TaxTMI 
TaxTMI 
TaxTMI 
1999 (6) TMI 474
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....assessing authority issued a pre-assessment notice dated March 16, 1999 proposing to assess that turnover of Rs. 1,89,60,195 representing flax fibre at 8 per cent instead of 3 per cent by stating as follows: "On a further scrutiny of assessment for the year 1993-94 it was noticed that the sales turnover amounting to Rs. 1,89,60,195 representing flax fibre was assessed at 3 per cent instead of higher rate of tax at 8 per cent. As per the clarification issued by the Commissioner of Commercial Taxes, Madras in D. Dis. Acts Cell II/132565/93 dated May 10, 1994 vide ([1995] 97 STC (Circulars & Clarifications), page 6) the viscose staple fibre falling under Central Excise Tariff No. 56.03 is liable to tax at 8 per cent under Part D, item 63 of the First Schedule." 2.. Time was granted till March 26, 1999 to file objections. The petitioner filed objections on March 26, 1999 by stating that the assessment originally made was in accordance with the clarification of the Special Commissioner and Commissioner of Commercial Taxes in D. Dis. Acts Cell II/752/94 dated May 30, 1994 and that flax fibre is produced from the plant just like cotton or jute and that it falls under item 5 of the Seco....
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.... by the petitioner is akin to staple fibre yarn and reliance was placed on the clarification of the Special Commissioner and Commissioner of Commercial Taxes in Acts Cell II/132565/93 dated May 10, 1994 which reads as follows: "Viscose staple fibre falling under Central Excise Tariff No. 56.03 is liable to tax at 8 per cent under entry 63 of Part D." Though it was explained in the objection letter filed that flax fibre obtained from plants is different from viscose extracted from soft wood trees by chemical process and material evidence was produced seeking a personal hearing on March 30, 1999 still the assessing authority without affording an effective hearing as prayed for has passed the impugned order. Thus, the reassessment made by relying on the circular of the Special Commissioner and Commissioner of Commercial Taxes in Acts Cell II/85058/97 dated June 11, 1998 which was not disclosed in the original pre-assessment notice obviously shows that there is violation of the principles of natural justice. The circular dated June 11, 1998 reads as follows: "Flax fibre does not find a place in any of the entries in the Schedule to the TNGST Act and therefore it is classified as a r....
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....hould not by-pass the statutory remedy and approach this Court in writ jurisdiction and in this connection, he referred to the decision of the Supreme Court reported in State of Goa v. Leukoplast (India) Ltd. [1997] 105 STC 318. 8.. I have considered the rival contentions. In the original assessment, the assessing authority proposed to levy tax on the sale of flax fibre under item 69(ii) of Part B of the First Schedule. However, while passing the assessment order, though no objections has been filed, the assessing authority stated that the item flax fibre would fall under the Second Schedule to the Act taxable at 3 per cent. Later, while proposing to revise the assessment on the ground that the commodity namely flax fibre was assessed at lower rate of tax, the assessing authority stated that the commodity flax fibre is assessable at 8 per cent instead of 3 per cent assessed originally and this is on the basis of the understanding as per the clarification of the Commissioner of Commercial Taxes dated May 10, 1994. When objections were filed apart from referring to the basis for the revision as stated in the notice, the assessing authority further stated that the clarification issue....
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....d, if the assessment orders are revised. No doubt it is not a ground for interpreting entries in favour of the assessee. On the other hand, I have interpreted the entries first and I have found that the interpretation sought to be placed by the petitioners is justified." 9.. Thus only after interpreting the relevant entry in regard to the rate of tax on the commodity in question reference was made to the clarification of the Commissioner of Commercial Taxes. In this connection, it is relevant to refer to the observation of the Supreme Court in the case of Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47 wherein the following observations have been made in regard to the clarifications/circulars: "Clarifications/circulars issued by the Central Government and/or the State Government represent merely their understanding of the statutory provisions. They are not binding upon the courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law. There can be no estoppel against the statute. The understanding of the Gov....