Smt. R. Pasuvamani vs The Commercial Tax Officer (FAC) and The Principal Commissioner and Commissioner of Commercial Taxes

S. Manikumar, J.—The petitioner has sought a Writ of Certiorarified Mandamus, to call for the records of the first respondent herein

TNGST/2462098/2003-04, quash the order dated 05.06.2006 passed therein and further direct the first respondent to grant exemption on the

narrow woven fabrics falling under Tariff No. 58.06 (and more particularly Tariff No. 5806.20) of the Central Excise Tariff Act sold by the

petitioner in the light of Entry 8(vi) of the Third Schedule to the TNGST Act, 1959 in the light of clarification No. 173 of 2005 issued by the

second respondent.

It is the case of the petitioner that she is a manufacturer of elastic tapes, called as narrow woven fabric, falling under Entry 5806.20 of the

Central Excise Tariff Act, registered as a dealer on the file of the respondent under the TNGST Act, 1959. Since narrow woven fabric contained

an elastometric yarn or rubber thread running through it for the purpose of elasticity, the said commodity in the commercial circle is well known as

elastic tape for the purpose of easy identification.

According to the petitioner, the narrow woven fabric is exempted from levy of sales tax. As per Part A of the Third Schedule to the TNGST

Act, the goods produced or manufactured in India as described in column (3) against the relevant heading in column (1) of the First Schedule to

the Additional Duties of Excise (Goods of Special Importance Act, 1957) (Central Act 58 of 1957) are exempted from the levy of sales tax. For

the past several years, the petitioner claimed exemption on the narrow woven fabric ""elastic tapes"" manufactured and sold by the petitioner under

Entry 8(vi) of Part A of the Third Schedule to the TNGST Act, 1959 and exemption was also granted.

While that being the position, the Special Commissioner and the Commissioner for Commercial Taxes, seemed to have issued a clarification in

K.Dis Acts Cell I/42548/2004 dated 12.8.2004 to some dealer clarifying that ""elastic tapes"" falls under Entry 32(ii) of Part D of the I Schedule to

the TNGST Act. Placing reliance on the said clarification, the respondent herein has issued a notice to the petitioner, proposing to levy tax @ 12%

on the sales of elastic tapes effected by the petitioner. The petitioner filed objections before the respondent, explaining that the product was only

narrow woven fabric and not an elastic tape, falling under Entry 32(ii) of Part D of the First Schedule to the Act. The first respondent has overruled

the said objections and confirmed the proposals, wherein, the petitioner was directed to pay tax at Rs. 11,83,285/- and penalty at Rs. 17,74,928/-

u/s 12(3)(b) of the TNGST Act. Therefore, the petitioner has preferred this writ petition, challenging the order of assessment.

Learned Counsel for the petitioner submitted that the Assessing Authority has failed to consider that the elastic tapes, manufactured and sold by

the petitioner, falls under Entry 8 (6) of Part A of the Third Schedule to TNGST Act and therefore, exempted from levy of sales tax. Placing

reliance on the decision in Om Plastics v. Deputy Commercial Tax Officer, Kondunagar Assessment Circle, Tirupur and Anr. reported in 2007 (6)

VST 100 (Mad), he submitted that the clarification issued should be applied prospectively and not retrospectively.

On the other hand, learned Counsel for the respondents submitted that the goods sold by the petitioner under Entry 32(ii) of Part D of the First

Schedule to the Act, is taxable and therefore, the petitioner is liable to pay sales tax. He further submitted that the order of the first respondent in

rejecting the contention that narrow woven fabric falls only under Entry 8 (6) of Part A of the Third Schedule to TNGST Act, is correct and

therefore, the levy of tax is valid.

Without going to the merits of the case, as to whether the above said good, viz., narrow woven fabric falls under Entry 32(ii) of Part D of the

First Schedule to the Act or not, it is sufficient to consider as to whether the clarification issued by the first respondent on 12.08.2004, would have

retrospective effect or not.

In Om Plastics v. Deputy Commercial Tax Officer, Kondunagar Assessment Circle, Tirupur and Anr. reported in 2007 (6) VST 100 (Mad),

this Court, after analyzing various decisions on this point, held that the clarification issued u/s 28A of the TNGST Act, would only have prospective

effect and quashed the assessment order.

Following the above said decision, the clarification in K.Dis Acts Cell I/42548/2004 dated 12.8.2004, clarifying that ""elastic tapes"" falls under

Entry 32(ii) of Part D of the I Schedule to the TNGST Act, will have only prospective effect and not retrospective effect. In view of the above, the

proposed tax at 12% on a total and taxable turnover of the petitioner for the assessment year 2003-04 is liable to be set aside and the same is set

aside.

With the above observation, the Writ petition is allowed. No costs. Consequently, connected Miscellaneous Petition is also closed.