Madras High Court
Paranthaman Rock Drills vs / on 15 October, 2019
Author: Anita Sumanth
Bench: Anita Sumanth
WP.Nos.5982 & 5984 of 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 15.10.2019
CORAM
THE HON'BLE DR.JUSTICE ANITA SUMANTH
WP.Nos.5982 & 5984 of 2009
Paranthaman Rock Drills,
Represented by its Partner,
T.P.Thangaraj,
136-B, Sankari Main road,
Tiruchengode. ... Petitioner in W.P.No.5982 of 2009
Parantham Hydraulics and Equipments,
Represented by its Proprietor,
T.T.Paranthaman,
Sankari Main Road,
Sitharampalayam P.O,
Tiruchengode. ... Petitioner in W.P.No.5984 of 2009
/Vs/
1.The Commercial Tax Officer (FAC)
Tiruchengode (Town),
Tiruchengode.
2.The Commissioner of Commercial Taxes,
Ezhilagam, Chepauk,
Chennai – 600 005. .... Respondents in both W.Ps.
PRAYER in W.P.Nos.5982 and 5984 of 2009: PETITIONs filed under Article
226 of the Constitution of India praying for the issuance of writ of Certiorarified
Mandamus, to call for the records on the files of the First Respondent herein in
VAT No.33093182418/07-08 & 33573181960/07-08 dated 18.03.2009 and
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WP.Nos.5982 & 5984 of 2009
quashing the same and direct the first respondent herein to redo the
assessment based on the circular issued by the Second Respondent herein in his
VAT.Cell/20344/07(VCC No.582) dated 25.05.2007.
For Petitioner : Mrs.R.Hemalatha in both WPs.
For Respondents : Mr.V.Haribabu,
Additional Government Pleader
in both WPs.
COMMON ORDER
Heard Mrs.R.Hemalatha, learned counsel for the petitioners and Mr.V.Haribabu, learned Additional Government Pleader for the Commercial Taxes Department.
2. The petitioners are manufacturers of borehole drilling rigs (in short ‘equipment’) used for the purpose of drilling. They are registered dealers on the file of the first respondent, the Commercial Tax Officer. Since there was some ambiguity felt as to the rate of tax applicable to the equipment, the petitioners sought a clarification from the Commissioner of Commercial Taxes under application dated 29.03.2007 as to what the proper classification of the commodity 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 http://www.judis.nic.in 2/20 WP.Nos.5982 & 5984 of 2009 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 st rate of 4% under Entry No.138 of Part B to the I 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 Sir, Sub: TNVAT Act, 2006 – Rate of tax clarification under TNVAT Act, 2006 for water borehole drilling rigs – requested- regarding.
Ref: Lr. Dated 29.03.2007 from Tvl.Paranthaman Hydraulics and Equipment, Tiruchengode, Namakkal.
Tvl.Paranthaman Hydraulics and Equipments 135 A TTP Complex, Sankari Road, Tiruchengode have requested rate of tax clarification under the TNVAT Act 2006 for water borehole drilling rigs and unloader.
It is clarified that water borehole drilling rigs are taxable at 4% vide entry No:138 of Part B to I Schedule to TNVAT Act 2006 with effect from 01.01.2007.
UNLOADER 12.5% Part C to I Schedule.
Sd/.XXXXXXXX, For Commissioner of Commercial Taxes Copy to The Secretary to Government, Commercial Taxes and Registration Department, Chennai 9.
http://www.judis.nic.in 3/20 WP.Nos.5982 & 5984 of 2009 /True copy by order/ XXXXXX COMMERCIAL TAX OFFICER (VAT)’
4. The petitioners on the basis of the aforesaid clarification collected tax at the rate of 4% on the sales of the equipment. While this is so, proceedings appear to have been initiated by the Commercial Taxes Department proposing to levy tax at the rate of 12.5% treating the equipments as ‘Motor Vehicle accessories’. A provisional assessment was originally made which was challenged by way of Writ Petition. The provisional assessment was set aside and the Assessing Authority directed to pass final orders on merits and in accordance with law.
5. Proceedings for assessment were thereafter concluded on 26.11.2008 accepting the return filed by the petitioners. A copy of this order is not available on file. This was followed by show cause notice dated 04.12.2008 proposing the levy of a higher rate of tax. This was also challenged by the petitioners but the challenge was rejected by order of this Court dated 22.12.2008 directing the petitioners to file objections and explanations as well as all materials that they may rely upon in support of their stand and directing the Assessing Authority to conduct a proper enquiry, afford opportunity and pass order on merits and in accordance with law in a time bound fashion.
