Rupa and Co. Ltd. vs Special Commissioner and Commissioner of Commercial Taxes and Commercial Tax Officer

S.J. Mukhopadhaya, J.—The appellant challenged the assessment order dated 30th June, 2003, passed by the 2nd respondent,

Commercial Tax Officer, Central Circle-I, Tirupur, in CST No. 314614/2001-2002 on the ground that the respondent made assessment in

violation of clarification given by the Commissioner of Commercial Taxes, Chennai, vide order dated 11th Jan., 2002, Learned single Judge by

impugned order dated 28th Aug., 2003, disposed of the writ petition, W.P. No. 21170/03 without deciding the claim on merit, there being an

alternative remedy of appeal.

The main plea taken by the appellant/petitioner is that learned single Judge, instead of asking the appellant to move in appeal, should have

decided the writ petition on merit, the order of assessment being without jurisdiction and against law.

The appellant is a manufacturer and dealer in cotton hosiery goods. According to the appellant, as per notification issued on 5th March, 1997

by the respondent, hosiery goods were generally exempted under the Sales Tax laws of Tamil Nadu. Consequently, rate of tax under the Central

Sales Tax was also ''Nil''. It was in effect for the relevant period, i.e., 2001-02, but upto 30th Nov., 2001. Further, a notification, G.O. Ms. No.

273 dated 5th Aug., 1996, was issued under the Central Sales Tax Act (hereinafter referred to as ''CST Act''), whereby it was directed that the

tax payable by the dealer, who does not have any branch transfer or consignment transfer during an year, shall be calculated at the reduced rate of

1% in respect of sale effected by him of hosiery goods (other than those made of wool) in the course of inter-state trade or commerce.

According to the appellant, it is engaged in inter-state trade of hosiery goods and also transfer hosiery goods to its own branches outside the State.

The appellant had raised specific query to the 1st respondent, Commissioner of Commercial Taxes, Chennai, and sought a clarification on whether

the appellant would be eligible for rate of tax at 1% if it did not claim any exemption on branch transfers. The 1st respondent clarified by

communication dated 11th Jan., 2002, addressed to the appellant that inter-state sale of cotton hosiery goods is taxable at 1% if there is no claim

of branch transfer or consignment in the return filed. Accordingly, the appellant reported taxable turnover under the CST Act without claiming any

exemption for branch transfer and paid tax at 1% on the whole.

As learned senior counsel for the appellant placed much reliance on the letter of the 1st respondent dated 11th Jan., 2002, we quote the

relevant portion of the said letter hereunder:

Sir,

Sub : Centralised Tax Act, 1956 - Exemption on local sale in hosiery goods withdrawn - whether inter-state sale is taxable at the reduced rate as

per earlier satisfaction - clarification requested - Reg.

Ref : 1. From Tvl. Rupa and Co. Ltd., Tirupur, Letter dt. Nil.

From Tvl. Maxwell Apparel Industries Ltd., Gobichettipalayam Letter dt. Nil.

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With reference to the petition cited, the petitioners are clarified that the inter-state sale of cotton hosiery goods is taxable at 1% if there is no claim

of branch transfer or consignment in the returns filed. The tax at 1% is collectable from such dealers whether they charge tax at 1% or not in the

invoices.

Sd/- G. Chelvakumar

For Special Commissioner and

Commissioner of Commercial Taxes

It appears that the 2nd respondent issued a pre-assessment notice dated 7th April, 2003, stating that the appellant ought to have claimed

exemption in respect of branch transfer and cannot claim the lower rate of tax at 1% as claimed. The appellant filed its reply pointing out that the

2nd respondent cannot bring the goods to tax at the higher rate than what has been specified in the clarification and brought to his notice the order

of clarification communicated by letter dated 11th Jan., 2002. Thereafter, the impugned order of assessment was passed by 2nd respondent on

30th June, 2003, whereby he interpreted the letter of the 1st respondent and brought inter-state sales turnover of the appellant for the period 1st

Nov., 2001 to 31st March, 2002, to tax at the rate of 10% proposing penalty u/s 9(2) of the CST Act read with Section 12(3)(v) of the Tamil

Nadu General Sales Tax Act (hereinafter referred to as the ''TNGST Act'').

Learned senior counsel for the appellant referred to Supreme Court decision in Commissioner of Sales Tax, U.P. Vs. M/s. Indra Industries, and

submitted that the department cannot question the circular issued by the Commissioner, which is binding on them. Reliance was also placed on this

Court''s decision in Tvl. Pizzeria Fast Foods Restaurant (Madras) Pvt. Ltd. Vs. Commissioner of Commercial Taxes and Others, to suggest the

circumstances in which relief cannot be refused on the ground of alternative remedy.

Learned Counsel appearing on behalf of the State while submitted that the consignment transfer made as evident from document, it was

submitted that the appellant made suppression of fact before the authority. He placed reliance on the assessment order to suggest the manner in

which the appellant suppressed the fact and to justify the order of assessment. According to him, Section 6-A of CST Act is not applicable and he

referred to unamended Section 8(2)(b) of CST Act.

We have heard the learned Counsel for the parties, noticed the relevant provisions, judgments as referred to by one or other party and the

impugned order dated 28th Aug., 2003, passed by learned single Judge.

Section 6-A of CST Act of which reference made by learned senior counsel for the appellant, deals with burden of proof, etc., in case of

transfer of goods claimed otherwise then by way of sale, but the said provision is not applicable for determination of the question as raised in this

case.

Section 8(2)(b) relates to rates of tax on sales in the course of inter-state trade or commerce in case of goods other than declared goods. As per

unamended Section, which was applicable at that relevant year, in case of goods other than declared goods, it is to be calculated at the rate of

10% or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher. This was relied upon by

learned Counsel for the State to justify 10% charged for transfer of goods, which has not been disclosed by the appellant.

