TaxTMI 
TaxTMI 
2019 (10) TMI 1213
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.... would be as well as the applicable rate of tax. The Application reads as follows: ' 29th March 2007 The Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai. Dear Sir, Sub: Seeking clarification on Rate of Tax under TNVAT Act, 2006 We are the manufacturer of water borehole drilling rigs to be mounted on the chassis supplied by our customers and it is a capital goods. We would like to seek your clarification on the rate of tax applicable to the above capital goods under TNVAT Act, 2006. Thanking You, Yours faithfully, For PARANTHAMAN HYDRAULICS & EQUIPMENTS XXXX Proprietor' 3. According to the petitioners all material to illustrate the nature of the equipment as well as the use thereof were placed before the Commissioner, who upon consideration of the same, clarified that the equipment is taxable at the rate of 4% under Entry No.138 of Part B to the Ist Schedule to the Tamil Nadu Value Added Tax Act, 2006 (in short 'Act'). The Clarification reads as follows: ' COMMERCIAL TAXES DEPARTMENT .......... LR.VAT.CELL/20344/07/(VCC No:582) DATED 25.5.2007 ....
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.... tax at the rate of 12.5% upon the turnover from the sale of the equipment in question. 7. The Assessing Authority was of the view that the equipment cannot be classified as a 'tool' but should be classified only as an accessory of a 'Motor Vehicle'. The reliance placed by the petitioners on the clarification issued by the Commissioner was simply rejected stating that the same has been obtained by mis-representation. It is as against the aforesaid orders that the petitioners have approached this Court by way of the present Writ Petitions. 8. The main ground raised and argued is to the effect that the Clarification issued by the Commissioner was very much in force at the time of assessment and thus the Assessing Authority ought not to have simply ignored the same without noting the position that a superior authority had considered the very same equipment that was in issue, holding the same to be taxable as a 'tool'. 9. The petitioners point out that the sales strategy adopted by them had taken into account the classification and the rate of tax as clarified by the Commissioner and hence no tax in excess of 4% had been collected by it. The petitioner had legitimately been of....
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....ron pipes, manhole covers, bends, etc. manufactured by a dealer from cast iron purchased by him. In doing so, the Bench noticed a Clarification issued by the Andhra Pradesh Revenue Department in favour of the assessee stating that such a Clarification was devoid of binding force and would, in any event, not bind the Court. At Paragraph Nos.18 and 19, the Court states thus: '18. So far as clarifications/circulars issued by the Central Government and/or State Government are concerned, they 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 government, whether in favour or against the assessee, is nothing more than its understanding and opinion. It is doubtful whether such clarifications and circulars bind the quasi-judicial functioning of the authorities under the Ac. While acting in quasi-judicial capacity, they are bound by law and not by any....
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.... 28A of the TNGST Act. The Clarification in that case thus, had statutory force and backing notwithstanding which the Bench states that it cannot override the statutory provisions including the prescriptions of rate of tax contained in the Schedules to the Act. Thus, while framing an assessment, an assessing authority has to act judicially and judiciously, applying the provisions of the Act and Schedules appropriately and in a proper fashion. If, in doing so, a view is taken that is contrary to a Clarification issued by the Commissioner, then, so be it, as long as the view is legally and statutorily proper and tenable. This is the view of the Bench in the paragraphs extracted below: '..... 24. Before dealing with the questions involved in these cases, we may refer to Section 28-A of the Act, which states:- "Power to issue clarification by Commissioner of Commercial Taxes: - (1) The Commissioner of Commercial Taxes on an application by a registered dealer, may clarify any point concerning the rate of tax under the Act. Such clarification shall be applicable to the goods specified in the application. Provided that no such application s....