6. Pursuant thereto, notice was issued on 02.02.2009 by the Assessing Authority. Objections were filed by the petitioners, notwithstanding which, the http://www.judis.nic.in 4/20 WP.Nos.5982 & 5984 of 2009 impugned orders of assessment have been passed levying 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 the understanding that the Clarification having been issued by the Commissioner of Commercial Taxes, the Head of the Commercial taxes Department, it would be followed by the assessing authorities in the matter of framing of assessments. They have thus been greatly prejudiced by virtue of the classification and the enhanced rate of tax adopted by the Assessing Authority.
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10. A counter has been filed by the respondents wherein the order of assessment has been strenuously defended. The counter reiterates the position that rigs, other than hammer bits mounted upon lorries, would fall only under the entry dealing with accessories of Motor Vehicles and there was thus no flaw in the reasoning of the Assessing Officer. The respondents state that rigs that run on hydraulic power and mounted on vehicles are called rig vehicles and had been rightly classified by the Assessing Authority. They point out that the Clarification relied upon has no relevance in the present case since the bore well rigs that are sold by the petitioner are not delivered as rigs but are mounted on lorries and hence can only be classified as accessories of Motor Vehicles.
11. One of the grounds raised by the petitioner relates to random selection for scrutiny and assessment in terms of Section 22 (iii), which is not very seriously pursued and is hence rejected in limine.
12. On the ground of classification and applicable rate itself, the equipment in this case is seen to be a rig which, as disclosed appropriately by the petitioner in its application before the Commissioner, is mounted on a chassis. While the Commissioner, after taking cognizance of the description set out by the petitioner has chosen to classify the equipment as a tool, the Assessing Authority has taken the view that the equipment is an accessory to a motor vehicle. No doubt, the Clarification is of the nature of an Executive Order and the question that arises for determination is as to whether it will bind the Assessing Authority in the matter of framing of assessments. http://www.judis.nic.in 6/20 WP.Nos.5982 & 5984 of 2009
13. This question is hardly res integra, having been considered by a number of judgements of the Supreme Court/decisions of this Court. A Full Bench of the Supreme Court, in the case of Bengal Iron Corporation and Others V. Commercial Tax Officer and others (1994 Supp (1) SCC 310), considered whether ‘cast iron’ would cover castings, such as, cast iron 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 administrative instructions, opinions, clarifications or circulars. Law is what is declared by this Court and the High Court - to wit, it is for this Court and the High Court to declare what does a particular provision of statute say, and not for the executive. Of course, the Parliament/Legislature never speaks or explains what does a provision enacted by it mean. (See Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd. and Anr. MANU/SC/0040/1982 :
[1983]1SCR1000 ).
19. Now coming to G.O. Ms. 383, it is undoubtedly of a statutorily character but, as explained hereinbefore the power under Section 42 cannot be utilised for altering the provisions of the Act but only for giving effect to the provisions of the Act. Since the goods manufactured by the appellant are different and distinct goods from cast iron, their sale attracts the levy created by the Act. In such a case, the government cannot say, in exercise of its power under Section 42(2) that the levy created by the Act shall not be effective or operative. In other words, the said power cannot be utilised for dispensing with the levy created by the Act, over a class of http://www.judis.nic.in 7/20 WP.Nos.5982 & 5984 of 2009 goods or a class of persons, as the case may be. For doing that, the power of exemption conferred by Section 9 of the A.P. Act has to be exercised.
Though it is not argued before us, we tried to see the possibility but we find it difficult to relate the order in G.O. Ms. 383 to the power of the Government under Section 9, apart from the fact that the nature and character of the power under Section 42 is different from the one conferred by Section 9. As exemption under Section 9 has to be granted not only by a notification, it is also required to be published in the Andhra Pradesh Gazette. It is not suggested, nor is it brought to our notice, that G.O. Ms. 383 was published in the Andhra Pradesh Gazette. This does not, however, preclude the Government of Andhra Pradesh from exercising the said power of exemption, in accordance with law, if it is so advised. We need express no opinion on that score.
14. This view has been reiterated by the First Bench of this Court in the case of Pizzeria Fast Foods Restaurant vs. Commissioner of Commercial Taxes (W.A.3995 of 2004 dated 15.02.1995). The Bench has considered the validity of a Clarification issued by the Commissioner, the head of the Department, in terms of Section 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 shall be entertained unless it is http://www.judis.nic.in 8/20 WP.Nos.5982 & 5984 of 2009 accompanied by proof of payment of such fee, paid in such manner, as may be prescribed.
