Rupa & Co. Ltd. v. Special Commissioner & Commissioner of Commercial Taxes Ezhilagam

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 17.04.2008CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE M.VENUGOPALW.A. NO. 3003 OF 2003ANDW.A.M.P. NO. 4742 OF 2003Rupa & Co. Ltd.24, Vallipalayam III St.Tirupur... Appellant- Vs -1. Special Commissioner & Commissioner of Commercial Taxes Ezhilagam, Chennai.2. Commercial Tax Officer Central I Circle Tirupur... Respondents Writ Appeal filed against the order dated 28th Aug., 2003, passedby learned single Judge in W.P. No.21170 of 2003 under Article 226 ofthe Constitution of India, praying for the issue of Writ ofCertiorarified Mandamus to call for the records of the 2nd respondentin CST No.314614/2001-2002 and quash the order dated 30.6.2003 andfurther forbear the 2nd respondent from levying and collecting tax toexcess of 1% on the inter status turnover of the petitioner.For Appellant: Mr. Arvind P.Datar, SC, for M/s.Pushya SitaramanFor Respondents: Mr. Haja Naziruddin, Spl. G.P. (Taxes)JUDGMENTS.J.MUKHOPADHAYA, J.The appellant challenged the assessment order dated 30th June,2003, passed by the 2nd respondent, Commercial Tax Officer, CentralCircle-I, Tirupur, in CST No.314614/2001-2002 on the ground that therespondent made assessment in violation of clarification given by theCommissioner 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 theclaim on merit, there being an alternative remedy of appeal. https://hcservices.ecourts.gov.in/hcservices/

2. The main plea taken by the appellant/petitioner is thatlearned single Judge, instead of asking the appellant to move inappeal, should have decided the writ petition on merit, the order ofassessment being without jurisdiction and against law.3. The appellant is a manufacturer and dealer in cotton hosierygoods. According to the appellant, as per notification issued on 5thMarch, 1997 by the respondent, hosiery goods were generally exemptedunder the Sales Tax laws of Tamil Nadu. Consequently, rate of taxunder the Central Sales Tax was also 'Nil'. It was in effect for therelevant period, i.e., 2001-02, but upto 30th Nov., 2001. Further, anotification, G.O. Ms. No.273 dated 5th Aug., 1996, was issued underthe Central Sales Tax Act (hereinafter referred to as 'CST Act'),whereby it was directed that the tax payable by the dealer, who doesnot have any branch transfer or consignment transfer during an year,shall be calculated at the reduced rate of 1% in respect of saleeffected by him of hosiery goods (other than those made of wool) inthe course of inter-state trade or commerce.According to the appellant, it is engaged in inter-state trade ofhosiery goods and also transfer hosiery goods to its own branchesoutside the State. The appellant had raised specific query to the 1strespondent, Commissioner of Commercial Taxes, Chennai, and sought aclarification on whether the appellant would be eligible for rate oftax at 1% if it did not claim any exemption on branch transfers. The1st respondent clarified by communication dated 11th Jan., 2002,addressed to the appellant that inter-state sale of cotton hosierygoods is taxable at 1% if there is no claim of branch transfer orconsignment in the return filed. Accordingly, the appellant reportedtaxable turnover under the CST Act without claiming any exemptionfor branch transfer and paid tax at 1% on the whole.4. As learned senior counsel for the appellant placed muchreliance on the letter of the 1st respondent dated 11th Jan., 2002, wequote the relevant portion of the said letter hereunder :-"Sir, Sub : Centralised Tax Act, 1956 – Exemption onlocal sale in hosiery goods withdrawn – whetherinter-state sale is taxable at the reduced rateas per earlier satisfaction – clarificationrequested – Reg.Ref : 1. From Tvl. Rupa and Co. Ltd., Tirupur,Letter dt. Nil.2. From Tvl. Maxwell Apparel Industries Ltd.,Gobichettipalayam Letter dt. Nil.-----------With reference to the petition cited, thepetitioners are clarified that the inter-state saleof cotton hosiery goods is taxable at 1% if there isno claim of branch transfer or consignment in thereturns filed. The tax at 1% is collectable fromsuch dealers whether they charge tax at 1% or not inthe invoices.Sd/- G.Chelvakumar For Special Commissioner and Commissioner of Commercial Taxes" https://hcservices.ecourts.gov.in/hcservices/

