TMI Blog2019 (10) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, executive or otherwise, will bind the Courts. In fact, Courts have held that even a statutory Clarification issued by the head of the Commercial Taxes Department would not be the final word when it comes to matters such as classification of commodities/equipments or rate of tax thereupon, if such clarifications are contrary to law or the provisions of the Statute itself, including the Schedules thereto. Such being the case, a Clarification, in the nature of an Executive Circular has no binding force. More so, in the present case, the assessing authority has taken up and completed the assessment pursuant to an order passed by this Court dated 22.12.2008 directing completion of the assessment. The Officer was specifically directed to complete the assessment on merits and in accordance with law which means a proper interpretation of the relevant statutory provisions and schedules thereto. The classification of the equipment as accessories of motor vehicle has been done by the officer in a proper and detailed manner and nothing has been pointed out to establish that the classification is perverse or contrary to the factual position. The only argument raised and argued is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hilagam, Chepauk, Chennai. Dear Sir, Sub: Seeking clarification on Rate of Tax under TNVAT Act, 2006 We are the manufacturer of water borehole drilling rigs to be mounted on the chassis supplied by our customers and it is a capital goods. We would like to seek your clarification on the rate of tax applicable to the above capital goods under TNVAT Act, 2006. Thanking You, Yours faithfully, For PARANTHAMAN HYDRAULICS EQUIPMENTS XXXX Proprietor 3. According to the petitioners all material to illustrate the nature of the equipment as well as the use thereof were placed before the Commissioner, who upon consideration of the same, clarified that the equipment is taxable at the rate of 4% under Entry No.138 of Part B to the Ist Schedule to the Tamil Nadu Value Added Tax Act, 2006 (in short Act ). The Clarification reads as follows: COMMERCIAL TAXES DEPARTMENT . LR.VAT.CELL/20344/07/(VCC No:582) DATED 25.5.2007 Sir, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 02.02.2009 by the Assessing Authority. Objections were filed by the petitioners, notwithstanding which, the impugned orders of assessment have been passed levying tax at the rate of 12.5% upon the turnover from the sale of the equipment in question. 7. The Assessing Authority was of the view that the equipment cannot be classified as a tool but should be classified only as an accessory of a Motor Vehicle . The reliance placed by the petitioners on the clarification issued by the Commissioner was simply rejected stating that the same has been obtained by mis-representation. It is as against the aforesaid orders that the petitioners have approached this Court by way of the present Writ Petitions. 8. The main ground raised and argued is to the effect that the Clarification issued by the Commissioner was very much in force at the time of assessment and thus the Assessing Authority ought not to have simply ignored the same without noting the position that a superior authority had considered the very same equipment that was in issue, holding the same to be taxable as a tool . 9. The petitioners point out that the sales strategy ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Supreme Court/decisions of this Court. A Full Bench of the Supreme Court, in the case of Bengal Iron Corporation and Others V. Commercial Tax Officer and others (1994 Supp (1) SCC 310), considered whether cast iron would cover castings, such as, cast iron pipes, manhole covers, bends, etc. manufactured by a dealer from cast iron purchased by him. In doing so, the Bench noticed a Clarification issued by the Andhra Pradesh Revenue Department in favour of the assessee stating that such a Clarification was devoid of binding force and would, in any event, not bind the Court. At Paragraph Nos.18 and 19, the Court states thus: 18. So far as clarifications/circulars issued by the Central Government and/or State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the Courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law. There can be no estoppel against the statute. The understanding of the government, whether in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. This view has been reiterated by the First Bench of this Court in the case of Pizzeria Fast Foods Restaurant vs. Commissioner of Commercial