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....sioner under Section 28-A of the Act cannot override the rate of tax fixed in the Schedules to the Act. 28. As regards, sub-section (3) of Section 28-A, in our opinion this provision only means that when the sales tax authorities are fixing the rate of tax in their executive capacity, they shall follow the circular of the Commissioner under Section 2. However, when the sales tax authorities are acting in a judicial or quasi-judicial capacity, in our opinion, they cannot be bound by the order of the Commissioner, because to take a contrary view would mean interference by the executive in a judicial function. When the assessing authority under the Sales Tax Act (or the appellate authority) decides a case, he is functioning in a judicial capacity (even though he may be a sales tax authority). Hence, when he is acting in a judicial capacity, he should not feel bound by any clarification issued by the Commissioner, as such clarifications under Section 28-A are not binding on him when he is functioning in a judicial capacity, and they are only binding when he is functioning in an administrative capacity, when initially fixing the rate of tax on a specific commodity.' 15. ....
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....ate Limited and Ors Vs. State of Tamil Nadu; Commissioner of Commercial Taxes, Department of Commercial Taxes; Commercial Tax Officer, Valluvarkottam Assessment Circle and Ors [(2013) 1 GSTL (VAT) 1 (MAD)], a Division Bench of this Court, while considering whether an Executive Circular will bind an assesee or not states as follows: '22.That apart, as pointed out by the learned Senior counsel Mr.Arvind P.Datar, at the time when the circular/clarification was issued, there was no enabling power under the VAT Act to issue such circulars or clarifications, which would bind the assessing authorities. The power to issue clarification and advance ruling was conferred on a State Level Authority comprising of the Commissioner of Commercial Taxes and tow additional Commissioner by insertion of Section 48A to the VAT Act by amendment Act 26 of 2011 w.e.f. 27.09.2011. Therefore, on the date when the clarification was issued based on which the petitioners are now called upon to pay tax at 14.5%, there was no enabling power to issue such clarifications. In fact, this issue was considered by a Division Bench of this Court in Texy One Private Limited Vs. The Principal Commissioner, 2012 5....
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....y, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding fifteen years from such date on or after the date of starting production as may be specified by the State Government in such notification, which may be the date of the notification or a date prior or subsequent to the date of such notification, and where no date is so specified from the date of first sale by such manufacturer, if such sale takes place within six months from the date of starting production, and in any other case from the date following the expiration of six months from the date of starting production, and subject to such conditions as may be specified, be exempt from trade tax on sale of goods whether wholly or partly or be liable to tax at such reduced rate as it may fix: Provided that in respect of goods manufactured in a new unit having a fixed capital investment of five crore rupees or more or in an existing unit which may make fixed capital investment of five crore rupees or more in expansion, diversification, modernisation and backward integration or in any one of them, within such period not exceeding fiv....
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.... in KESHAVJI RAVJI & CO. v. COMMISSIONER OF INCOME TAX, [1990] 183 ITR 1. In KESHAVJI RAVJI & CO. v. COMMISSIONER OF INCOME TAX, referred supra, while dealing with Section 119 of the Income Tax Act, which is pari materia to Section 28-A of the Tamil Nadu General Sales Tax Act, the Apex Court held that the benefits of such circulars to assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. That apart, the clarification dated 27.12.2000 gains a statutory force in view of Section 28-A of the Act, which was inserted by the Tamil Nadu Act 60 of 1997, which came into force with effect from 6.11.1997.' 22. In Hotel Shri Kannan Vs. State of Tamil Nadu and Another [(2007) 8 VST 97 Mad] and K.Arumuga Mudaliar & Co. Vs. Registrar, Tamil Nadu Taxation Special Tribunal and another, [(2003) 129 STC 141], Division Benches of this Court held that a Clarification issued by the Commissioner under Section 28-A of the TNGST Act, 1959 would bind the revenue, particularly where such clarification/instructions are favourable to an assessee. In the aforesaid three cases, the Clarifica....