(2) The Commissioner of Commercial Taxes may, if he considers it necessary or expedient so to do, for the purpose of uniformity in the work of assessment and collection of tax, clarify any point concerning the rate of tax under this Act or the procedure relating to assessment and collection of tax as provided for under this Act.
(3) All persons working under the control of Commissioner of Commercial Taxes shall observe and follow the clarification issued under sub-section (1) and sub-section (2)"
Amendment to the above Act was inserted from 6.11.1997 by the Tamil Nadu General Sales Tax (6th Amendment) Act, 1997.
25. A perusal of the above provision shows that the Commissioner can clarify any point concerning the rate of tax under the Act, and in view of sub-section (3) all persons working under the control of the Commissioner have to observe and follow the clarification issued by him. In our opinion, this power of the Commissioner to issue clarification does not mean that the Commissioner can override or amend provisions of the Act or rules made thereunder.
26. It may be noted that a clarification can only be issued on an application by a registered dealer regarding the rate of tax on any goods. It seems that the purpose of inserting Section 28-A was that some businessmen wanted to know their tax liability, so that they could make financial and other arrangements accordingly. In a business, a businessman has to do planning so that he can earn profits. For doing such planning, he obviously would like to know what would be his tax liability so that he can t ake it into account when doing his financial planning for the business. Hence, for the above said purpose, he can apply to the Commissioner to clarify any point regarding the rate of sales tax on a taxable commodity. 27. It may be noted that the rates of tax are mentioned in the Schedules to the Act. The charging sections are Section 3 and other following provisions of the Act. It is well settled that a Schedule to an Act is part of the Act itself and hence has statutory force. The Commissioner, who is only an executive authority, cannot over-ride the provisions of the Act itself. That being so, in our opinion, the direction issued by the Commissioner 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 http://www.judis.nic.in 9/20 WP.Nos.5982 & 5984 of 2009 functioning in an administrative capacity, when initially fixing the rate of tax on a specific commodity.'
15. A Division Bench of this Court in Texx One Private Limited Vs. Principal Commissioner and Commissioner Commercial Taxes, Chepauk, Chennai and another and S.R.F. Limited Vs. Commercial Tax Officer, Manali Assessment Circle, Chennai and another [(2012) 52 VST 377 (Mad)] has also opined that, while undoubtedly, statutory circulars and instructions would bind the authorities under the respective statutes, executive and other departmental instructions really have no existence in law and to the extent to which they are contrary to statutory provisions could claim no binding force. Paragraphs Nos. 27 and 28 are relevant and are extracted below:
’27. There is no doubt that circulars and instructions issued in exercise of statutory powers are binding on the authorities under the respective statutes. Before deciding the binding nature of such circulars, the power derived from the statute for issuing such circulars has also to be considered. The Supreme Court in Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries [2008] 13 SCALE 353, held that a circular which is contrary to the statutory provisions has really no existence in law.
28. Since the Commissioner has not issued any clarification earlier in This copy was printed from VATLaws licensed to: R.S. Goyal VATLaws (Readable Version) - Tuesday, May 07, 2013 respect of the product manufactured by the petitioner the Commissioner was justified in clarifying the position later at the instance of the petitioner. In any case, the impugned clarification was no merits, correctness of which is a matter to be decided in appropriate proceedings. Since the legality and correctness of the finding recorded by the Commissioner is not under challenge in this writ petition, such contentions could be raised before the assessing authority and as such, we are not expressing any opinion on such matters.’
16. Two learned Single Judges of this Court in the cases of M/s.Celebrity Fashions Limited Vs. The Commissioner of Commercial Taxes, Chepuak, Chennai in W.P. No.3926 of 2008 dated 04.09.2008 and Lloyd Insulations (India) Limited http://www.judis.nic.in 10/20 WP.Nos.5982 & 5984 of 2009 Vs. Joint Commissioner (CT), Chennai (Central Division) and others [(2010) 35 VST 103 (Mad)] have also held that an executive circular has no binding force.
17.The petitioner relies on the following decisions, specifically on the portions extracted. In Canon India Private 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 52 VST 377 Madras, wherein, the Division Bench held that on the date when the circular was issued, the Commissioner did not have statutory powers to issue such circular and the net result is that the circular has no statutory force.
