TaxTMI 
TaxTMI 
2017 (12) TMI 1013
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....d registered as dealers on the file of the respective Assessing Officers under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (hereinafter, referred to as 'TNVAT Act') have challenged the proceedings of the Authority for Clarification and Advance Ruling, the first respondent, dated 29.06.2017. 3. The effect of the impugned clarification is that, 100% viscose staple fibre (VSF) hank yarn sold by the dealers/petitioners is taxable at 5%, under Entry No.3 (a) of Part B of the first schedule to the TNVAT Act. 4. With consent of the learned counsel appearing for the parties, Writ Petition No.17722 of 2017, is taken as a lead case, and it would suffice to note the facts stated thereunder :- 4.1) The petitioner is a registered dealer on the file of the second respondent/Assistant Commissioner (CT), Periya Agraharam Assessment Circle, Erode, and would state that, they were under the belief that the commodity dealt with by them, viz., staple fibre hank yarn, is exempt from taxation under Entry 44 of Part-B of the fourth schedule to the TNVAT Act, as they were informed that, some of the dealers had approached the Commissioner of Commercial Taxes during 2007, and ....
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....ed, contending that the commodity, hank yarn, is exempted goods, and no VAT is required to be collected on the sale of hank yarn. The said Writ Petitions were disposed of, by order, dated 24.11.2015, by directing the petitioner to submit their objections to the show cause notice and the Assessing Officer was directed to take a decision on the matter. 4.4) Parallely, the petitioner and few other dealers filed Petitions before the first respondent to review the clarification, dated 14.02.2013. These Petitions were rejected, by the impugned orders/clarification, dated 29.06.2017, and the earlier clarification given vide proceeding, dated 14.02.2013 was reiterated. Aggrieved by the same, the petitioner and some of the dealers, who are petitioners in other Writ Petitions are before this Court. 5. Mrs. R. Hemalatha, the learned counsel appearing for the petitioners in some of the Writ Petitions submitted that, the petitioners have challenged the impugned clarification on the following grounds :- 5.1) Entry 44 of Part-B of the fourth schedule to the TNVAT Act mentions only hank yarn, and there is no distinction or specification to the texture of the yarn, and therefore, all categ....
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....eing a complete code by itself, no reference would have been made to other enactment. 5.5) The respondents rely upon the Budget Speech given by the then Hon'ble Minister of Finance, Government of Tamil Nadu, on 22.07.2006, and even in the said Budget Speech, there is reference only to hank yarn, and there is no distinction drawn between the cotton hank yarn and VSF hank yarn. 5.6) It is submitted that the petitioners are also suppliers of hank yarn to the hand loom weavers and hand loom weavers also uses fibres such as polyester fibre, viscose fibre, blended fibre, etc., and it is incorrect to state that, hand loom products are made only with cotton hank yarn. In support of such contention, reliance was placed on the Circular issued by the Chairman of the Hand Loom Export Promotion Council, Ministry of Textiles, Government of India, dated 16.03.2013. As per the said Circular, the first respondent has no jurisdiction to invoke his power under Section 48 -A of the TNVAT Act, as there is no ambiguity in the Entry to the schedules under the TNVAT Act, and no clarification is required. 5.7) It is further submitted that the clarification issued, even assuming to be valid, ca....
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....ned finality, and no application for clarification is maintainable. 6.1) Relying upon the decision of the Hon'ble Supreme Court, in the case of Mauri Yeast India Pvt. Ltd. Vs. State of U.P. and another) reported in [(2008) 14 VST 259 (SC)], the learned counsel submitted that, when a commodity has been accepted to be of a particular nature by the Assessing Officer for a long time, it should remain to be classified as such without any change, and the common parlance test, or user test, cannot be said to be decisive in such a situation, and the onus would be on the Department to show, as to why, a different interpretation should be resorted to, when there is no change in the statutory provision, and if two views are possible, then, one, which is favorable to the assessee has to be adopted. 6.2) Further, it is submitted that, no opportunity of personal hearing was granted to the petitioners before the clarification, dated 14.02.2013 was issued, and in such situation, orders were set aside and the matters were heard afresh, in the case of Supreme Industries Ltd., Vs. Authority for Clarification and Advance Rulings, Chennai and another reported in [(2014) 68 VST 494 (Madras)]. ....