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....ows: 'Y}g;hpfz;l; Mapy; kPjhd thp tut[ jpUg;gk; bra;jjd; kPjhd ghprPyid Kot[ tzpfh;fs; Y}g;hpfz;l Mapy; bfhs;Kjy; kPJ 12/5# thp brYj;jp mjid ,z;l!;l;hpay; ,d;g[l; Mf gad;gLj;jpajhf bjhptpj;J 12/5# thp tut[ <L bra;Js;sjhf bjhptpj;Js;shh;/ Mdhy; Y}g;hpfz;l; Mapiy gad;gLj;jp vt;tpj bghUSk; cw;gj;jp bra;jikf;fhd Mjhuk; VJk; ,y;iy/ g[jpa bghUs; jahhpg;g[f;F fd;R{kg[s; Mf (Use Consumable) gad;gLj;jpajw;fhd Mjhuk; VJkpy;iy/ nkYk; jkpH;ehL kjpg;g[f; Tl;L thpr; rl;lk; 2006. gphpt[ 19(2) (ii) d;go. bfhs;Kjy; bra;j bghUspidf; bfhz;L cw;gj;jp bra;J mjid tpw;gid bra;a[k;nghJ brYj;j ntz;oa thpf;F kl;Lnk bfhs;Kjy; kPjhd cs;sPl;L thpapid <L bra;a Koa[k;/ ,t;tpdj;jpy; tzpfh; bfhs;Kjy; bra;j Y}g;hpfz;l; Mapy; K:yg; bghUshfnth. fd;R{kg[s; Mfnth gad;gLj;jp g[jpa tzpfg; bghUs; cw;gj;jp bra;jjw;fhd Mjhu Mtz';fs; VJk; tzpfh;fs; jhf;fy; bra;ahjjhYk; gphpt[ 19(2)?d; go fz;Ls;s c&uj;JfSf;F cl;ghj fhuzj;jpdhYk; tzpfhpd; kWg;g[iufs; epuhfhpf;fg;gLfpwJ/ 3/hpf; kt[z;o';' kPJ thp tut[ jpUg;gk; bra;jjd; kPjhd ghprPyid Kot[ tzpfh;fs; j';fs; cw;gj;jp bra;tJ epyj;jpypUe;J ePh; vLg;gjw;F JisapLk; fUtp vdt[k; ,J xU Tools vdt[k; bjhptpj;J mjw;F 4# kl;Lnk thptpfpjk; vdj; b....
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....(Zhaving Razar) apid vLj;Jf; bfhz;lhy; mjdpy; gpnsoid bghUj;jp kl;Lnk gad;gLj;j ,aYk;/ gpnsL ntW bghUs; nrtp'; bkc&pdpd; L:y;!; Mf fUj KoahJ/ gpsL ntW bghUs; nrtp'; bkc&pd; ntW bghUshFk;/ mJ nghynt Jis nghl gad;gLk; ,ae;jpuj;jpy; Hamer bit?apid bghUj;Jtjhy; kl;Lnk ,ae;jpuj;jpid Tools Mf fUj KoahJ/ nkYk; ,t;tpae;jpuj;jpd; ruhrhp tpw;gid kjpg;g[ U:/10 yl;rk; MFk;/ nkYk; tzpfh;fs;. yhhp nrrp'; bghUj;jpa gpd;dh;jhd hpf; tz;o Mf bgah; khw;wk; bgw;W nkhl;lhh; thfd rl;lj;jpd; fPH; gjpt[ bra;ag;gl;L gad;ghl;Lf;F vLj;Jr;bry;yg;gLfpwJ vd;gjw;F kWg;g[ VJk; kWg;g[iufspy; bjhptpf;ftpy;iy/* 25. The classification of the equipment as 'accessories of motor vehicle' has been done by the officer in a proper and detailed manner and nothing has been pointed out to establish that the classification is perverse or contrary to the factual position. The only argument raised and argued is to the effect that the officer ought to have followed the Clarification issued by the authority. In the light of the detailed discussion as above, this argument of the petitioner is rejected. 26. Having said so, I cannot, but, note the position that, admittedly, the Clarification issued by the C....