23. In the light of the above discussion taking note of the decisions cited supra, in our view the circular issued by the Commissioner though stated to be without jurisdiction, the circular having been issued by the highest officer in the department, the assessing officers, who are subordinate officers cannot be expected to take a different view and therefore, no useful or fruitful purpose would be served in directing the petitioners to avail the remedy under the Act and therefore, these writ petitions questioning the classification of the goods are held to be maintainable before this Court on account of the reason recorded above. This conclusion of ours is fortified by the decision of the Hon’ble Supreme Court instate of U.P vs. Indian Hume Pipe Co.Ltd., 1977 39 STC 355.’ http://www.judis.nic.in 11/20 WP.Nos.5982 & 5984 of 2009
18. In the case of Commissioner of Sales Tax, U.P Vs. Indra Industries [(2000) 9 SCC 66], a Full Bench of the Supreme Court considered the proposition as to whether Circulars issued by the Commissioner of Sales Tax would bind the Assessing Authority and held in that context that though a Circular issued by a Tax Authority would bind neither the Court nor an assessee, an interpretation placed by a taxing authority on a position of law would bind that taxing authority. Thus Assessing Authorities working under the jurisdiction of a Commissioner cannot be heard to advance an argument that would be contrary to the superior officers’ interpretation on the same point.
19. The Bench in this case was considering a Circular issued in the context of Section 4-A of the U.P. Trade Tax Act, 1948 that grants an exemption from the levy of trade tax in certain cases. Section 4-A of the U.P. Trade Tax Act is extracted below:
' Section 4-A - Exemption from trade tax in certain cases (1) Notwithstanding anything contained in this Act, where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any district or parts of district in particular, it may on application or otherwise, in any particular cases or generally, 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 http://www.judis.nic.in 12/20 WP.Nos.5982 & 5984 of 2009 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 five years as may be specified in the notification, the exemption from or reduction in the rate of tax may be granted.]'
20. The assessee in that case was entitled to an exemption in terms of Section 4-A and had obtained an eligibility certificate in that regard. The Commissioner of the State appears to have instructed the authorities to the effect that the sales effected by an assessee through commission agent would also be included in the assessee's turnover for the purpose of computation and grant of exemption despite which the sales through commission agent were brought to tax. This was a matter of challenge before the Allahabad High Court that held on October 23, 1992 in Indra Industries Vs. Commissioner of Sales Tax that the sales through commission agent would also be eligible to the exemption sought in the light of the Commissioners' circular aforesaid. This decision was rendered by Justice M.Katju (as he then was). Notably, the decision of the First Bench of this Court in Pizzeria Fast Foods Restaurant (supra) has also been authored by the same Judge, as Chief Justice of this Court. The decision of the Allahabad High Court as confirmed by the Supreme Court thus proceeded on the basis of the statutory exemption granted to an assessee in terms of Section 4-A of the U.P. Trade Tax Act and the eligibility certificate granted to the assessee in that case. The judgment of the Supreme Court in Indra Industries (supra) has to be seen in the context of the aforesaid facts and legal position and is distinguishable from the facts and circumstances of the present case. http://www.judis.nic.in 13/20 WP.Nos.5982 & 5984 of 2009
21. In the case of Mohan Breweries and Distilleries Limited Vs. Commercial Tax Officer and others [(2005) 1 39 STC 477 (Mad)] a Division Bench of this Court at paragraph No.8.6.2 states as follows:
‘8.6.2. The Apex Court in STATE BANK OF TRAVANCORE v. C.I.T., [1986] 158 ITR 102 held that even though the clarifications issued by the revenue being executive in character cannot alter the provisions of the Act, since they are in the nature of concessions, they can always be prospectively withdrawn. In the instant case, even though the clarification dated 9.11.1989 is executive in nature, the concessions given to the assessee could be withdrawn only prospectively, but not retrospectively because, such executive circulars are binding on the authorities, as held by the Apex Court 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 Clarifications under reference were issued under Section 28-A of the TNGST thus assuming statutory force whereas in the present case, the Clarification is executive in nature and admittedly, has no statutory backing.