Taxes (W.A.3995 of 2004 dated 15.02.1995). The Bench has considered the validity of a Clarification issued by the Commissioner, the head of the Department, in terms of Section 28A of the TNGST Act. The Clarification in that case thus, had statutory force and backing notwithstanding which the Bench states that it cannot override the statutory provisions including the prescriptions of rate of tax contained in the Schedules to the Act. Thus, while framing an assessment, an assessing authority has to act judicially and judiciously, applying the provisions of the Act and Schedules appropriately and in a proper fashion. If, in doing so, a view is taken that is contrary to a Clarification issued by the Commissioner, then, so be it, as long as the view is legally and statutorily proper and tenable. This is the view of the Bench in the paragraphs extracted below: ' .. 24. Before dealing with the questions involved in these cases, we may refer to Section 28-A of the Act, which states:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the rates of tax are mentioned in the Schedules to the Act. The charging sections are Section 3 and other following provisions of the Act. It is well settled that a Schedule to an Act is part of the Act itself and hence has statutory force. The Commissioner, who is only an executive authority, cannot over-ride the provisions of the Act itself. That being so, in our opinion, the direction issued by the Commissioner under Section 28-A of the Act cannot override the rate of tax fixed in the Schedules to the Act. 28. As regards, sub-section (3) of Section 28-A, in our opinion this provision only means that when the sales tax authorities are fixing the rate of tax in their executive capacity, they shall follow the circular of the Commissioner under Section 2. However, when the sales tax authorities are acting in a judicial or quasi-judicial capacity, in our opinion, they cannot be bound by the order of the Commissioner, because to take a contrary view would mean interference by the executive in a judicial function. When the assessing authority under the Sales Tax Act (or the appellate authority) decides a case, he is functioning in a judicial capacity (even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngle Judges of this Court in the cases of M/s.Celebrity Fashions Limited Vs. The Commissioner of Commercial Taxes, Chepuak, Chennai in W.P. No.3926 of 2008 dated 04.09.2008 and Lloyd Insulations (India) Limited Vs. Joint Commissioner (CT), Chennai (Central Division) and others [(2010) 35 VST 103 (Mad)] have also held that an executive circular has no binding force. 17.The petitioner relies on the following decisions, specifically on the portions extracted. In Canon India Private Limited and Ors Vs. State of Tamil Nadu; Commissioner of Commercial Taxes, Department of Commercial Taxes; Commercial Tax Officer, Valluvarkottam Assessment Circle and Ors [(2013) 1 GSTL (VAT) 1 (MAD)], a Division Bench of this Court, while considering whether an Executive Circular will bind an assesee or not states as follows: 22.That apart, as pointed out by the learned Senior counsel Mr.Arvind P.Datar, at the time when the circular/clarification was issued, there was no enabling power under the VAT Act to issue such circulars or clarifications, which would bind the assessing authorities. The power to issue clarification and advance ruling was conferred on a State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the levy of trade tax in certain cases. Section 4-A of the U.P. Trade Tax Act is extracted below: ' Section 4-A - Exemption from trade tax in certain cases (1) Notwithstanding anything contained in this Act, where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any district or parts of district in particular, it may on application or otherwise, in any particular cases or generally, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding fifteen years from such date on or after the date of starting production as may be specified by the State Government in such notification, which may be the date of the notification or a date prior or subsequent to the date of such notification, and where no date is so specified from the date of first sale by such manufacturer, if such sale takes place within six months from the date of starting production, and in any other case from the date following the expiration of six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.8.6.2 states as follows: 8.6.2. The Apex Court in STATE BANK OF TRAVANCORE v. C.I.T., [1986] 158 ITR 102 held that even though the