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Issues: (i) whether chewing tobacco could be subjected to tax for the assessment year 2007-2008 when it was inserted as a taxable item in the Second Schedule to the Tamil Nadu Value Added Tax Act, 2006 only with effect from 12.07.2011; (ii) whether the rectification petitions under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 were within limitation and had to be decided before coercive recovery.
Issue (i): whether chewing tobacco could be subjected to tax for the assessment year 2007-2008 when it was inserted as a taxable item in the Second Schedule to the Tamil Nadu Value Added Tax Act, 2006 only with effect from 12.07.2011.
Analysis: The taxable entry for chewing tobacco was inserted into the Second Schedule only by the amending provision that came into force on 12.07.2011. The commodity was not a scheduled taxable item during the assessment year 2007-2008. The demand was therefore founded on an entry that had not yet become operative for that assessment period.
Conclusion: The levy could not be sustained for the assessment year 2007-2008 on the basis of the later amendment, and the petitioners' objection on this aspect was accepted.
Issue (ii): whether the rectification petitions under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 were within limitation and had to be decided before coercive recovery.
Analysis: Section 84 provides rectification of errors apparent on the face of the record within the prescribed period. The interim stay granted in the connected batch proceedings was treated as a period to be excluded for computing limitation. On that footing, the rectification petitions filed in July 2021 were treated as within time. Since those petitions were pending, the recovery action was premature.
Conclusion: The limitation objection was rejected, and the rectification petitions were required to be considered first before any further recovery steps.
Final Conclusion: The coercive recovery communication was set aside, and the matter was sent back for fresh decision on the rectification petitions in the light of the taxable-entry issue and limitation computation.
Ratio Decidendi: A tax demand cannot be enforced for an assessment period when the relevant taxable entry was introduced only prospectively, and limitation for rectification may be computed after excluding a subsisting stay period that prevented effective pursuit of remedies.
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