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2009 (7) TMI 1293

iff Act, 1985, with regard to paper based decorative laminated sheets can be relied on by the first respondent to collect tax under TNGST Act, 1959, which is a separate enactment passed by the State Legislature? - Held that: - the is covered by the recent judgment of this Court in CCE v. Mysore Electricals Industries Ltd, [2006 (11) TMI 202 - SUPREME COURT OF INDIA], where this Court held that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively. Thus, when the circular is against the assessee, they have right to claim enforcement of the same prospectively. - In tax matters, the clarifications issued can be applied only prospectively, failing which it will cause hardship to the assessees. - In Manish Maheshwari v. Assistant Commissioner of Income-tax and Another, [2007 (2) TMI 148 - SUPREME COURT OF INDIA], the Supreme Court held that while two interpretations are possible, the Court would ordinarily interpret the provisions in favour of the tax-payers and against the revenue - In the cases on hand, admittedly there was ambiguity with regard to the rate of tax payable by the assessees for the paper based deco .....

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er reviewing the same, issued clarification No.55/2006 on 23.3.2006 and stated that the paper based decorative laminated sheets are taxable at 10% as the goods are falling under Entry No.22(iv), Part-C of First schedule of the Act. The said clarification was issued taking note of the order of the Tamil Nadu Taxation Special Tribunal made in O.P. No.120 of 2006 dated 12.4.1996. The said decision was given by the said Special Tribunal after obtaining a report from the Joint Director of Industries and Commerce, Guindy Industrial Estate, Chennai-32. As per the above order of the Taxation Special Tribunal, assessments for the petitioners were made by the Assessing Officers all these years and collected 10% tax.(d) The petitioners, all of a sudden received revision notice from the respective Assessing Officer stating that the Assessing Officers proposed to re-open completed assessments and proposed to re-assess the Sales turnover of paper based decorative laminated sheets at 16%. In some cases, revised orders were passed. The said show cause notices/revised orders were issued on the basis of the clarification issued by the first respondent dated 30.5.2008. The said clarification is chall .....

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SCC 438 and also Commissioner of Central Excise, Chandigarh v. Punjab Laminates (P) Ltd., 2006 (7) SCC 431, held that paper based decorative laminated sheets are not paper products but falling under entry 3920.31 of the Central Excise Tariff Act, 1985, taking note of the manufacturing process of paper based decorative laminated sheets, they would fall under the heading 39. 20. The Apex Court having conclusively held that these goods can never be treated as paper products viz., "Other plates, sheets, film, foil and strip of plastics, non-cellular, whether lacquered or metallised or laminated supported or similarly combined with other materials or not", tax could be levied on such products at 16% by treating them as falling under Entry 8(ii) of Part -E- in the First Schedule. It is also stated in the counter affidavit that this was correctly clarified in the clarification dated 17.8.2005 and subsequently reviewed based on the order passed in O.P. No.120 of 1996 dated 12.4.1996 by the Tamil Nadu Taxation Special Tribunal and the impugned clarification is issued based on the judgments of the Supreme Court above referred and in some cases the already concluded assessments wer .....

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retrospectively since the petitioners have sold their paper based laminated sheets prior to the said clarification and assessments are also completed and the petitioners have also paid 10% of the tax amount and the impugned show cause notices/revised orders issued for re-opening the already completed assessments in terms of the clarification issued in the year 2008, is improper, as it causes great prejudice to the petitioner assessees. The learned counsels also submitted that admittedly there was doubt/ambiguity with regard to the collection of tax to the department with regard to the paper based laminated sheets and the respondents have collected only 10% of tax and the benefit of doubt/ambiguity has to be extended to the assessees and on such ground also the impugned show cause notices/assessment orders passed after reassessment are liable to be set aside. The learned counsels cited the judgment of the Supreme Court reported in Binani Industries Limited v. Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore and Others, 2007 (6) VST 783 (SC) Mauri Yeast India Pvt. Ltd. v. State of UP. and Another, 2008 (10) RC 607 (SC) M/s. MSCO Pvt. Ltd. v. Union of India and Others .....

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lying upon the judgments of the Supreme Court. (6.) I have considered the rival submissions made by the learned counsels for the petitioners as well as the learned Special Government Pleader for the respondents. The relevant entry under the TNGST Act falls under Part -C-, Sl. No.22(iv), which states that all kinds of papers and paper board not otherwise specified, including carbon paper, stencil paper, ammonia paper, ferro paper, cellphone paper, litmus-paper, but excluding cinematographic and photographic paper are taxable at 10%. The entry as existed in Part of First Schedule during the year 2002-2003, 2003-2004, 2004-2005, 2005-2006 under 22(iv) viz., paper and board laminated, quoted or interlined with other materials are liable for tax at 10%. The issue as to whether laminated papers are liable for tax at 10% or 16%, came up for consideration before the Tamil Nadu Taxation Special Tribunal in O.P.No.120 of 1996 and the Tribunal after obtaining the opinion of the Joint Director of Industries and Commerce (Chemical), Chennai-32, (namely expert opinion) held that the paper based resin reinforced decorative sheets (laminated paper as described by the Joint Director of Industries a .....

