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2006 Supreme(Mad) 2916
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. A.P. SHAH & THE HONOURABLE MR. JUSTICE K. CHANDRU
M/s. P.A.S. Industries, rep. by its Proprietor - Appellant
Versus
The Commissioner of Commercial Taxes & Another - Respondents
W.A.No.1293 of 2006 & W.P.No.30256 of 2006 & M.P.Nos.1 of 2006 and 2 of 2006
Decided On : 01 November 2006
Clarifications issued by the revenue department are binding and can only be prospectively withdrawn, and cannot affect the assessee prejudicially in the assessment year in question.
Headnote:
Clarification - Tax Assessment - Tamil Nadu General Sales Tax Act, 1959, Central Sales Tax Act, 1956 - Section 28-A, Section 42 - Summary: The court considered the issue of retrospective application of a clarification issued by the Commissioner of Commercial Taxes, Chennai, and held that such clarifications cannot affect the assessee prejudicially in the assessment year in question. The court relied on various judgments to establish that clarifications issued by the revenue department are binding and can only be prospectively withdrawn. The court allowed the writ petition, declaring that the clarification would have only prospective application and quashed the impugned assessment order.
Fact of the Case:
The petitioner, a registered dealer, contested a revision of assessment proposing higher tax rates for the sale of Compacting Machinery. The petitioner argued that a clarification issued by the first respondent should only have prospective application and cannot affect settled assessments.
Finding of the Court:
The court found that the clarification issued by the Commissioner of Commercial Taxes, Chennai, would have only prospective application and consequently quashed the impugned Assessment Order.
Issues: The main issue was the retrospective application of the clarification issued by the Commissioner of Commercial Taxes, Chennai, and its impact on the petitioner's settled assessments.
Ratio Decidendi: The court relied on various judgments to establish that clarifications issued by the revenue department are binding and can only be prospectively withdrawn. It held that the clarification would have only prospective application and quashed the impugned assessment order.
Final Decision: The writ petition was allowed, declaring that the clarification would have only prospective application and quashed the impugned Assessment Order. The writ appeal was dismissed, and the connected miscellaneous petitions were closed with no costs.
(Prayer in WA: Appeal filed under Clause 15 of the Letters Patent against the order, dated 02.9.2006 passed in M.P.No.2 of 2006 in W.P.No.30256 of 2006 on the file of this Court.
Prayer in WP: Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorari to call for the records of the second respondent in Asst.No.2440839/2003-04, dated 15.5.2006 and quash the same as illegal and further pass such further orders.)
A.P. Shah, C.J.
Heard the learned counsel appearing for the parties. The learned Special Government Pleader appearing for the respondents waives service. By consent, the writ petition itself is taken up for final hearing along with the writ appeal.
2. The petitioner is a registered dealer both under the Tamil Nadu General Sales Tax Act, 1959 and the Central Sales Tax Act, 1956. The petitioner is engaged in the business of sale of Compacting Machine to the Spinning Mills. For the year 2003-2004, the petitioner had reported a total and taxable turnover of Rs.77,69,000/- exigible to tax at 4% and the same was duly accepted and assessment was finalised. Subsequently, the second respondent proposed a revision of assessment vide his proceedings, dated 24.2.2006 on the ground that Compacting Machinery dealt with by the petitioner would fall under Entry No.20 of Part D of the First Schedule attracting 12% tax and penalty is also leviable for the shortfall of tax paid. The petitioner filed their objections vide letter, dated 19.3.2006 contending inter alia that Compacting Machinery is a 'Textile Machinery' and hence it cannot be categorised under General Entry No.20. The second respondent vide his order, dated 15.5.2006, relying upon the clarification issued by the Commissioner of Commercial Taxes, Chennai, dated 23.11.2005 vide clarification No.205/2005, held that the Compacting Machinery would fall under Entry No.20 and thus exigible to tax at 12%. Consequently, the second respondent imposed additional levy of tax at the rate of 12% amounting to Rs.6,21,520/- and penalty at the rate of 125% amounting to Rs.7,76,900/-. The order of the second respondent is impugned in this writ petition under Article 226 of the Constitution of India.
3. The learned counsel appearing for the petitioner strenuously contended that any clarification issued by the first respondent can only be prospective in operation and cannot be retrospective for the simple reason that the assessments settled or returns filed and acted upon in lieu of an earlier clarification or circular could never be reopened on the basis of a subsequent clarification or circular. Our attention was drawn to the earlier clarification issued by the first respondent vide his Communication, dated 02.12.1998 under Section 28-A of the Tamil Nadu General Sales Tax Act, 1959, whereby it was clarified that the Compacting Machinery would fall under Entry 76 in Part-B of the First Schedule and is exigible to tax at 4% with effect from 17.7.1996.
4. In support of his submission, the learned counsel relied upon various judgments of the Supreme Court including the judgment in Paper Products Limited -Vs- Commissioner of Central Excise (1999 (112) E.L.T. 765), wherein it was held that the Revenue can withdraw the earlier clarification issued with prospective effect and not with retrospective effect. He also relied upon a decision of the Division Bench of this Court in Mohan Breweries & Distilleries Ltd. -Vs- Commercial Tax Officer, (139 S.T.C. 477).
5. In reply, the learned Special Government Pleader submitted that a clarification issued under sub-section (3) of Section 28-A of the Tamil Nadu General Sales Tax Act, 1959 cannot bind the sales tax authorities acting under judicial or quasi-judicial capacity. He submitted that such clarifications are 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. He further submitted that there can b