clarifications issued by the revenue being executive in character cannot alter the provisions of the Act, since they are in the nature of concessions, they can always be prospectively withdrawn. In the instant case, even though the clarification dated 9.11.1989 is executive in nature, the concessions given to the assessee could be withdrawn only prospectively, but not retrospectively because, such executive circulars are binding on the authorities, as held by the Apex Court in KESHAVJI RAVJI CO. v. COMMISSIONER OF INCOME TAX, [1990] 183 ITR 1. In KESHAVJI RAVJI CO. v. COMMISSIONER OF INCOME TAX, referred supra, while dealing with Section 119 of the Income Tax Act, which is pari materia to Section 28-A of the Tamil Nadu General Sales Tax Act, the Apex Court held that the benefits of such circulars to assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. That apart, the clarification dated 27.12.2000 gains a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g opportunity to the petitioner and pass fresh orders on merits and in accordance with law, expeditiously, in any event within a period of eight weeks from the date of receipt of a copy of this order. No costs. Consequently, the connected Miscellaneous petitions are closed.' Thus, the Officer was specifically directed to complete the assessment on merits and in accordance with law which means a proper interpretation of the relevant statutory provisions and schedules thereto. 24. The operative portion of the orders of assessment and the reasons adduced by the Assessing Authority in support of the classification and rate adopted by him are as follows: Y}g;hpfz;l; Mapy; kPjhd thp tut[ jpUg;gk; bra;jjd; kPjhd ghprPyid Kot[ tzpfh;fs; Y}g;hpfz;l Mapy; bfhs;Kjy; kPJ 12/5# thp brYj;jp mjid ,z;l!;l;hpay; ,d;g[l; Mf gad;gLj;jpajhf bjhptpj;J 12/5# thp tut[ L bra;Js;sjhf bjhptpj;Js;shh;/ Mdhy; Y}g;hpfz;l; Mapiy gad;gLj;jp vt;tpj bghUSk; cw;gj;jp bra;jikf;fhd Mjhuk; VJk; ,y;iy/ g[jpa bghUs; jahhpg;g[f;F fd;R{kg[s; Mf (Use Consumable) gad;gLj;jpajw;fhd Mjhuk; VJkpy;iy/ nkYk; jkpH;ehL kjpg;g[f; Tl;L th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.Compressor nkw;fz;l midj;Jk; ml';fpa Tl;L bghUs; epyj;jo ePh; vLf;f gad;gLk; hpf; ,ae;jpuk; MFk;/ ,jdpy; ml';;fpa nkw;fz;l bghUl;fs; hpf; ,ae;jpuj;jpd; !;ngh;!; (Spares) MFk;/ nkw;go ,ae;jpuk; yhhpapy; bghUj;jg;gl;L yhhp fk;igd; hpf; tz;o vd nkhl;lhh; thfd rl;lj;jpd; gjpt[ bgw;W epyj;jo ePh; vLf;f Jis nghLtjw;F gad;gLj;jg;gLfpwJ/ ,t;tpae;jpuj;jpd; icwl;uhypf; tpirahy; ,a';Fk; nghJ mjdpy; bghUj;jg;gl;l fk;gurphpy; cs;s Edpapy; JisnghLtjw;F bghUj;J Hammer bit vd;w bghUs;jhd; L:y;!; vd miHf;fg;gLfpwJ/ nkw;go Hammer bit vd;w bghUs; kl;Lnk Jis nghLk; fUtp MFk;/ Mdhy; tzpfh;fs; tzpf thp Mizah; mth;fSf;F Jis nghl gad;gLj;Jk; ,ae;jpuj;jpid tpsf;fkhf vLj;Jiuf;fhky; jtwhd Kd;bkhHpt[fis rkh;g;gpj;J bjspt[iu bgw;Ws;shh;/ (c/k;) thof;ifahsh; gad;gLj;Jk; Kfr; rtuk; bra;a[k; fUtp (Zhaving Razar) apid vLj;Jf; bfhz;lhy; mjdpy; gpnsoid bghUj;jp kl;Lnk gad;gLj;j ,aYk;/ gpnsL ntW bghUs; nrtp'; bkc pdpd; L:y;!; Mf fUj KoahJ/ gpsL ntW bghUs; nrtp'; bkc pd; ntW bghUshFk;/ mJ nghynt Jis nghl gad;gLk; ,ae;jpuj;jpy; Hamer bit?apid bghUj;Jtjhy; kl;Lnk ,ae;jpuj;jpid Tools Mf fUj KoahJ/ nkYk; ,t;tpae;jpuj;jpd; ruhrhp tpw;gid kjpg;g[ U:/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts have held that while such a Clarification would neither bind the Court nor an assessee, it would bind an Assessing Authority, subordinate to the Commissioner in hierarchy where it favours the assessee. Discretion/liberty was available with the Commissioner to withdraw the clarification, if, on examination of other materials that may have been brought to his attention by Officers of the Department, he realises that the Clarification issued was incorrect in law or fact. This has not been done and admittedly, the Commissioners Clarification was current during the relevant periods when the transactions of saletook place and when the assessments were framed. It has, in fact, not been withdrawn till date. 29. The Commercial taxes Department has, for this reason, constituted a Committee to consider and grant a waiver of disputed demands, the liability for which arises on account of conflicting clarifications and/or opinions expressed by Commissioners of the Department/assessing officers. This has also been note of by the Supreme Court in the case of Vasantham Foundry V. Union of India and others {1995 SCC (5) 289} As a fact, the assessee in the present case has not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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