5. It appears that the 2nd respondent issued a pre-assessmentnotice dated 7th April, 2003, stating that the appellant ought to haveclaimed exemption in respect of branch transfer and cannot claim thelower rate of tax at 1% as claimed. The appellant filed its replypointing out that the 2nd respondent cannot bring the goods to tax atthe higher rate than what has been specified in the clarification andbrought to his notice the order of clarification communicated byletter dated 11th Jan., 2002. Thereafter, the impugned order ofassessment was passed by 2nd respondent on 30th June, 2003, whereby heinterpreted the letter of the 1st respondent and brought inter-statesales turnover of the appellant for the period 1st Nov., 2001 to 31stMarch, 2002, to tax at the rate of 10% proposing penalty u/s 9 (2) ofthe CST Act read with Section 12 (3) (v) of the Tamil Nadu GeneralSales Tax Act (hereinafter referred to as the 'TNGST Act').6. Learned senior counsel for the appellant referred to SupremeCourt decision in Commissioner of Sales Tax, U.P. - Vs - IndiraIndustries reported in 122 STC 100 (SC) :: 248 ITR 338 and submittedthat the department cannot question the circular issued by theCommissioner, which is binding on them. Reliance was also placed onthis Court's decision in Pizzeria Fast Foods – Vs – Commissioner ofCommercial Taxes, Chennai reported in 140 STC 97 to suggest thecircumstances in which relief cannot be refused on the ground ofalternative remedy.7. Learned counsel appearing on behalf of the State whilesubmitted that the consignment transfer made as evident fromdocument, it was submitted that the appellant made suppression offact before the authority. He placed reliance on the assessmentorder to suggest the manner in which the appellant suppressed thefact and to justify the order of assessment. According to him,Section 6-A of CST Act is not applicable and he referred to unamendedSection 8 (2) (b) of CST Act.8. We have heard the learned counsel for the parties, noticed therelevant provisions, judgments as referred to by one or other partyand the impugned order dated 28th Aug., 2003, passed by learned singleJudge.9. Section 6-A of CST Act of which reference made by learnedsenior 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 thequestion as raised in this case.Section 8 (2) (b) relates to rates of tax on sales in the courseof inter-state trade or commerce in case of goods other than declaredgoods. As per unamended Section, which was applicable at thatrelevant year, in case of goods other than declared goods, it is tobe calculated at the rate of 10% or at the rate applicable to thesale or purchase of such goods inside the appropriate State,whichever is higher. This was relied upon by learned counsel for theState to justify 10% charged for transfer of goods, which has notbeen disclosed by the appellant. https://hcservices.ecourts.gov.in/hcservices/

10. Section 12 of the TNGST Act deals with procedure to befollowed by the assessing authority. Under Section 28-A, as reliedon by learned counsel for the appellant, while the Commissioner ofCommercial Taxes is empowered to issue clarification u/s 28-A (3),the subordinates to the Commissioner are bound to follow suchclarification. Relevant provision is quoted hereunder :-"28-A. Power to issue clarification by Commissionerof Commercial Taxes.- (1) The Commissioner ofCommercial Taxes on an application by a registereddealer, may clarify any point concerning the rate oftax under the Act. Such clarification shall beapplicable to the goods specified in theapplication :********Sec. 28-A (3) All persons working under the controlof Commissioner of Commercial Taxes shall observe andfollow the clarification issued under sub-section (1() and sub-section (2)."11. 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 ofpayment of tax admitted by appellant and 25% of difference of the taxassessed by the assessing authority.12. As 25% of the difference of tax assessed by the assessingauthority has to be paid for preferring such appeal, learned seniorcounsel for the appellant submitted that in such case, just for anillegal order, one should not be forced to pay the amount bydirecting the party to move in appeal. However, such argument cannotbe accepted merely because a person will be liable to pay statutoryinterest, as generally a party moves in appeal only when it feelsthat the assessment order is illegal or without jurisdiction orexcessive.13. Learned senior counsel for the appellant relied on SupremeCourt decision in State of Kerala – Vs – M/s.Kurian Abraham Pvt. Ltd.reported in 2008 TIOL 20. The said case was relied to suggest thatthe High Court can entertain writ petition against order ofassessment, but from the said judgment it will be evident that noratio has been laid down with regard to entertaining an order ofassessment of tax under writ jurisdiction, where alternative remedyis available.Learned senior counsel for the appellant also relied on Supremecourt decision in Commissioner of Sales Tax, U.P. - Vs - IndiraIndustries reported in 122 STC 100 (SC) :: 248 ITR 338 . In the saidcase, the Supreme Court held that a circular by Sales Tax Authorityis not binding on the court and assessee, but binding on the taxingauthority. The taxing authority cannot be heard to advance hisarguments, which is contrary to the interpretation.14. From the impugned order dated 30th June, 2003, it will beevident that the assessing authority has not specifically stated thatthe clarificatory order of Commissioner dated 11th