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2013 Supreme(Mad) 1776
High Court of Judicature at Madras
R. SUDHAKAR, J.
Nazareth Foods (P) Ltd., rep. by its Managing Director Ms. Telma Isaac & Another
Versus
The Assistant Commissioner (CT) & Another
W.P. Nos. 11121 of 2011 to 11124 of 2011
Decided On : 29-04-2013
Advocate Appeared:
For the Petitioners:V. Sundareswaran, Advocate.
For the Respondents:P.H. Arvind Pandian, Additional Advocate General Assisted by V. Haribabu, Addl. Govt. Pleader (Taxes) Assisted by Cibi Vishnu, Addl. Govt. Pleader (Taxes)
The substitution of a provision in a statute has retrospective effect if the intention of the legislature is to grant tax relief measures and if the new provision is to be read as if it had always been in force.
Headnote:
The issue in these writ petitions is whether the petitioners are entitled to exemption from Value Added Tax (VAT) for the sale of turmeric powder and coriander powder for the assessment year 2006-2007 and 2007-2008. The petitioners were registered dealers under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) and are now registered dealers under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act). The goods in question, turmeric and coriander, were exempted from VAT under the TNGST Act. However, when the TNVAT Act came into force on 1.1.2007, the exemption for turmeric and coriander was not specifically mentioned. The petitioners continued to sell turmeric powder and coriander powder as exempted goods and filed monthly returns for the assessment years 2006-2007 and 2007-2008. In 2008, the Tamil Nadu Value Added Tax (Amendment) Act, 2009 (Act 32/2008) was passed, which substituted Serial No.18 of Part B of the Fourth Schedule to the TNVAT Act to restore the exemption for turmeric and coriander. The petitioners contended that the substitution made by Act 32/2008 has retrospective effect from 1.1.2007, when the TNVAT Act came into force. The respondents, on the other hand, contended that the exemption is applicable only from 1.4.2008, the date on which Act 32/2008 came into force.
Fact of the Case:
The petitioners were registered dealers under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) and are now registered dealers under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act). The goods in question, turmeric and coriander, were exempted from VAT under the TNGST Act. However, when the TNVAT Act came into force on 1.1.2007, the exemption for turmeric and coriander was not specifically mentioned. The petitioners continued to sell turmeric powder and coriander powder as exempted goods and filed monthly returns for the assessment years 2006-2007 and 2007-2008. In 2008, the Tamil Nadu Value Added Tax (Amendment) Act, 2009 (Act 32/2008) was passed, which substituted Serial No.18 of Part B of the Fourth Schedule to the TNVAT Act to restore the exemption for turmeric and coriander.
Finding of the Court:
The Court held that the substitution made by Act 32/2008 has retrospective effect from 1.1.2007, when the TNVAT Act came into force. The Court relied on the following factors: * The intention of the legislature, as evidenced by the objects and reasons of Act 32/2008, was to grant tax relief measures. * The word "substitution" in the context of the amendment means that the new provision is to be read as if it had always been in force. * The Full Bench of the Kerala High Court and the Supreme Court have held that turmeric and coriander are one and the same goods, and that the powder form of these goods is also exempt from VAT. * The Government of Tamil Nadu had issued a Government Order in 1998 clarifying that turmeric powder and coriander powder are exempt from VAT. The Court also held that the proceedings initiated by the respondents under Section 27 of the TNVAT Act, which is the provision relating to assessment of escaped turnover, were without jurisdiction and contrary to law, since there was no original assessment order passed by the respondents.
Issues: 1. Whether the substitution made by Act 32/2008 has retrospective effect from 1.1.2007, when the TNVAT Act came into force? 2. Whether the proceedings initiated by the respondents under Section 27 of the TNVAT Act were without jurisdiction and contrary to law?
