IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.01.2011 CORAM: THE HONOURABLE MR. JUSTICE F.M. IBRAHIM KALIFULLA and THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN Tax Case (Revision) Nos.642, 643 and 646 of 2006 M/s.Diamond Traders No.40, Acharappan Street .. Petitioner in T.C.(R)Nos. Chennai 600 001. 642 and 646 of 2006. M/s.Union Trading Company No.153/5, Govindappa Naicken Street Chennai 600 001. .. Petitioner in T.C.No.643/06 vs. State of Tamil Nadu rep. by the Commercial Tax Officer Loan Square – I Assessment Circle Kuralagam Annexe, II Floor .. Respondent in T.C.(R)Nos. Chennai- 600 108. 642 and 646 of 2006. State of Tamil Nadu rep. by the Commercial Tax Officer Sowcarpet III Assessment Circle Chennai 600 001. .. Respdt. in T.C.No.643/06 Tax Case Revisions filed under Section 38 of the Tamil Nadu General Sales Tax Act, against the common order of the Tamil Nadu Sales Tax Appellate Tribunal (Addl. Bench), Chennai passed in T.A.Nos.611/2000, 495/2002 and 1096/2001, dated 25.10.2002 and against the proceedings of the Commercial Tax Officer Sowcarpet III Circle dated 31.5.2001, in TNGST-0260461-99-2000 and against the order of the Principal Commissioner and Commissioner of Commercial Taxes in Lr.Acts Cell-5/61744/2000, dated 21.11.2000, in TC (R) Nos.642 and 646/2006. And against the proceedings of the Appellate Assistant Commissioner (CT) II Chennai-108, dated 21.8.01 in Appeal No.59/2000, for the Assessment year TNGST 1998-1999. And against the proceedings of the Commercial Tax Officer, Sowcarpet-III Assessment Circle dated 31.1.2000 in TNGST/0260461/98-99 in TC (R) No.643/2006. https://hcservices.ecourts.gov.in/hcservices/ For Petitioners : Mr.N.Murali For Respondent : Mr.K.Radhakrishnan Govt. Advocate (Taxes) COMMON ORDER (Order of the Court was made by F.M. IBRAHIM KALIFULLA,J.) The common substantial question of law that arises for consideration in these revision petitions is "whether the goods 'star anise seeds' (sombu) is liable to be taxed under Entry 28 of Part C of the First Schedule or under Entry 2 of Part B of the First Schedule to the TNGST Act, 1959. 2. The petitioner in T.C.(R) Nos.642 and 646 of 2006 is one and the same while T.C.(R)No.643 of 2006 is by another petitioner. Both the petitioners are dealers in various items including the sale of 'star anise seeds'. The assessment year insofar as T.C.Nos.642 and 646/2006 are concerned pertains to 1997-98 and 1998-99 respectively and T.C.No.643 of 2006 pertains to 1998-1999. The Assessing Authority took the view that 'star anise seeds' is not one of the classified items in the Schedule and therefore, the same will fall under the residual Entry, namely, Entry 67 of Part D of the First Schedule, which is taxable @ 11%. 3. Aggrieved by the order of the Assessing Officer, the petitioners preferred appeals before the Appellate Assistant Commissioner, who also confirmed the order of the Assessing Authority. On further appeals before the Tribunal, by the common order impugned, the Tribunal held that the goods 'star anise seeds' will fall under Entry 28A(iii) "country drugs", for which the rate of tax applicable is 8%. 4. Be that as it may, for the relevant assessment years, it is stated that there was a clarification letter issued by the Commissioner of Commercial Taxes relating to 'star anise seeds', as per which, the same has to be covered by residual Entry 67 of Part D. However, on 21.11.2000, different clarification letter came to be issued in respect of an assessee by name M/s.Shobhakant & Co., by which, it was clarified as under: "Star anise are taxable at 4% under Item 2 of Part B of First Schedule to the Act 1959, as it will fall under the Broaden group of anise seeds". 5. Based on the said clarification letter, the petitioners also approached the Principal Commissioner and Commissioner of Commercial Taxes by its petition dated 27.2.2001. Based on the said petition, by letter dated 13.3.2001 addressed to the Commercial Tax Officer, the Principal Commissioner and Commissioner of Commercial Taxes https://hcservices.ecourts.gov.in/hcservices/ stated that it has already been clarified by his letter dated 21.11.2000 as to the rate of tax applicable to 'star anise seeds' and that the Assessing Authority should follow the clarification issued in the said letter. A copy of the said letter was also enclosed along with the subsequent letter dated 13.03.2001. The petitioners, therefore, contended before the Tribunal by relying upon the clarification letter dated 21.11.2000 issued under Section 28-A of the TNGST Act and claimed that the issue may be remitted back to the Assessing Authority to follow the aforesaid clarification. The Tribunal however held that the clarification letter was not binding on the Tribunal and that all its endeavour was only to classify the commodity according to law and decide the rate of tax applicable. So holding, even while allowing the petitioners' appeals, the Tribunal held that the 'star anise seeds' is only a 'country drug' and is liable to be taxed at 8% for the relevant assessment year. 6. Mr.Murali, learned counsel for the petitioners in his submissions contended that when under Section 28-A(3) clarification letter issued by the Commissioner is binding on its subordinates and by the time the appeals before the Tribunal came to be