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Sundek India Limited Versus Commissioner of Commercial Taxes

2009 (7) TMI 1293 - MADRAS HIGH COURT

Enhancement of Tax Rate - paper based laminated sheets - rate enhanced to 16% from 10% - whether interpretation given by the Supreme Court with respect to entry made under the Central Excise Tariff 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 Electr .....

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t 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 decorative laminated sheets and the benefit of the said ambiguity should be extended to the petitioner-assesse .....

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KUMAR J. N. Murali, K. Soundara Rajan, R. Hemalatha, S. Ravi Kumar, Haja Naziruddin, Advocates. JUDGEMENT (1.) IN W.P. Nos.20474 to 20476 of 2008, the petitioners have prayed to quash the clarification issued by the Commissioner of Commercial Taxes dated 30.5.2008, enhancing the rate of tax to 16% from 10% for the paper based laminated sheets. (2.) IN all other Writ Petitions, the prayer is to quash the show cause notices/reassessment orders, issued for re-assessing the tax, at the rate of 16% b .....

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ax Rules, 1959.(b) Petitioners are dealers in paper based decorative laminated sheets, which are received from other States and they have paid the tax at the point of first sale in the State. The product is made up of paper and is being treated as paper based products. The first respondent issued clarification under Section 28-A of the TNGST Act, 1959, with regard to the rate of tax on paper based decorative laminated sheet. In clarification No.100/2005, dated 17.8.2005, the first respondent cla .....

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irst 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 .....

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in W.P. No.20474 to 20476 of 2008.(e) In all other Writ Petitions, the petitioners have challenged the show cause notices/revised orders on the ground that there is no purpose in giving reply to the show cause notices on re-opening the assessment or filing Appeal, since the Assessing Officers relied upon the clarification issued by the first respondent, which is binding on the Assessing Officers. The jurisdiction of the first respondent in issuing the clarification is also challenged on the grou .....

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x now proposed, from their customers.(f) It is also stated in the affidavit that the impugned clarification and the consequential re-opening of the assessments were made based on the judgment of the Supreme Court in interpreting the product under the Central Excise Tariff Act, 1985, which is an independent enactment and interpretation given under the said Act cannot be applied to the entries made in the TNGST Act, without making any amendment to the relevant entries.(g) It is further stated in t .....

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e laminated sheets were assessed by levying tax at 10% under Entry 22(iv) of Part-C of the First schedule and it was brought to the notice of the department that the Supreme Court by following its own earlier decision in the case of Collector of Central Excise, Hyderabad v. Bakelite Hylam Limited, 1997 (10) SCC 350 Decent Laminates (P) Ltd v. Collector of Central Excise and Customs, 2006 (7) SCC 438 and also Commissioner of Central Excise, Chandigarh v. Punjab Laminates (P) Ltd., 2006 (7) SCC 43 .....

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pported 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 judgmen .....

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r or board. The law having been declared by the Supreme Court, though under the Central Excise Taxation Tariff Act, 1985, the interpretation given by the Supreme Court equally applies to the paper based laminated sheets, which is being sold by the petitioners and therefore the clarification issued by the first respondent is valid and the second respondent is entitled to reassess the assessments already completed and entitled to demand the difference in tax i.e., from 10 to 16%. No separate count .....

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.3.2006. THE first respondent is not empowered to take a different view, particularly when the assessments were completed and 10% of tax having been paid by the petitioners. THE learned counsels further submitted that the interpretation given by the Honourable Supreme Court in the judgments relied on by the first respondent is applicable to the tariff payable under the Central Excise Tariff Act, 1985, and the same cannot be made applicable automatically to the TNGST Act, 19.59 and in support of .....

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spectively 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 dou .....

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cial 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, AIR 1985 SC 76 and Union of India and Others v. R.C. Jain and Others, AIR 1981 SC 951, in support of their above said contentions. The learned Special Government Pleader, appearing for the respondents submitted that the Supreme Court having declared the law on the subject giving interpretation with rega .....

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nd now the Supreme Court having declared the law, the impugned clarification has been issued, which is in accordance with the said Judgments of the Supreme Court. It is also contended by the learned Special Government Pleader that the Writ Petitions challenging show cause notices are not maintainable as the petitioners have got remedy to file objections with regard to the reassessment orders passed, the petitioners are having a remedy to file appeal against the said orders and therefore the Writ .....

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Special Commissioner and Commissioner for Commercial Taxes, Chepauk, Madras-5 and Another, Vol.95 STC 476 (Mad) and judgment of the Supreme Court reported in State of Goa and Others v. Leukoplast (India) Ltd., Vol.105 STC 318 (SC) in support of his contention. (5.) IN reply to the said submission, the learned counsels appearing for the petitioners submitted that the paper based laminated sheets shall not be treated as plastic products or plywood products. The interpretation given by the Supreme .....

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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 Tribuna .....

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12.11.1998 by cancelling the earlier clarification issued on 22.4.1998 and allowed 8% of tax. The said 8% tax was raised to 10% subsequently. (7.) AGAIN the first respondent issued another clarification on 17.8.2005 stating that paper based decorative laminated sheets is taxable at 16% under Entry 8(ii) of Part -C- of the First Schedule. When objections were filed and prayed for reconsideration of the said clarification, the first respondent accepted the same and cancelled the said clarification .....