Jan., 2002, iscontrary to the law or is not binding. He has given his explanation https://hcservices.ecourts.gov.in/hcservices/ as to how the Commissioner's order to be read in between. Whethersuch finding of the assessing authority is against the spirit ofletter dated 11th Jan., 2002, issued by the Commissioner is to bedetermined either by the appellate authority or by a court of law.In this background, if learned single Judge, for deciding thequestion of legality and propriety of the assessment order, has askedthe appellant to move before the appellate authority u/s 31-A of theTNGST Act, no interference is called for.15. Another case relied upon by learned senior counsel for theappellant is the case of Pizzeria Fast Foods – Vs – Commissioner ofCommercial Taxes, Chennai reported in 140 STC 97. In the said case,this Court, while observed that the clarification is not binding onauthorities exercising judicial functions, held that remedies understatute, if inefficacious, writ petition is maintainable.16. In the present case, there is no allegation that thestatutory alternative remedy is inefficacious. The main plea astaken is that the order is without jurisdiction and illegal andassessment is excessive and for that the appellant will have tounnecessarily pay 25% of the difference amount, which is veryexcessive. But such ground cannot be accepted to entertain a writpetition rendering Section 31-A as ineffective.17. Some other judgments referred to by learned senior counselfor the appellant on similar point is not dealt with, as theobservation and finding made by us in the preceding paragraphs willcover them.18. We have noticed the Supreme Court decision in Union of India– Vs – Tata Engineering & Locomotive Company Ltd. reported in AIR1998 SC 287, as relied on by learned senior counsel for theappellant. Therein, the Court made the following observation :-"4. .............. The Assistant Collector isentitled to complete the assessment as he thinks fitin exercise of his judgment and according to hisunderstanding of the law and facts. For thispurpose, he can call for and examine whateverdocuments he considers relevant. If the AssistantCollector fails to follow any judgment of the HighCourr or this Court, the assessee had adequatestatutory remedies by way of an appeal and revisionagainst the assessment order. The Court should nottry to control the mode and manner in which anassessment should be made. ............"5. ......... He has to make whatever enquiries hethinks necessary for determination of the value ofexcisable goods. The High Court in exercise of itsjurisdiction cannot give guidance to AssistantCollector about the manner and mode in which theassessment should be made."Learned counsel for the appellant also placed reliance on recentSupreme Court decision in State of Punjab – Vs – Punjab Fibres Ltd.reported in 2005 (1) SCC 604 wherein taking into consideration thatthe assessee challenged the order of Sales Tax Tribunal in appeal aswell as in the writ petition simultaneously, held that the writ https://hcservices.ecourts.gov.in/hcservices/ petition was not maintainable during the pendency of alternativeremedy.19. In the present case, learned senior counsel for theappellant, apart from placing reliance on the order of assessment,also placed reliance on a chart showing the manner in whichassessment should have been made. It was also submitted that theappellant-dealer had not filed 'C' Form for the sales for the periodfrom 8th Feb., 2002 to 31st March, 2003 as also the records relating tobranch transfer only because of the clarification made by theCommissioner. But in the present case, we are not inclined todeliberate on this factual aspect as we are not inclined to determinewhether the claim as was made by petitioner was rightly made or not.Under the appellate jurisdiction we are deciding the question whetherthe order passed by learned single Judge was legal and proper.20. In view of our discussion and in absence of any illegality inthe order passed by learned single Judge and there being alternativeremedy available to the appellant, as observed earlier, nointerference is called for with the impugned order passed by learnedsingle Judge. However, in the facts and circumstances, we allowfurther one months time to the appellant to prefer appeal with apetition for condonation of delay bringing to the notice of theappellate authority that the appellant was pursuing the matter beforethis Court. The writ appeal is dismissed with the aforesaidobservation. Consequently, connected miscellaneous petition is alsodismissed. But there shall be no order as to costs.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.GLNTo1. Special Commissioner & Commissioner of Commercial Taxes Ezhilagam, Chennai.2. Commercial Tax Officer Central I Circle Tirupur.+ 1 CC To M/s.Pushya Sitaraman, Advocate SR NO.22320+ 1 CC to the Government Pleader SR NO 21867 W.A. NO. 3003 OF 2003sp[co]gp/24.4.