23. The legal position that emerges to me from a consolidated understanding of the decisions referred to above is that an Executive Circular that has no claim to statutory sanction or force cannot bind either an assessee or http://www.judis.nic.in 14/20 WP.Nos.5982 & 5984 of 2009 the revenue. Needless to say, no Circular, executive or otherwise, will bind the Courts. In fact, Courts have held that even a statutory Clarification issued by the head of the Commercial Taxes Department would not be the final word when it comes to matters such as classification of commodities/equipments or rate of tax thereupon, if such clarifications are contrary to law or the provisions of the Statute itself, including the Schedules thereto. Such being the case, a Clarification, in the nature of an Executive Circular has no binding force. More so, in the present case, the assessing authority has taken up and completed the assessment pursuant to an order passed by this Court dated 22.12.2008 directing completion of the assessment in the following manner:
'6. In view of the said submission made by the learned counsel for the petitioner as well as the respondents and considering the fact that by the impugned order, the petitioners have been directed to give objections within 15 days, the writ petitions are disposed of with direction to the petitioners to submit detailed explanation and also necessary accounts and necessary materials to prove the nature of goods before the assessing authority and the assessing authority shall conduct proper enquiry after giving opportunity to the petitioner and pass fresh orders on merits and in accordance with law, expeditiously, in any event within a period of eight weeks from the date of receipt of a copy of this order. No costs. Consequently, the connected Miscellaneous petitions are closed.' Thus, the Officer was specifically directed to complete the assessment on merits and in accordance with law which means a proper interpretation of the relevant statutory provisions and schedules thereto.
24. The operative portion of the orders of assessment and the reasons adduced by the Assessing Authority in support of the classification and rate adopted by him are as follows:
‘Y}g;hpfz;l; Mapy; kPjhd thp tut[ jpUg;gk; bra;jjd; kPjhd ghprPyid Kot[ http://www.judis.nic.in 15/20 WP.Nos.5982 & 5984 of 2009 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; bjhptpj;Js;sdh;/ nkYk; tzpf thp Mizah; mth;fSf;F jtwhd Kd;bkhHptpid (Misrepresentation) rkh;g;gpj;J jh';fs; cw;gj;jp bra;j bghUs; Tools vd bjspt[iu bgw;Ws;shh;/ Mdhy; epyj;jpypUe;J ePh; vLg;gjw;F gad;gLj;Jk; JisapLk; fUtpahdJ (Water Borehold Drilling Rigs) Tools my;y/ ,f;fUtpapid jdpj;J gad;gLj;j ,ayhJ/ yhhp nrrp!;fspy; ,f;fUtpapid kt[z;o'; bra;J. yhhp nrrp!; vd;w epiyapypUe;J hpf; tz;o vd KGikailfpwJ/ tzpfh; hpf; kt[z;o'; kw;Wk; Water Borehold Drilling Rigs vd;gJ nkhl;lhh; thfd Jiz ghfnk/ ,jw;Fhpa FwpaPl;L vz; 349 /// 12/5#f;F cl;gl;lJ Tools vd;gJ vspjpy; ifapy; vLj;Jr; bry;yf;Toa !;ngdh;. jpUg;g[sp ,it nghd;w gpw bghUl;fs; kl;LkhFk;/ nkYk; yhhp nrrp';fps; tzpfh; jahhpj;j ,ae;jpuj;jpid bghUj;jg;gl;l gpd;dh;jhd;. upf; tz;o vd bgah; bgw;W nkhl;lhh; thfdr; rl;lj;jpd; fPH; gjpt[ bra;ag;gl;L gjpt[ vz; tH';fg;gLfpwJ/ mjhtJ Lorry Combined Rig Vehicle vd khw;wk; bra;J epyj;joapypUe;J ePh; vLg;gjw;F gad;gLj;jg;gLfpwJ (c/k;) ouhf;lhpy; bey; mWtil ,ae;jpuk; bghUj;Jtijg; nghd;wjhFk;/ bey; mWtil ,ae;jpuj;jpid L:y;!; vd fUj ,ayhJ ,jid Tractor Combine Harvestor vd g[jpa tzpfg; bghUshf bgah; bgw;W miHf;fg;gLfpwJ/ nkYk; tzpfh; jahhpg;g[ bghUshd hpf; kt[z;o';’ epHy; glk; (Zerox copy) kw;Wk; mjdpy; Fwpg;gplg;gl;ll ,ju tt[r;rh;fis Muha;e;jjpy; gpd;tUk; bghUl;fs; ml';fpajhf bjhptpf;fg;gl;Ls;sJ/