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0005. C-I Ground Floor, 49, Mambalam High Road, T. Nagar, Chennai-17.Lr. No.L.Dis.Acts Cell II/67772/05, dated 23.3.06Clarification No.55/06Sir,Sub: Tamil Nadu General Sales Tax Act, 1959 - Rate of tax clarification under Section 28-A of the Act for -Paperbased decorative laminated sheet- Clarification issued - Reconsideration of - Reg.Ref 1. Commissioner of Commercial Taxes' Dis.ACII/23668/05, dated 17.8.2005. 2. Note by Deputy Commissioner (Central), Chennai, dated 25.11.2005. 3. Review Pe .....

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le to the Tamil Nadu General Sales Tax Act, 1959.In the reference 3rd cited, the petitioners have filed a reconsideration petition with a request to consider their product as taxable at 10% under 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 fro .....

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ussed 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 entry 44(v), Part C, First Schedule (at 8% - old entry). In his report in Rc.3097/CW.4/96, dated 29.3.06, the .....

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axation Special Tribunal, it is clarified that -Paper based decorative laminated sheet- is taxable at 10% under entry No.22(iv), Part-C, First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The clarification already issued in the reference 1st cited is hereby cancelled.Sd/- Dr. T. Prabhakara Rao Commissioner of Commercial Taxes". The first respondent issued the clarification dated 7.4.2007 and stated that the paper based laminated sheets are taxable at 16% and not at 10%, as it com .....

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rt by order dated 29.1.2008 set aside the clarification dated 7.4.2007 and directed the first respondent to issue notice, hear the objections and pass revised orders. Consequentially the first respondent issued clarification on 30.5.2008 stating that no fresh point for consideration was made by the assessees at the time of hearing and therefore reiterated the earlier clarification issued on 7.4.2007 as valid and stated that paper based decorative laminated sheets is taxable at 16% under Entry 8( .....

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te 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 Leg .....

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t the intention of the Legislature was to extend the benefit of single point taxation to "fungicides" only from the date of the addition, viz., September 13, 1977. The commodities covered by the amended entry are wider than those in the original entry and since the effect of the amended entry was not made retrospective, it would be reasonable to hold that it was not the intention of the Legislature to employ the expanded entry for considering the original entry. The expressions used in .....

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fungicides" cannot advance the case of the appellant because, the Legislature in its supreme wisdom, brought "fungicides" to be included in Entry 66 for the first time only by amending Act 7 of 1977 with effect from September 13, 1977."(b) The Bombay High Court also in (13) VST 157 (Bom) considered as to whether the decision rendered in a Central Excise Act and Central Excise Tariff has any relevance in interpreting plastic laminates in Entry C-11.61 in Schedule II Bombay Sal .....

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tion of the entries under the Central Excise Act and not under the BST Act. Apart from the fact that entries under the Central Excise Tariff are totally different, it is well-settled in law that a, situation contemplated in one statute cannot, in the absence of any express or clear intendment, be made to apply or be given effect while applying the provisions of another statute. Moreover, even the CEGAT ruling under the Central Excise Act is not to the effect that "paper based decorative lam .....

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xcise 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 .....

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ntended by the learned counsel for the petitioners, the Tamil Nadu Taxation Special Tribunal, in O.P. No.120 of 1996, by order dated 12.4.1996, considered the issue with regard to the taxability of paper based laminated sheets. In fact, the Taxation Special Tribunal directed to produce the sample of the product by directing the revenue to inspect the place of business and make a sample purchase of the product and the said sample was sent to the Joint Director of Industries and Commerce, Chennai- .....

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Supreme Court with respect to the Central Excise leviable under the Central Excise Tariff Act, 1985, cannot be relied on to issue the impugned circular. Admittedly the entry contained in the TNGST Act was not amended after the interpretation given by' the Tamil Nadu Taxation Special Tribunal. Thus, the circular issued by the first respondent cannot be sustained. As rightly contended by the learned counsel for the petitioners, the respondents are also not justified in relying on the circular .....

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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 .....

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he 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.(c) In Commissioner of Customs v. Spice Telecom, 2006 (10) SCC 704, the retrospective effect of the notification was considered and in paragraph 16 it is held as follows:". 16. Revenue has relied upon the subsequent Notification No. 21/2002 dated 10.3.2002. THE subsequent notification defines the sc .....

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bmission. THE subsequent notification which defines the scope of ancillary equipment is effective only from 1.3.2002 and does not have retrospective effect. THE respondent's clearance pertains to July 1998 and Notification No.21/2002 has come into effect with effect from 1.3.2002. It would not apply to the goods which have already been cleared. Notification No.21/2002 cannot be given retrospective effect. In the absence of any express provision contained in the notification ordinarily it can .....

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) SCC 452: 2007 (208) ELT 321 (SC), whether the departmental clarifications will have retrospective effect was considered by the Supreme Court and in paragraph 2 held thus:". 2. We have heard Mr. A.R. Madhav Rao, learned counsel for the appellant and Mr. K. Radhakrishna, learned Senior Counsel for the respondent. We have perused the orders passed by the lower authorities and also of the Tribunal. THE point raised by the learned counsel for the appellant is covered by the recent judgment of .....

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he 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 shoul .....

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n in this connection is whether sub-section (1) of Section 127-A and the proviso to sub-section (2)(b) should be construed together and the annual letting values of all the buildings owned by a person to be taken together for determining the amount to be paid as tax in respect of each building. In our considered view this position cannot be accepted. The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is pla .....

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serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter." (b) In Manish Maheshwari v. Assistant Commissioner of Income-tax .....

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9; should be applied. The court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions 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) EL .....

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