Salem District Co-Operative Milk Producers Union Ltd. vs State of Tamil Nadu

R. Sudhakar, J.—This tax case (revision) is filed by the assessee as against the order of the Tamil Nadu Sales Tax Appellate Tribunal for the assessment year 1998-99. The brief facts are as follows :

"The assessee, who is a co-operative milk producers union, otherwise called as Aavin, is engaged in the sale of milk and milk products, such as, butter and ghee. The issue in dispute relates to the assessment year 1998-99. The admitted facts, which are not in dispute, is that the assessee had sold its products for the assessment year in question under the brand name Aavin, which is registered under the Trade and Merchandise Act, 1958. The assessee had paid tax at the rate of 10 per cent in respect of butter and ghee sold under the brand name based on the Notification II(1)/CTRE/22/ (a-2)/97 Gazette dated March 5, 1997, effective from March 5, 1997-G.O. Ms. No. 73 dated March 5, 1997. The assessing officer made an assessment demanding tax at 11 per cent on the sales turnover of Rs. 4,75,01,647 relating to sale of butter and ghee effected by the assessee from May 4, 1998 to March 31, 1999 as against the claim of the assessee that it was taxable at 10 per cent in terms of the abovesaid Government Order."

According to the assessing officer, the demand of payment of 11 per cent is on account of the rate of tax as determined in entry 8 of Part D of the First Schedule to the Tamil Nadu General Sales Tax Act, amended with effect from May 4, 1998 in terms of G.O. No. 139, CT & RE dated May 4, 1998. The view of the Department is that consequent to this amendment, the benefit of the earlier G.O. No. 73 dated March 5, 1997 will not enure to the benefit of the assessee. On that premise, the tax was demanded at 11 per cent , as against the claim of 10 per cent by the assessee and penalty was also imposed by the assessing officer.

Aggrieved by the same, the assessee preferred an appeal before the Appellate Assistant Commissioner, who partly accepted the plea of the assessee and remanded the matter back to the assessing officer directing the assessing officer to re-determine the rate of tax. As against the order of remand, the assessee filed an appeal before the Tamil Nadu Sales Tax Appellate Tribunal. The Tribunal accepted the plea of the Revenue and dismissed the appeal filed by the assessee holding as follows :

"9. Now, it is essential to go through the description of relevant entry found in the First Schedule to the Act for the relevant period of time. From July 17, 1996 to May 3, 1998 ''butter and ghee sold under a brand name'' was taxable at 11 per cent as per entry No. 8 of Part D of the First Schedule to the TNGST Act, 1959. However, the rate of tax was reduced to 10 per cent as per the abovesaid notification with effect from March 5, 1997. When it is so, the description of above entry was changed to ''butter and ghee sold under a brand name registered under the Trade and Merchandise Marks Act, 1958'' with effect from May 4, 1998 by G.O. Ms. No. 139 CT & RE dated May 4, 1996 (Notification No. II(1)/CTRE/49(a-2)/98 Gazette dated May 4, 1998. As the entry itself is changed in the Schedule, the notification which was issued for reduction of tax to 10 per cent would lose its effect on introduction of new entry, i.e., from May 4, 1998 as per the abovesaid notification. From the above, it is clear that the notification which reduced the rate to 10 per cent is only applicable to previous entry, (i.e., butter and ghee sold under a brand name) and therefore the previous notification reducing the rate of tax at 10 per cent is applicable only for the period from March 5, 1997 to May 3, 1998. As per new entry, the goods sold by the dealer-respondents is taxable at 11 per cent and not at 10 per cent

With the above observation, we direct the assessing authority to levy tax at 11 per cent on the disputed turnover of Rs. 4,75,01,647."

Aggrieved by the order of the Tribunal, the assessee is before this court.

We have heard learned counsel appearing for the assessee and Mr. A.R. Jayapratap, learned Special Government Pleader (Taxes), who, on instruction, takes notice for the respondent.

The only question that arises for consideration in this appeal is whether the butter and ghee sold by the assessee under a brand name registered under the Trade Marks and Merchandise Act, 1958 falls under entry 8(1) of Part D of the First Schedule to the Tamil Nadu General Sales Tax Act at the reduced rate of tax at 10 per cent, for the assessment year 1998-99.

The controversy that has been raised by the Department can be laid to rest if entry 8 of Part D of the First Schedule to the Tamil Nadu General Sales Tax Act is taken on record as it is found in the statute. The said entry reads as follows :

"Part D

Goods which are taxable at the rate of 11 per cent 8. Entry from July 17, 1996 to May 3, 1998 Butter and ghee sold under a brand name Entry from May 4, 1998 (vide note 3)

Butter and ghee sold under a brand name registered under the Trade and Merchandise Marks Act, 1958 (Central Act 43 of 1958)

Note : 1. This entry is as per substituted First Schedule introduced by Act 37/96-Gazette dated September 17, 1996 with effect from July 17, 1996 (retrospective)

Rate of tax reduced to 10 per cent as per Notn. II(1)/CTRE/ 22(a-2)/97-Gazette dated March 5, 1997--Effect from March 5, 1997.

The expression ''butter and ghee sold under a brand name registered under the Trade and Merchandise Marks Act, 1958 (Central Act 43 of 1958)'' was substituted for the expression ''butter and ghee sold under a brand name'' by G.O. Ms. No. 139, CT & RE dated May 4, 1998-Notn. No. II(1)/CTRE/49{a-2)98-Gazette dated May 4, 1998-Act 21/98-Gazette dated June 18, 1998--with effect from May 4, 1998."

For better clarity, it is also relevant to extract G.O. Ms. No. 73 dated March 5, 1997, which reads as follows :

"Notification G.O. Ms. No. 73, dated the March 5, 1997.

No. II(1)/CTRE/22(a-2)/97.--In exercise of powers conferred by sub-section (1) of section 17 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959), the Governor of Tamil Nadu hereby makes a reduction in rate to ten per cent in respect of the tax payable under the said Act on the sale of following goods by any dealer :

Butter and ghee sold under a brand name specified in item 8 of Part D of the First Schedule.

...

It is not in dispute that the goods falling under entry 8 of Part D of I Schedule are taxable at the rate of 11 per cent in relation to butter and ghee if sold under the brand name prior to May 4, 1998. The dispute relates to the period on or after May 4, 1998. The rate of tax, as understood by the Department, in respect of butter and ghee sold under the brand name registered under the Trade Marks and Merchandise Act, 1958 continued to have the benefit of reduced rate of tax at 10 per cent in terms of Notification No. 73 dated March 5, 1997, as is evident from the entry itself. Once the entry shows that the rate of tax would be 10 per cent in terms of the said notification dated March 5, 1997, even after May 4, 1998, the question of the Department demanding tax at the rate of 11 per cent cannot be justified. The issue becomes more clear in view of the errata issued by the Department on April 20, 2001, which reads as follows :

Erratum

The above erratum makes it clear that prior to the issuance of erratum, Notification No. 73 dated March 5, 1997 would hold good and therefore the assessee was justified in paying 10 per cent tax. Hence, the Tribunal failed to consider the said entry 8 of Part D of the First Schedule to the Tamil Nadu General Sales Tax Act, as we have already extracted supra. In the result, the issue is answered in favour of the assessee. Accordingly, this tax case (revision) stands allowed and the order of the Tribunal stands set aside. No costs. Consequently, M.P. No. 1 of 2014 is closed.