2011 (7) TMI 738 - HC - VAT and Sales Tax

Court Invalidates Unilateral Amendment of VAT Schedule, Emphasizes Legal Procedures

The court held that the assessing authority cannot unilaterally amend Schedule entries under the VAT Act without following prescribed procedures or ... Petition - Advance Ruling Authority, by their clarification dated August 8, 2006, ruled that 'orthopedic splints and fracture appliances', covered under HSN Code No. 9021.10.00, alone fell under entry 2 of the First Schedule, and were not liable to tax - While the submission of the learned standing counsel cannot be said without merit, more so as the VAT Act places onus on the assessee to prove that the goods in question are exempt from tax under the First Schedule to the VAT Act, we are satisfied that the impugned order of assessment must be set aside as entry 2 of the First Schedule can neither be amended nor circumscribed except in accordance with section 79 of the VAT Act, or by way of a legislative amendment - if the Schedule is amended following the procedure stipulated in section 79 of the VAT Act, or by way of a legislative exercise, would it be valid and not by mere issuance of a notification under section 76(2) of the VAT Act - The power to remove difficulties under section 76(2) of the VAT Act, by issuance of an executive/administrative order, can neither nullify nor circumscribe entries in the Schedules to the VAT Act - Decided in favor of the assessee by way of remand to assessing authority Issues:Challenge to assessment order under VAT Act based on HSN Codes and Schedule entries.Analysis:The petitioner challenged an assessment order under the VAT Act, claiming exemption from tax for goods covered under HSN Code 9021.10.00. The Advance Ruling Authority clarified that these goods fell under entry 2 of the First Schedule and were not liable to tax. However, the assessing authority passed the impugned assessment order, placing the goods under a different entry. The petitioner contended that the Advance Ruling Authority's decision was binding, and the goods fell under entry 2. The court noted that the assessing authority must prove that the goods are exempt under the First Schedule. The court held that entry 2 of the First Schedule cannot be amended without following the procedure under section 79 of the VAT Act or through legislative amendment. The court cited a previous judgment to emphasize the limited power to alter Schedules under section 79(1) of the Act.The court highlighted that a Schedule is an integral part of an enactment and can only be amended through the prescribed procedure or legislative action. The court found that the reliance on HSN Codes to restrict the scope of entry 2 was illegal and quashed the assessment order. The matter was remanded back to the assessing authority for a fresh assessment in accordance with the law, without reference to the HSN Codes. The court disposed of the writ petition without costs, emphasizing the importance of following the correct legal procedures for Schedule amendments under the VAT Act.