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....he exemptions based on the commodity, it specifically does so. 8.1) It is submitted that, a perusal of the Entry 3 (a) of Part-B of the first schedule to the TNVAT Act shows that, all types of yarns other than hank yarn is taxable at 5%. Therefore, the word 'hank yarn' cannot be given a restrictive meaning. Further, it is submitted that, under the provisions of CST Act and TNVAT Act, there is no power to interpret the Entries, and the impugned clarification is beyond the powers conferred on the first respondent. 8.2) The learned counsel, in order to define the meaning of 'hank yarn', placed reliance on the decision of the Hon'ble Supreme Court, in the case of Cannanore Spining and Weaving Mills Ltd., Vs. Collector of Customs and Central Excise Cochin and others, [(1979) 2 SCR 830]. 9. Mrs. S. Narmadha Sampath, the learned Special Government Pleader appearing for the respondents submitted that, Section 48-A empowers the first respondent to clarify any point, concerning the rate of tax on an application by a registered dealer, and the impugned clarification concerns the rate of tax, which would include the powers to consider as to whether the exemption cl....
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.... 'cotton yarn', reliance was placed on the decision of the Hon'ble High Court of Calcutta, in the case of India Jute Co. Ltd., Vs. Assistant Collector of Central Excise and others reported in [(1988) 34 ELT 452 (Cal)]. 9.5) It is submitted that the onus to show that the impugned clarification is unsustainable or unreasonable, is on the petitioners/dealers, which, they have failed to discharge in the present litigation. To support such a stand, reliance was placed on the decision of the Hon'ble Supreme Court, in the case of Khyerbari Tea Co. Ltd. and another Vs. State of Assam and others reported in AIR (1964) S.C. 925. 9.6) It is submitted that, the petitioners cannot plead any equity in the matter of taxation, and equitable consideration are not relevant in interpreting the provisions of a taxing statute. In support of such contention, reliance was placed on the decisions of the Hon'ble Supreme Court, in the case of The Commissioner of Income Tax, Calcutta Vs. Central India Industries Ltd. reported in [(1972) AIR SC 397] and M/s. Murarilal Mahabir Prasad and others Vs. Shri .B. R. Vad and another reported in [(1975) 2 SCC 736]. 9.7) It is further submi....
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....ot be subject to the period of limitation. 12. During 2013, one of the Spinning Mills, viz M/s. Rajaguru Spinning Mills, the dealer in hank yarn, approached the first respondent and sought clarification with regard to rate of tax on 100% VSF hank yarn. The first respondent, by proceeding, dated 14.02.2013, clarified that the rate of tax as 5% under Entry No.3 (a) of Part B of the first schedule to the TNVAT Act. In terms of Section 48- A 3 (ii) & (iii), such clarification or advance ruling is binding in respect of the goods, in relation to which, the clarification or advance ruling was sought for, and on all Officers working under the control of the CCT. As a result of the binding nature of the clarification, dated 14.02.2013, the respective Assessing Officers of the petitioners issued notices for re-opening the assessments, which were completed by treating the transactions as an exempted transactions under Entry 44 of Part-B of the fourth schedule to the TNVAT Act. Challenging the same, some of the dealers had filed Writ Petitions before this Court, and ultimately, Review Petitions were filed by the petitioners and other dealers before the first respondent to review the clarifi....
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....ided merely based upon the description of the commodity, as found in the various schedules to the Act, because, such exemption came into vogue only in the year, 2006. 16. Next, it has to be seen as to what was the purpose, for which, the Government brought out amendment Act 26 of 2011 in the TNVAT Act, by including the hank yarn as a commodity. The reason is explicit on a perusal of the budget speech given by the then Hon'ble Minister of Finance, Government of Tamil Nadu on 22.07.2006, which would clearly show that, the intent of the Government is to encourage the hand loom Industries in the State and to benefit lakhs of hand loom weavers. The Government was conscious of the fact that this exemption will result in substantial financial loss to its exchequer, which was then, quantified at Rs. 56 crore per annum. Thus, it has to be seen as to what are the category of persons, which weighed in the minds of the Government to extend the benefit of exemption to the handloom Industries. 17. The budget speech given by the then Hon'ble Minister of Finance, mentions about the commodity hank yarn as the chief raw material for handloom goods. Three important things have to be bor....
