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2009 (7) TMI 1293 - MADRAS HIGH COURT

2009 (7) TMI 1293 - MADRAS HIGH COURT - TMI - W.P.Nos.19331, 19843-44, 20154-58, 20314-17, 20325-29, 20334-35, 20347-49, 20406-07, 20421-22, 20474-76, 20521, 20759-63, 20848-51, 20998-00, 21010-12, 21022-24, 21174-79, 21463, 21464-69, 21803-05 and 25229 of 2008 - Dated:- 17-7-2009 - N. PAUL VASANTHAKUMAR 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 clarificatio .....

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stered dealers under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as -TNGST Act-) and they are assessees, file returns before the jurisdictional Commercial Tax Officer/Assessing officer. The petitioners have filed monthly returns under Rule 18 of the Tamil Nadu General Sales Tax 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 prod .....

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s 10% and therefore they sought for review of the said clarification. The first respondent after 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 give .....

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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 challenged 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 s .....

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has not been amended or modified, based on which the Commissioner issued clarification on 23.3.2006 and the petitioners have also paid 10% of the tax on the sale of paper based laminated sheets and the sales having taken place long ago, they will not be in a position to recover the difference of tax 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 S .....

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the clarification cannot be applied retrospectively and if the same is applied, it will cause great hardships to the petitioners, who have already paid 10% of tax on their sale of laminated paper products. The second respondent filed counter affidavit by stating that originally paper based decorative 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 .....

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sed 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 .....

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.) IT is further stated in the counter affidavit that while manufacturing paper based decorative laminated sheets, the paper used in the manufacturing process as raw material completely disappears on the creation of altogether new products and therefore there is no nexes or relation with either paper 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 bas .....

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petitioners submitted that the Tamil Nadu Taxation Special Tribunal having rendered a finding in O.P. No.120 of 1996 on 12.4.1996 and the said order having become final, the respondents are bound by the said order which was also accepted and implemented by issuing clarification on 12.11.1998 and 23.3.2006. 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 furth .....

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luxe India Private Limited and Another v. Commissioner of Sales Tax, Vikrikar Bhavan, Bombay and Another, 2008 (13) VST 157 (Bom). The learned counsels also submitted that even assuming without admitting that the clarification issued by the first respondent is valid, the same cannot be applied 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 amoun .....

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y 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, AIR .....

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that the paper based laminated sheets on sale is liable to be levied 16% tax instead of 10% tax, is valid. The learned Special Government Pleader further submitted that the earlier clarifications issued to collect 10% of tax was based on the order passed by the Tamil Nadu Taxation Special Tribunal and 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 S .....

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h paper is used as raw material, higher tax are liable to be payable by the dealers as it is coming under Entry 8(ii) of Part -E- of First Schedule to the Act. The learned Special Government Pleader cited the Division Bench decision of this Court reported in Valtech High Tech Composites Pvt. Ltd. v. 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 (In .....

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arned 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- .....

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inforced decorative sheets (laminated paper as described by the Joint Director of Industries and Commerce) fell under Entry 44(v) of Part -C- assessment year 1994-95 and paper based decorative laminated sheets are taxable at 8%. The respondents accepted the said findings and issued clarification on 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 clarificati .....

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on issued was in operation till 7.4.2007. The clarification No.55/2006 dated 23.3.2006 is extracted hereunder: "Commercial Taxes DepartmentFrom : To :Dr. T. Prabhakara Rao, 1AS., Thiru V.V. Ramesh,Commissioner of Commercial Taxes, Counsel for Tvt. CenturyChepauk, Laminating Co. Ltd.,Chennai -600005. 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 ta .....

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12.1.2006 by Thiru. V.V. Sampathkumar, Chartered Accountant on behalf of the petitioner. -In the reference 1st cited, a clarification was issued to Tvl. Century Laminating Co. Ltd., Chennai, that -Paper based decorative Laminated Sheet- is taxable at 16% under entry 8(ii), Part E of the First Schedule 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 entr .....

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(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 Commer .....

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n the category mentioned in the extract given as Sl.No.44(v), Part-C, First Schedule to the Tamil Nadu General Sales Tax Act, 1959."The particulars furnished by them have been examined. In view of the fresh facts put forth by the petitioners and relying on the above decision of the Tamil Nadu Taxation 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. T .....

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essees and a Writ Petition was filed in W.P. No.16867 of 2007 by contending that when the earlier clarification restoring 16% of tax was cancelled, opportunity of hearing was given to the assessee and while cancelling the same and enhancing the tax rate at 16%, no notice having been issued, this Court 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 respond .....

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nder 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, 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 I .....

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on 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 obvious that 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 .....

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in which they are understood in the trade. No aid can, therefore, be available from the publications of the Indian Standards Institute as to what "pesticides" are. Even the certificate issued by the Tamil Nadu Agricultural University to say that "pesticides" would include "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 .....

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manufacturers for the first time started claiming that the goods in question are paper board/coated board classifiable under Entry C-II-9 and not under Entry C-II-61. It is pertinent to note that the decision of CEGAT in the case of Melamine Fibre Board Ltd., 1988 (36) ELT 139, related to interpretation 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, si .....

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s" 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 Ta .....

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board, card board, pulp board including grey board, corrugated hoard, duplex and triplex boards and board for playing cards it would only go to show that each and every kind of product connected with or having paper as one of its constituents, is made to encompass under the said entry. As rightly contended 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 pa .....

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over the other with resin and not with gum, and it was not plywood based. The said finding was accepted by the respondents and issued clarifications as stated supra. It is admitted by the respondents that there is no change made in the entry in TNGST Act, 1959. (9.) THE interpretation given by the 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 .....

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will have retrospective effect (a) In the decision reported in Government of India v. Indian Tobacco Association, 2005 (187) ELT 162 (SC) similar issue was considered by the Supreme Court with regard to the exemption notification issued under the DEPB Scheme of Customs Tarrif Act. In paragraphs 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 stat .....

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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.(c) I .....

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terminals in this notification have not been considered as ancillary equipment of BTS. Revenue contends that Notification No. 21/2002 is clarificatory in nature and would be applicable to the radio terminals imported by the respondent in the year 1998 as well. We do not find any substance in this submission. 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 .....

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ned that with regard to the identical goods imported through Delhi, wherein the items were classified under the same heading, Delhi Customs House extended the benefit of the said notifications to the respondent. "(d) In Suchitra Components Ltd v. Commissioner of Central Excise, Guntur, 2006 (12) 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. .....

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rospectively. 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% .....

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t is also well settled that if there is ambiguity with regard to the rate of tax to be collected, the benefit should go to the assessee.(a) In Mathurmn Agrawal v. State of Madhya Pradesh, 1999 (8) SCC 667, in paragraph 12 it is held as follows: "12. Another question that arises for consideration 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 .....

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to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will 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 .....

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against the revenue. In paragraph 13 it is held thus: ". 13. A taxing statute, as is well known, must be construed strictly. In Sneh Enterprises v. Commr of Customs it was held: (SCC p.721, para 24)". 24. While dealing with a taxing provision, the principle of 'strict interpretation' 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 provisio .....

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