2018 (9) TMI 807 - HC - VAT and Sales Tax

High Court directs reassessment of tax classification based on product nature and technical specs

M/s. Texonic Instruments Versus The Commissioner of Commercial Taxes Ezhilagam, The Assistant Commissioner (CT)

The High Court set aside the Assessment Orders for 2010-11 to 2012-13, directing reconsideration by the assessing officer. The court emphasized ... Classification of goods - Clarification dated 11.12.2007 - Whether the petitioner's product is Information Technology product or it is a telecommunication cable? - TNVAT Act, 2006 - CST Act, 1956. Held that:- The first step that has to be undertaken is to examine as to whether the product will fall within Entry 68 of Part B of First schedule to the Tamil Nadu Value Added Tax Act, 2006, which deals with Information Technology Product. For testing this question, the respondent has to necessarily examine the product, its application and all other technical specifications before arriving at a conclusion. Having arrived at a conclusion that it is an Information Technology product, the respondent should consider as to under which entry the product would fall, whether Entry 19 or Entry 20 as submitted by the petitioner - the impugned Assessment orders have to be redone. Matter is remanded to the respondent for fresh consideration to examine the nature of product dealt with by the petitioner and after affording an opportunity of personal hearing - Petition allowed by way of remand. Issues:Challenge to Assessment Orders for 2010-11 to 2012-13Challenge to Clarification issued by Commissioner of Commercial TaxesAnalysis:- The petitioner challenged Assessment Orders for the years 2010-11 to 2012-13, which were based on a clarification from the Commissioner of Commercial Taxes. The clarification stated that the petitioner's product should be taxed at 12.5% as a telecommunication cable, not as an Information Technology product. The petitioner argued that the clarification did not bind them as a third party, and the assessing officer should have independently examined the nature of the product.- The High Court found that the clarification issued by the Commissioner did not bind the petitioner, and the assessing officer should have determined the product's nature independently. The petitioner presented evidence showing the product's use in Information Technology industries, and similar products were classified as Information Technology products in other states. The court emphasized the need for a thorough examination of the product's technical specifications to determine its correct classification.- The court directed that the Assessment Orders be set aside and remanded to the respondent for reconsideration. The assessing officer was instructed to examine the product's nature, technical specifications, and appropriate classification under the relevant tax entry. The court highlighted the importance of accurately classifying the product to determine the applicable tax rate.- Regarding the challenge to the clarification issued by the Commissioner, the court held that it did not bind the petitioner and could not be the sole basis for determining the tax rate. The court emphasized the need for an independent assessment of the product's classification and directed the respondent to make a fresh decision after considering all relevant factors. The court allowed the writ petitions challenging the Assessment Orders and disposed of the petition related to the clarification without costs.