Binding tax clarification on used-car sales requires value-addition basis, not tax on entire sale value.

Assessment of used-car sales by registered automobile dealers must follow the binding clarification under Section 48(A) of the Tamil Nadu Value Added Tax Act, 2006, which treated the taxable base as value addition without input tax credit. An order taxing the entire sale value, instead of applying that clarified treatment and the relevant notifications, was found inconsistent with the binding clarification and therefore unsustainable. The assessment was quashed and the matter remitted for fresh consideration after allowing objections and hearing the dealer.

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Issues: Whether the assessment order levying tax on the entire sale value of used cars, instead of on value addition as clarified by the Authority for Clarification and Advance Ruling, was sustainable.

Analysis: The assessment was tested against the earlier governmental notifications and the clarification issued by the Authority for Clarification and Advance Ruling. The clarification had interpreted the applicable tax treatment for used cars sold by registered automobile dealers as tax on value addition without input tax credit, and such interpretation was held to be binding on the taxing authority under Section 48(A) of the Tamil Nadu Value Added Tax Act, 2006. The assessment order, which proceeded on a higher rate computed on the entire sale value, was found to have ignored the binding clarification and the relevant notifications.

Conclusion: The assessment order was held unsustainable and was quashed. The matter was remitted to the assessing authority for fresh consideration after giving the petitioner an opportunity to raise objections and to be heard.

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