Personal hearing required before adverse tax clarification; beneficial clarification binds revenue, while adverse clarification remains appealable.

Under section 28-A of the Tamil Nadu General Sales Tax Act, 1959, a dealer seeking clarification is entitled to a personal hearing before an adverse clarification is issued when such hearing is requested, because the clarification can bind the assessing authority and materially affect assessment rights. The Court also stated that a beneficial clarification binds the revenue authorities in proceedings under the Act, while an adverse clarification, though binding on the assessing authority, remains open to challenge by the assessee in appeal. The impugned clarification was set aside for breach of fairness and remitted for reconsideration after hearing.

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Issues: (i) Whether a dealer seeking clarification under section 28-A of the Tamil Nadu General Sales Tax Act, 1959 is entitled to a personal hearing before an adverse clarification is issued. (ii) Whether a clarification issued by the Commissioner under section 28-A binds the revenue authorities, and to what extent it may be challenged by the assessee.

Issue (i): Whether a dealer seeking clarification under section 28-A of the Tamil Nadu General Sales Tax Act, 1959 is entitled to a personal hearing before an adverse clarification is issued.

Analysis: Though the provision does not expressly mandate a hearing, an adverse clarification can have serious consequences because it binds the assessing authority and affects the dealer's rights in assessment proceedings. A dealer who invokes the statutory remedy cannot be placed in a worse position than one who awaits assessment. Where the Commissioner proposes to record a finding adverse to the applicant and a personal hearing has been sought, fairness requires that the dealer be heard before the order is made.

Conclusion: An adverse clarification under section 28-A could not be issued without granting the dealer a hearing when one was sought.

Issue (ii): Whether a clarification issued by the Commissioner under section 28-A binds the revenue authorities, and to what extent it may be challenged by the assessee.

Analysis: The statutory object is uniform administration and application of the taxing statute. A clarification beneficial to the assessee is binding on the revenue in proceedings under the Act. If the clarification is adverse, it still binds the assessing authority, but it does not prevent the assessee from contesting its correctness in appellate proceedings. The principle was aligned with the effect of departmental circulars under the Income-tax Act, 1961, as relied upon in the reasoning.

Conclusion: A beneficial clarification binds the revenue, while an adverse clarification also binds the assessing authority but remains open to challenge by the assessee in appeal.

Final Conclusion: The impugned clarification was set aside for breach of fairness in not granting the requested hearing, and the matter was required to be reconsidered by the Commissioner after affording the petitioner an opportunity of hearing.

Ratio Decidendi: Where a statutory clarification mechanism may adversely affect the assessee and bind subordinate revenue , an adverse clarification cannot be issued without giving the dealer an opportunity of hearing, and a beneficial clarification is binding on the revenue in proceedings under the Act.

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