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....ons and for securing compliance to the said statutory provision by all concerned. Further, the preamble of the notification states that, hand loom Industry, which caters to the employment and earning capacity of lakhs of power hand loom weavers, and their family members need to be provided with adequate quantity of yarn in the hank form, (its raw material) at reasonable prices and on an assured basis. With this objective, the statutory notification has been issued by the Textile Commissioner. Section 4 of the Hank Yarn Packing Notification defines the term 'Yarn' for the purpose of H.Y.N. 2003, to mean yarn made/spun wholly out of cotton or its waste but does not include a) hosiery yarn, sewing thread, industrial yarns, like tyre cord, multiple yarn, mixed yarn of various counts reeled off from cop bottoms and yarn comprising single count yarn reeled off from cop bottoms having loose ends or knots at short lengths. 20. Thus, the Hank Yarn Packing Notification issued by the Government of India pertains to yarn made out of the cotton. Hence, the term ''hank yarn'' used in the Budget Speech shall be referable to only cotton yarn packed in hank form. The inte....
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....spondent did not suo motto issue the clarification, but, it was on an application filed by the M/s. Rajaguru Spinning Mills, one of the dealers in hank yarn. Therefore, for the petitioners to state that the first respondent has no jurisdiction is a plea, which has to be outrightly rejected, and even assuming such plea was available to the petitioner, they have deemed to have waived such a plea. 25. That apart, the decision in the case of M/s. Mass Textiles is referable to a particular assessee, whereas, the clarification issued by the first respondent has wider impact binding the applicant, who sought for the clarification, the commodity, in relation to which, the clarification or advance ruling was sought, and on all officers working under the CCT. Therefore, the decision of the STAT cannot act as a fetter for exercise of power by the first respondent. Furthermore, the embargo under Section 48-A (2) (i) is only with regard to pending Appeals/Revisions, but not cases, which have been disposed of. Thus, the petitioners, having voluntarily gone before the first respondent and sought for reviewing the earlier clarification, dated 14.02.2013 estopped from now contending that the fir....
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.... Section 14 of the CST Act, to explain true meaning of the term 'hank yarn' is also not tenable, for the reasons assigned earlier with regard to the object, for which, such exemption was granted. 29. In the decision rendered in the case of Grenfell Vs. Inland Revenue Commissioner, reported in [(1876) 1 Ex.D 242, it was held that, 'if a statute contains language, which is capable of being construed in a popular sense, such statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning of course, by the words ''popular sense'', that sense which people conversant with the subject matter with which the statute is dealing would attribute to it.' Applying the said decision to the facts and circumstances case, in popular sense, which the people conversant with the subject matter, referred to hank yarn as containing cotton yarn packed in hank form. Therefore, it is incorrect on the part of the petitioners to state that, in the popular sense, cotton yarn packed in hank form is cotton hank yarn and VSF yarn packed in hank form is VSF hank yarn. If this interpr....
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....the exemption granted under Entry 44 of Part-B of the fourth schedule to the Act, and it would be very harsh to direct the petitioners to pay higher rate of tax on past transactions does not merit consideration, for, the petitioners cannot plead any equity in the matter of taxation. Equitable considerations are not relevant in interpreting the provisions of a taxing statute. There is no equity about a tax in the sense that a provision, by which, a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the Revenue or to the tax payer. Though what is called equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute. 34. The Commissioner of Commercial Taxes, in the counter affidavit has set out the history behind the purpose of the exemption to state that, it was to promote the artisans involved in base functioning of handloom sector, and who had at no point of time would be in a position to own such huge machinery, required to manufacture the viscose and o....