under the Gujarat Sales Tax Act, prior to 1.4.1992 and thereafter, upto the Gujarat Value Added Tax Act, 2003 came into force from 1.4.2006 Sev made out of wheat flour or maida was exempt from payment of sales tax as if fall within exemption Entry 1(d) of Schedule I to the Gujarat Sales Tax Act ( .....

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..... or maida was falling under exemption Entry 10(3) of Schedule I to the Gujarat Sales Tax Act w.e.f. 1.4.1992, however, without any change in the wording. 8.7 Even after the Value Added Tax Act, 2003 came into force, Sev made out of wheat flour or maida is falling under Entry 9(3) of Schedule I to the Value Added Tax Act,2003 and the Sev made out of wheat flour or maida is exempted from payment of sales tax/VAT. It is required to be noted that upto the year 31.3.2006, in all the assessments in respect of the Noodles sold by the petitioner, the department had accepted that the Maggi Noodles would fall under category Sev made out of wheat flour or maida and was not liable to tax under the Gujarat Sales Tax Act. However, subsequently, during the course of assessment proceedings for the AY 2008- 09, the petitioner was served with the notice dated 30.8.2012 issued by the Deputy Commissioner (Assessment), Ahmedabad, by which the petitioner was called upon to show cause as to why the petitioner should not be subjected to tax on the sale of Maggi Noodles equating it to Farsan sold as branded product. At this stage, it is required to be noted that as such, in the year 2010, .....

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..... after 1.4.1992 and even under Entry 9(3) of the Gujarat VAT Act. 8.9 It is also the case on behalf of the petitioner that even otherwise, the impugned order cannot be sustained, inasmuch as show cause notice dated 30.8.2012 was issued by the Deputy Commissioner (Assessment) calling upon the petitioner to show cause why the product Maggi Noodles may not be treated as Farsan and Eatables (except sold in sealed container under a brand) falling under Entry 22 and why the tax at the rate of 4% is not leviable? However, the impugned order has been passed levying the tax at 12.5% putting the Maggi Noodles in the Residuary Entry i.e. Entry 87. It is submitted that therefore, the impugned order has gone beyond the scope and ambit of the show cause notice. 8.10 On the other hand, it is the case on behalf of the revenue that as such, on the goods manufactured and sold Maggi Noodles which is under brand and the object and purpose for which the Sev was exempted from payment of tax under the Sales Tax Act even subsequently Gujarat VAT Act, the petitioner is not entitled to the exemption from payment of tax on manufacture and sale of Maggi Noodles . It is also the case on behalf .....

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..... to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction. 8.12.2 In the recent decision in the case of Excel Industries Limited (supra), when it was found from the record that in several assessment years, the revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further, but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but with .....

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..... ncerned here with the correctness or otherwise of their conclusion or of any factual malafides but with the fact that the officers, in reaching in their conclusion,by-passed two appellate orders in regard to the same issue which were placed before them,one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view,rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate heirarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. Th .....

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..... priate proceedings being taken under Section.35-E (1) or (2) to keep the interests of the department alive. If the officer's view is the correct one, it will no doubt be finally upheld and the Revenue will get the duty, though after some delay which such procedure would entail. 8. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assesses-public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are bindi .....

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..... ty Commissioner is wholly impermissible and unpalatable and deserves to be quashed and struck down with a specific note of strong disapproval. The respondents simply could not have exercised the powers contained under the statute in such arbitrary exercise and in complete disregard to the pronouncement of this Court particularly reminding the Revenue authorities of the binding effect of decision of Tribunal on the identical question of law. This not only led to multiplicity of proceedings but also speaks of disregard to the direction of this Court rendered in the earlier petition of this very petitioner. Resultantly, petition stands allowed. Both the show cause notices dated 21.8.2012 and 22.1.2013 are quashed and struck down. It appears that still the message has not reached the concerned authorities in following the binding decisions of the higher appellate authorities and/or courts solely on the ground that the same is in the case of another assessee. Such a conduct is also required to be viewed from another angle. This would not only amount to disregarding the direction of the court rendered in earlier petitions but would also lead to multiplicity of proceedings. When the c .....

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..... and in that case, the Tribunal being Coordinate Bench may either follow the earlier decision of the Tribunal (Coordinate Bench) or may refer the matter to the Special Bench/Full Bench and if the Tribunal concurs with the earlier decision, in that case, the revenue may still approach the High Court and the High Court may take different view than the earlier view taken by the Tribunal, as in that case, the decision of the Tribunal is not binding to the High Court. Thus, even in case, where the officer and/or authority is of the opinion that the earlier decision though not challenged and/or even implemented for years is not a good decision and/or not in the interest of the revenue, the revenue is not remediless. However, as observed hereinabove, the Assessing Officer being lower in rank cannot be permitted to ignore and/or cannot be permitted to take a contrary view than the view taken by the higher forum, more particularly, when in the subsequent years, there are no change circumstances and the decision of the higher forum (in the present case, learned Tribunal), has been acted upon and implemented for the years. 8.13.1 Now, so far as the reliance placed upon the decision of the H .....

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..... l Industries Limited (supra), Ponds India Limited (supra) and Kamlakshi Finance Corporation Ltd. (supra), none of the decision shall be applicable to the facts of the case on hand. 8.14 Even, otherwise the impugned order passed by the Assessing Officer cannot be sustained, as the same is beyond the scope and ambit of the show cause notice dated 30.8.2012. It is required to be noted that by show cause notice dated 30.8.2012, the petitioner was called upon to show cause why Maggi Noodles shall not be treated as Farsan and Eatables (except sold in sealed container under a brand) falling under Entry 22 and liable to be taxed at 4%. However, by impugned order, the adjudicating authority has passed the impugned order holding that product Maggi Noodles would fall within Entry 87 (Residuary Entry) and liable to be taxed at 12.5% plus additional duty. Under the circumstances also, the impugned order cannot be sustained. 8.15 Now, so far as the contention on behalf of the State that at the time when the Sales Tax Tribunal passed order dated 9.9.1986 in Appeal No.11 of 1984, the learned Tribunal did not consider the object and purpose of granting the exemption for the product Sev .....

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