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r entry No.22(iv), Part C, First Schedule and they have requested a personal hearing. Accordingly, they have been provided with an opportunity to explain their case.Thiru V.V. Sampathkumar, Chartered Accountant, appeared at the time of personal hearing and filed copies of earlier clarifications issued from this office dated 12.11.1998 and 30.10.1998 and stated that in the above clarifications, their product was clarified as taxable at 8% (old rate) and the same entry is now available under entry No.22(iv), Part-C, First Schedule to the Act, taxable at 10%.He also filed a copy of Tamil Nadu Taxation Special Tribunal's decision in O.P. No.120/96 dated 12.4.1996 in the case of Tvl. Balaji Timber Corporation, Madras v. State of Tamil Nadu, in which the issue in question has been elaborately discussed as under:"The samples, (paper based decorative laminated sheet) one, produced by the assessee and the other purchased by the Revenue were sent to the Joint Director of Industries and Commerce (Chemical), Chennai-32, to submit a report as to whether the said samples would fall under which of the two entries extracted above, i.e. Entry 13(i), Part-E, First Schedule (at 16%) and entr .....

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ts can be relied on by the first respondent to collect tax under TNGST Act, 1959, which is a separate enactment passed by the State Legislature, is the issue to be decided. (a) In Associated Agencies v. State of Tamil Nadu, 1993 (89) STC 447, Division Bench of this Court considered similar issue with regard to the expression -pesticides- and -insecticides-, which were defined under Section 3(e) of the Insecticides Act, 1968 (Central Act 46 of 1968). The Division Bench held that,-the reliance placed by the learned counsel for the appellant on the Insecticides Act, 1969, to show that fungicides and weedicides are included in the expression "pesticides" cannot improve the situation. The Legislature is presumed to be aware of the need of the people and while classifying the entries in a particular Schedule, if it chose not to include certain commodities in the First Schedule, its intention is obvious that it did not wish to extend the benefit of single point taxation in respect of those commodities. Since "fungicides" was not included in Entry 66, as it existed at the relevant time, and it was specifically added in the original entry by the Amending Act, it is obvio .....

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n the CEGAT ruling under the Central Excise Act is not to the effect that "paper based decorative laminated sheets" are "paper board or coated board" as contended by the petitioners. All that is held in that case is that the goods in question are not classifiable as "plastic sheets" under Item 15-A(2) of the Central Excise Tariff but are classifiable under the residuary entry 68 of the Central Excise Tariff. Prior to amendment, Entry C-II-61 referred to "plastic laminates" and not "plastic sheets". Therefore, the decision rendered under the Central Excise Act has no relevance in interpreting the words "plastic laminates" in Entry C-II-6I." (Emphasis Supplied)(c) A Division Bench of this Court in the decision reported in State of Tamil Nadu v. Hajee P. Syed Mohammed (Decd) and Another, 1993 (91) STC 195 (Mad) considered similar issue and held that the description of paper as contained in Entry 117 of the First schedule to the TNGST Act, 1959, is not only all comprehensive, but includes paper of all sorts and all kinds of paper even other than those illustrated or enumerated in the entry. If reference is made to specifi .....

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hs 28 and 29 it is held as follows: "28. THE doctrine of fairness also is now considered to be a relevant factor for construing a statute. In a case of this nature where the effect of a beneficent statute was sought to be extended keeping in view the fact that the benefit was already availed of by the agriculturalists of tobacco in Guntur, it would be highly unfair if the benefit granted to them is taken away, although the same was meant to be extended to them also. For such purposes the statute need not be given retrospective effect by express words but the intent and object of the legislature in relation thereto can be culled out from the background facts.29. THE question has furthermore to be considered having regard to the language and object discernible from the statute read as a whole. THE Respondents were not ineligible from obtaining the benefit. Once they arc held to be eligible for obtaining the benefit, the amended notification being an exemption notification should receive the beneficent construction."(b) In Commissioner of Central Excise, Arne v. Pudumjee Pulp & Paper Mills Ltd., 2006 (198) ELT 330 (SC) also the Honourable Supreme Court took the same view .....

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that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively. Thus, when the circular is against the assessee, they have right to claim enforcement of the same prospectively."From the above cited decisions it is evident that in tax matters, the clarifications issued can be applied only prospectively, failing which it will cause hardship to the assessees. It is an admitted fact that there was ambiguity/doubt with regard to the collection of tax on paper based laminated sheets to the respondents, i.e., whether tax is leviable at 10% or 16%. Till 30.5.2008, the tax leviable was only 10% even according to the respondents and the petitioners have also paid the said rate of tax for their sales turnovers. Since the respondents were not firm in their view with regard to collection of tax, viz., percentage of tax, the benefit of doubt should be extended to the assessees, particularly when it is pleaded by the petitioners before this Court that they have not collected more than 10% of tax while selling the paper based laminated sheets. It is also well settled that if there is ambiguity with regard to the rate of tax to be collect .....

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ovisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the court ordinarily would interpret the provisions in favour of a taxpayer and against the Revenue."(c) Recently in Commissioner of Trade Tax, UP. v. S.S. Ayodhya Distillery, 2009 (233) ELT 146 (SC) again the same issue was considered in paragraph 10, wherein it is held that if an entry contained in a notification imposing tax is ambiguous, the assessee cannot suffer therefore'. In paragraph 14 it is held thus,". 14. Furthermore, if there is a doubt or dispute as to whether paddy husk or the rice husk denotes the same commodity or not, the benefit thereof shall be given to the assessee. "In the cases on hand, admittedly there was ambiguity with regard to the rate of tax payable by the assessees for the paper based decorative laminated sheets and the benefit of the said ambiguity should be extended to the petitioner-assessees and not to the department/revenue. (11.) THE contention of the learned counsel for the respondents that the Writ Petitions filed challenging the re-assessment notice to re-open the assessment is not maintainable as the Writ Petitio .....

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