heard, the clarification had already been issued by the Commissioner with reference to 'star anise seeds', the Tribunal should have remitted the matter back to the Assessing Authority to find out whether in the relevant assessment year, the clarification letter dated 21.11.2000/13.3.2001 should be applied for fixing the rate of tax. 7. The learned counsel would contend that since for the subsequent year, namely, 1999-2000 in respect of one of the petitioners, namely, the petitioner in T.C.No.643 of 2006, the Assessing Authority has chosen to follow the clarification letter dated 13.03.2001 and assessed the tax at the rate of 4% under Entry 2 of Part B of I Schedule, the order of the Tribunal in fixing the rate of tax at 8% treating the very same item as 'country drugs' would cause serious prejudice to the petitioner and will create unnecessary complications in applying the rate of tax. 8. The learned Government Advocate, on the other hand, contended that the clarification letter came to be issued only on 21.11.2000 and therefore, whatever clarification issued in that letter as regards the rate of tax would be applicable only from the date of issuance of clarification letter and not for the earlier years. The learned Government Advocate, therefore, contended that having regard to the prescription contained in Section 28-A(3) of the Act, which says that the clarification letters binding on subordinate authorities and when there was an earlier clarification letter issued in the year 1996, which stated that the rate of tax applicable to 'star anise seeds' was 11% under the residual Entry 67 of Part D, which came to be replaced by the subsequent clarification letter dated 21.11.2000, the claim of the petitioners for remittal order to the Assessing Authority was not justified. https://hcservices.ecourts.gov.in/hcservices/ 9. Having heard the learned counsel for the respective parties, we find force in the submission of the learned counsel for the petitioners. Admittedly, Entry II of Part B of I Schedule as it originally stood from 17.7.1996 contains among other items, an item called 'star anise seeds' (sombu). The item dealt with by the petitioners, namely, 'star anise seeds' did not find a place in the said Entry. Therefore, when by way of a clarification letter, the Commissioner in its letter dated 21.11.2000 specifically stated that the 'star anise seeds' would fall under Item 2 of Part B of First Schedule, the question would be 'whether the said clarification would hold good even for the period prior to the date of clarification, namely, 21.11.2000'. 10. The contention of the learned counsel for the petitioners that the conclusion of the Tribunal in holding that 'star anise seeds' is a 'country drug' falling under item 28-A(iii) if allowed to stand, the same would cause serious prejudice to the petitioners, inasmuch as such an order of the Tribunal as between the petitioners and the respondent authorities would be binding even in supersession of clarification letter dated 21.11.2000 of the Commissioner of Commercial Tax. Such a contention also sounds good. Therefore, in the interest of justice, we feel that it will be more appropriate that the applicability of the clarification letter dated 21.11.2000 with regard to 'star anise seeds' must be left to be decided by the Assessing Authority in the light of the special facts involved in these cases, as that would bring a lasting solution in the case of the petitioners. 11. With that view, while setting aside the orders of the Tribunal as well as the Appellate Assistant Commissioner and the Assessing Authority, insofar as it related to the assessment years 1997-1998 and 1998-1999 in respect of the petitioner in T.C.Nos.642 and 646 of 2006 and assessment year 1998-1999 in respect of the petitioner in T.C.No.643 of 2006, insofar as it related to 'star anise seeds' alone, we remit the matter back to the Assessing Authority to consider the question as to whether the petitioners are entitled for the benefit of the clarification letter dated 21.11.2000 for those relevant assessment years and whether the Assessing Authority should follow its own subsequent assessment order in respect of the very same item in relation to the petitioner in T.C.No.643 of 2006 for the assessment year 1999-2000. 12. Since the assessment years pertain to 1997-98 and 1998-1999, the Assessing Authority shall decide the issue on merits and in accordance with law expeditiously, preferably within three months from the date of receipt of copy of this order. https://hcservices.ecourts.gov.in/hcservices/ 13. These Tax Revision Petitions stand allowed and question of law is answered in favour of the petitioners. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ATR To 1. The Commercial Tax Officer Loan Square – I Assessment Circle Kuralagam Annexe, II Floor, Chennai- 600 108. 2. The Commercial Tax Officer Sowcarpet III Assessment Circle Chennai 600 001. 3. The Appellate Assistant Commissioner (CT) II VI Floor, Kuralagam Annexe, Chennai 600108. 4. The Secretary Tamil Nadu Sales Tax Appellate Tribunal (Addl. Bench) Chennai. 1 cc To Mr.N.Murali, Advocate, SR.6651 3 ccs To The Special Government Pleader, (Taxes) SR.6810,6811 & 8254 T.C.(R) Nos.642, 643 and 646 of 2006 SGL (CO) RH (24.2.11) https://hcservices.ecourts.gov.in/hcservices/