2014 (12) TMI 1222 - HC - VAT and Sales Tax

High Court rules in favor of petitioner challenging tax clarification, holding respondent lacked authority.

The High Court ruled in favor of the petitioner, 'the Madras Electric Trades Association,' in a case challenging a tax clarification issued by the ... Sustainability of clarification issued - Held that:- under the provisions of the Tamil Nadu Value Added Tax Act, there is no power for the Commissioner to issue a clarification and it has been so held by the. Therefore, in light of the decision of division bench of Delhi High Court in the case of Anchor Electricals (P.) Ltd. v. Commissioner, Sales Tax [2014 (4) TMI 294 - DELHI HIGH COURT] which is pari materia to the present case, the clarification issued by the respondent is held to be not sustainable in law, as the classification of the cables under the relevant statutory provision is applicable for the purposes of taxation under the provisions of the Tamil Nadu Value Added Tax Act. Seeking clarification for rate of tax - High voltage cable - Held that:- industrial cables which are high voltage cables with application above 650 volts are taxable at five per cent. under entry 66 with the description, 'industrial cables (high voltage cables, XLPE cables, jelly filled cables, optical fibre cables)' in part B of the First Schedule to the Act. - Decided in favour of petitioner Issues:1. Validity of the clarification issued by the respondent regarding the levy of tax on industrial cables based on their usage.2. Interpretation of statutory provisions for taxation under the Tamil Nadu Value Added Tax Act.3. Comparison with a similar case decided by the Delhi High Court.4. Consideration of the Authority for Clarification of Advance Rulings' decision on the tax rate for high voltage cables.Analysis:The petitioner, an association known as 'the Madras Electric Trades Association,' filed a writ petition challenging a clarification issued by the respondent on September 23, 2008. The petitioner sought to quash the clarification that imposed a higher tax rate of 12.5 per cent on industrial cables based on their usage, contrary to the voltage capacity-based classification under the Electricity Supply Act.The High Court noted that the Commissioner lacked the authority to issue such a clarification under the Tamil Nadu Value Added Tax Act. Citing precedents like the Pizzeria Fast Foods Restaurant case and the Canon India Private Limited case, the court emphasized that the impugned clarification was invalid solely due to the lack of statutory power to issue it.Drawing a parallel with a case before the Delhi High Court involving Anchor Electricals, the Madras High Court highlighted the technical definition of 'industrial cables' under the Electricity Act. The Delhi High Court's decision emphasized that the statutory classification of cables as high voltage under relevant laws should guide taxation, supporting the dealers' contention regarding industrial cables.Considering the Authority for Clarification of Advance Rulings' decision on the tax rate for high voltage cables, the court found that industrial cables above 650 volts were taxable at five per cent. under a specific entry in the First Schedule to the Act. Relying on this decision and the Delhi High Court's ruling, the High Court concluded that the respondent's clarification was unsustainable in law and quashed it in favor of the petitioner.In light of the above analysis, the writ petition was allowed, and the impugned clarification was quashed without costs. The connected miscellaneous petition was consequently closed, resolving the dispute over the tax levy on industrial cables based on their usage.