Ratio Decidendi: 1. The word "substitution" in the context of the amendment means that the new provision is to be read as if it had always been in force. 2. The intention of the legislature, as evidenced by the objects and reasons of Act 32/2008, was to grant tax relief measures. 3. The Full Bench of the Kerala High Court and the Supreme Court have held that turmeric and coriander are one and the same goods, and that the powder form of these goods is also exempt from VAT. 4. The Government of Tamil Nadu had issued a Government Order in 1998 clarifying that turmeric powder and coriander powder are exempt from VAT.
Final Decision: The writ petitions were allowed and the impugned orders were quashed.
1. The petitioners have filed these writ petitions seeking issuance of writ of Certiorarified Mandamus to call for the records of the first respondent in TIN/33161023402/2006-07, TIN/33161023402/2007-08, and TIN/33121024588/2006-07, TIN/33121024588/2007-08 respectively, quash the impugned proceedings dated 14.3.2011 and further direct the first respondent to grant exemption on the sale of "coriander powder" and "turmeric powder" in view of the Notification issued by the second respondent in G.O.Ms.No.36, CT & R (B1), dated 1.4.2008 substituting Entry 18, Part B, Fifth Schedule to the Tamilnadu Value Added Tax Act, 2006 being clarificatory in nature as held by the Apex Court in Government of India and others v. Indian Tobacco Association, (2005) 5 RC 379. The schedule relevant is Fourth Schedule and it has been wrongly stated as Fifth Schedule. The learned counsel for the petitioners sought for oral permission to amend the mistake and the same is granted.
2. The petitioners were registered dealers under the Tamil Nadu General Sales Tax Act, 1959 (for brevity, "the TNGST Act") and are now registered dealers under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (for brevity, "Act 32/2006") and under the Central Sales Tax Act, 1956. The petitioners are carrying on business in food and condiments.
3. Under the provisions of the TNGST Act, chilly, coriander and turmeric were exempted goods falling under Serial No.16 of Part B of the Third Schedule to the TNGST Act with effect from 17.7.1996. However, chilly power, coriander powder and turmeric powder did not fall within the purview of the Third Schedule to the TNGST Act.
4. The Madras Chillies Merchants Association requested the Government of Tamil Nadu to clarify whether chilly powder, pepper powder and coriander powder are taxable or not consequent to withdrawal of levy of tax on the sale of chilly, turmeric and coriander. This was considered by the Government of Tamil Nadu and on the basis of several decisions of the Courts, namely (i) Rajasthan Roller Flour Mills v. State of Rajasthan, 91 STC 403 (SC); (ii) Krishna Chander Dutta (Spice) Private Limited v. Commercial Tax Officer and others, 93 STC 180 (SC); and (iii) Namputhiris Pickle Industries v. State of Kerala and another, 92 STC 1 (Full Bench of Kerala High Court), it was concluded that mere change into powder does not change the essential nature of the commodity or its substantial identity and that when the above goods are powdered there is only a change in the form. Therefore, the Government was of the view that chilly, pepper and coriander would include the powder form also. Thus, by G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998, the Government granted exemption to chilly powder, pepper powder and coriander powder in the following manner:
"4. The Government consider that the Chillies Powder, Pepper Powder, Corriander Powder etc. are not taxable since the chilly, pepper and coriander etc. are exempted from the payment of tax under Tamil Nadu General Sales Tax Act."
5. As a consequence, the dealers of chilly, turmeric and coriander powders enjoyed the benefit of exemption in terms of G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998. The matter was further clarified by the Sales Tax Department in exercise of power under Section 28-A of the TNGST Act. The clarification which was issued on 9.12.2002 reads as under:
"Clarification in D.Dis.Cell/II 88685/2001, dated 9.12.2002
'sale by any dealer whose total turnover in respect of turmeric powder, Coriander powder and chilli powder does not exceed Rs.300 Crores in a year is exempt from tax liability under Serial No.16 in Part B of the Third Schedule to the TNGST Act, 1959.'"
The dealers, including the petitioners, enjoyed the above benefit without any restrain, as the goods coriander and turmeric and its powder form were treated as one and the same goods.
6. Thereafter, the Government of Tamil Nadu brought in Act 32/2006 with