1. Truck mounted rig power from truck engine.
2. Hydraulic cylinder and wire rope
3. Rotary head is powered by one hydraulic motor
4.Triplex reciprocating pump
5. Hydraulic break
6.Compressor nkw;fz;l midj;Jk; ml';fpa Tl;L bghUs; epyj;jo ePh; vLf;f gad;gLk; hpf; ,ae;jpuk;
MFk;/ ,jdpy; ml';;fpa nkw;fz;l bghUl;fs; hpf; ,ae;jpuj;jpd; !;ngh;!; (Spares) MFk;/ nkw;go ,ae;jpuk; yhhpapy; bghUj;jg;gl;L yhhp fk;igd; hpf; tz;o vd nkhl;lhh; thfd rl;lj;jpd; gjpt[ bgw;W epyj;jo ePh; vLf;f Jis nghLtjw;F gad;gLj;jg;gLfpwJ/ ,t;tpae;jpuj;jpd; icwl;uhypf; tpirahy; ,a';Fk; nghJ mjdpy; bghUj;jg;gl;l fk;gurphpy; cs;s Edpapy; JisnghLtjw;F bghUj;J Hammer bit vd;w bghUs;jhd; L:y;!; vd miHf;fg;gLfpwJ/ nkw;go Hammer bit vd;w bghUs; kl;Lnk Jis nghLk; fUtp MFk;/ Mdhy; tzpfh;fs; tzpf thp Mizah; mth;fSf;F Jis nghl gad;gLj;Jk; ,ae;jpuj;jpid tpsf;fkhf vLj;Jiuf;fhky; jtwhd Kd;bkhHpt[fis rkh;g;gpj;J bjspt[iu bgw;Ws;shh;/ http://www.judis.nic.in 16/20 WP.Nos.5982 & 5984 of 2009 (c/k;) thof;ifahsh; gad;gLj;Jk; Kfr; rtuk; bra;a[k; fUtp (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 Commissioner has not been withdrawn. If at all the Assessing Authority in the present case was of the view that the Clarification had not taken note of certain factual aspects or, as he has stated in the impugned orders, has been obtained on a mis-representation, he ought to have brought this to the notice of the higher authorities and obtained proper guidance before proceeding to unilaterally reject the ratio of the Clarification and proceed on an altogether different premise. What results is a contradiction between the view taken in assessment and what the Commissioner has stated, in regard to the identical commodity.
27. I also find some force in the statement of the assessee that, being guided by the Clarification issued it has collected only 4% of tax on the sale of http://www.judis.nic.in 17/20 WP.Nos.5982 & 5984 of 2009 the equipment. Though I am conscious of the position that there is no equity in tax law my conclusion to follow is not based on equity but on the fact that a higher tax burden has been mulcted on an assessee with regard to the same commodity that has been classified by the Commissioner at a lower rate, on account of the contrary views taken by the assessing officer and Commissioner resulting in an anomalous position.
28. The Commercial Taxes Department is one cohesive whole and an assessee, when it approaches the Head of the Department, believes that a Clarification obtained from such authority would be respected and applied by those subordinate to him. It is probably for this reason that some Courts have held that while such a Clarification would neither bind the Court nor an assessee, it would bind an Assessing Authority, subordinate to the Commissioner in hierarchy where it favours the assessee. Discretion/liberty was available with the Commissioner to withdraw the clarification, if, on examination of other materials that may have been brought to his attention by Officers of the Department, he realises that the Clarification issued was incorrect in law or fact. This has not been done and admittedly, the Commissioners’ Clarification was current during the relevant periods when the transactions of saletook place and when the assessments were framed. It has, in fact, not been withdrawn till date.
29. The Commercial taxes Department has, for this reason, constituted a Committee to consider and grant a waiver of disputed demands, the liability for which arises on account of conflicting clarifications and/or opinions expressed by Commissioners of the Department/assessing officers. This has also been note of http://www.judis.nic.in 18/20 WP.Nos.5982 & 5984 of 2009 by the Supreme Court in the case of Vasantham Foundry V. Union of India and others {1995 SCC (5) 289} As a fact, the assessee in the present case has not collected tax in excess of 4% relying on the Clarification issued by the Commissioner that has not been followed in assessment. Thus, the petitioner is permitted to seek waiver of the disputed amounts raised in the impugned assessments and the Committee for waiver shall consider the request and grant the same.
30. These Writ Petitions are dismissed, subject to the liberty granted as above, and connected Miscellaneous Petitions are closed. No costs.
15.10.2019 Index : Yes/No Internet : Yes/No speaking order/ non-speaking order rkp/sl To
1.The Commercial Tax Officer (FAC) Tiruchengode (Town), Tiruchengode.
2.The Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai – 600 005.
DR.ANITA SUMANTH, J.
rkp/sl http://www.judis.nic.in 19/20 WP.Nos.5982 & 5984 of 2009 WP.Nos.5982 & 5984 of 2009 15.10.2019 http://www.judis.nic.in 20/20