Section 12 of the TNGST Act deals with procedure to be followed by the assessing authority. u/s 28-A, as relied on by learned Counsel for

the appellant, while the Commissioner of Commercial Taxes is empowered to issue clarification u/s 28-A (3), the subordinates to the

Commissioner are bound to follow such clarification. Relevant provision is quoted hereunder:

28-A. 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:

* * * * * * * *

Section 28-A (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).

Against an order of assessment made u/s 12 of TNGST Act, appeal prescribed u/s 31-A of TNGST Act. For preferring such appeal, under

2nd proviso, such appeal should be accompanied by proof of payment of tax admitted by appellant and 25% of difference of the tax assessed by

the assessing authority.

As 25% of the difference of tax assessed by the assessing authority has to be paid for preferring such appeal, learned senior counsel for the

appellant submitted that in such case, just for an illegal order, one should not be forced to pay the amount by directing the party to move in appeal.

However, such argument cannot be accepted merely because a person will be liable to pay statutory interest, as generally a party moves in appeal

only when it feels that the assessment order is illegal or without jurisdiction or excessive.

Learned senior counsel for the appellant relied on Supreme Court decision in State of Kerala v. Kurian Abraham Pvt. Ltd. reported in 2008

TIOL 20. The said case was relied to suggest that the High Court can entertain writ petition against order of assessment, but from the said

judgment it will be evident that no ratio has been laid down with regard to entertaining an order of assessment of tax under writ jurisdiction, where

alternative remedy is available.

Learned senior counsel for the appellant also relied on Supreme court decision in Commissioner of Sales Tax, U.P. Vs. M/s. Indra Industries, . In

the said case, the Supreme Court held that a circular by Sales Tax Authority is not binding on the court and assessee, but binding on the taxing

authority. The taxing authority cannot be heard to advance his arguments, which is contrary to the interpretation.

From the impugned order dated 30th June, 2003, it will be evident that the assessing authority has not specifically stated that the clarificatory

order of Commissioner dated 11th Jan., 2002, is contrary to the law or is not binding. He has given his explanation as to how the Commissioner''s

order to be read in between. Whether such finding of the assessing authority is against the spirit of letter dated 11th Jan., 2002, issued by the

Commissioner is to be determined either by the appellate authority or by a court of law. In this background, if learned single Judge, for deciding the

question of legality and propriety of the assessment order, has asked the appellant to move before the appellate authority u/s 31-A of the TNGST

Act, no interference is called for.

Another case relied upon by learned senior counsel for the appellant is the case of Tvl. Pizzeria Fast Foods Restaurant (Madras) Pvt. Ltd. Vs.

Commissioner of Commercial Taxes and Others, . In the said case, this Court, while observed that the clarification is not binding on authorities

exercising judicial functions, held that remedies under statute, if inefficacious, writ petition is maintainable.

In the present case, there is no allegation that the statutory alternative remedy is inefficacious. The main plea as taken is that the order is without

jurisdiction and illegal and assessment is excessive and for that the appellant will have to unnecessarily pay 25% of the difference amount, which is

very excessive. But such ground cannot be accepted to entertain a writ petition rendering Section 31-A as ineffective.

Some other judgments referred to by learned senior counsel for the appellant on similar point is not dealt with, as the observation and finding

made by us in the preceding paragraphs will cover them.

We have noticed the Supreme Court decision in Union of India v. Tata Engineering & Locomotive Company Ltd. reported in AIR 1998 SC

287, as relied on by learned senior counsel for the appellant. Therein, the Court made the following observation:

...The Assistant Collector is entitled to complete the assessment as he thinks fit in exercise of his judgment and according to his understanding of

the law and facts. For this purpose, he can call for and examine whatever documents he considers relevant. If the Assistant Collector fails to follow

any judgment of the High Courr or this Court, the assessee had adequate statutory remedies by way of an appeal and revision against the

assessment order. The Court should not try to control the mode and manner in which an assessment should be made....

...He has to make whatever enquiries he thinks necessary for determination of the value of excisable goods. The High Court in exercise of its

jurisdiction cannot give guidance to Assistant Collector about the manner and mode in which the assessment should be made.

Learned Counsel for the appellant also placed reliance on recent Supreme Court decision in State of Punjab and Others Vs. Punjab Fibres Ltd.

and Others, wherein taking into consideration that the assessee challenged the order of Sales Tax Tribunal in appeal as well as in the writ petition

simultaneously, held that the writ petition was not maintainable during the pendency of alternative remedy.

In the present case, learned senior counsel for the appellant, apart from placing reliance on the order of assessment, also placed reliance on a

chart showing the manner in which assessment should have been made. It was also submitted that the appellant-dealer had not filed ''C'' Form for

the sales for the period from 8th Feb., 2002 to 31st March, 2003 as also the records relating to branch transfer only because of the clarification

made by the Commissioner. But in the present case, we are not inclined to deliberate on this factual aspect as we are not inclined to determine

whether the claim as was made by petitioner was rightly made or not. Under the appellate jurisdiction we are deciding the question whether the

order passed by learned single Judge was legal and proper.

In view of our discussion and in absence of any illegality in the order passed by learned single Judge and there being alternative remedy

available to the appellant, as observed earlier, no interference is called for with the impugned order passed by learned single Judge. However, in

the facts and circumstances, we allow further one months time to the appellant to prefer appeal with a petition for condonation of delay bringing to

the notice of the appellate authority that the appellant was pursuing the matter before this Court. The writ appeal is dismissed with the aforesaid

observation. Consequently, connected miscellaneous petition is also dismissed. But there shall be no order as to costs.