IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.01.2010 CORAM THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA W.A.Nos.231 and 232 of 2008 M/s Kailash Trade Links Pvt.Ltd., rep.by its Director K.S.Kasi No.22, Ormes Road Kilpauk Chennai 600 010 .. Appellant -Vs- The Commercial Tax Officer Ayanavaram Assessment Circle Chennai .. Respondent Appeals filed under Clause 15 of the Letters Patent against the order dated 17.12.2007 made in W.P.Nos.18790 and 24315 of 2007. WP No.18790/2007 & 24315/2007, Presented under Article 226 of the constitution of India to issue a writ of Certiorari calling for the records (1) on the file of the Respondent in his proceedings in TNGST No.1001236/2005-2006, dated 15.3.2007 quash the same. (2) of the impugned proceedings of the respondent in CST No.7189918/2005-2006, dated 7.5.07 quash the same as illegal and against the provisions of the act. For Appellant :: Mr.A.L.Somayaji Senior Counsel for Mrs.R.Hemalatha For Respondent :: Mr.Haja Naziruddin Special Government Pleader (T) JUDGMENT (Judgment of the Court was delivered by D.MURUGESAN, J.) The appellant is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959 (for short, "the TNGST Act") as well as the Central Sales Tax Act, 1956 (for short, "the CST Act") and is mainly in the business of manufacture of textile fabrics laminated with polyurethene. For the assessment year 2005-2006, the appellant had reported a total and taxable turnover of Rs.2,89,53,404/- and Rs.45,908/- respectively under the TNGST Act and Rs.53,55,826/- and Rs.Nil respectively under the CST Act. The appellant claimed exemption in respect of sales return amounting to Rs.3,43,210/- and Rs.2,87,52,193/- towards the sale of textile laminated fabrics. https://hcservices.ecourts.gov.in/hcservices/ However, the assessing officer by the order impugned in the writ petition dated 15.3.2007 disallowed the claim of exemption and assessed the turnover of Rs.2,87,52,193/- as taxable at 16% on the sale of textile laminated fabrics with polyurethene, as the same falls under Entry 2 of Part E of the First Schedule to the TNGST Act, besides levying surcharge at 5% as well penalty @ 150% under the said Act. Similarly, the turnover projected under the CST Act was re- fixed in a sum of Rs.53,55,826/- and Rs.42,30,598/- respectively by the impugned assessment. However, the appellant claimed exemption in respect of the turnover of Rs.42,30,598/- as pertaining to inter- State sales, as the goods fall under Entry 9(iii) of Part-A of the Third Schedule to the TNGST Act. However, the assessing officer by the order impugned in the writ petition dated 7.5.2007 disallowed the claim of exemption on the ground that the goods would fall under Entry 2 of Part £ of the First Schedule taxable at 16% under the TNGST Act and at 16.8% in the absence of 'C' forms under the CST Act besides levying penalty. Though the appellant had the remedy of preferring appeal against the orders of assessment before the Appellate Assistant Commissioner and in case of failure before that authority, to a further remedy of appeal before the Tribunal, the appellant had approached this Court by way of the writ petitions on the peculiar facts and circumstances of the case. 2. It appears that for the assessment year 2003-2004, the appellant collected tax at 16% while dealing with the very same goods, namely, textile fabrics laminated with polyurethene and had remitted the same to the department. However, the assessing officer found that the goods in question are exempted and therefore the appellant ought not to have collected tax and in that view, imposed penalty in terms of Section 22(2) and Section 23 of the TNGST Act. That order was questioned by the appellant before the Appellate Assistant Commissioner, who found that the goods in question are not exempted from tax and consequently set aside the order of the assessing officer. As against the order of the Appellate Assistant Commissioner for the assessment year 2003-2004, the revenue has preferred further appeal to the Tribunal and the same is pending. In such circumstances, there is no point in moving the Appellate Assistant Commissioner, as the orders impugned in the writ petitions were passed on the basis of the order of the Appellate Assistant Commissioner in respect of the assessment year 2003-2004. 3. The writ petitions did not find favour with the appellant before the learned single Judge on the ground that the appellant cannot take two different stands, one for the assessment year 2003- 2004 and another for the assessment year 2005-2006 and for the said reason, the writ petitions came to be dismissed. 4. We have heard Mr.A.L.Somayaji, learned senior counsel for the appellant and Mr.Haja Naziruddin, learned Special Government Pleader (Taxes) for the respondent. 5. When a claim for tax exemption is made for a particular assessment year, the assessing officer is bound to consider such claim, particularly with reference to the clarifications which were in force on the date of such claim. It is submitted by Mr.A.L.Somayaji, learned senior counsel that after the earlier https://hcservices.ecourts.gov.in/hcservices/ assessment order for the year 2003-2004 was passed, two clarifications were issued in this regard and one clarification relates to the very appellant themselves. That clarification was issued on 3.8.2004, which states that the goods mentioned in the petition 'textile fabric lamination with polyurethene' is exempted from tax liability under the TNGST Act vide Serial No.9(iii) of Part- A of the Third Schedule to the Act. One more clarification dated 9.10.2004 issued in respect of another dealer was also to the same effect. Apparently, these two clarifications have not been considered by the assessing officer. The binding nature of such clarifications on the officers of the revenue came up for consideration before a Division Bench of this Court, to which one of us was a party, in Pizzeria Fast Foods Restaurant (Madras) Pvt.Ltd. v. Commissioner of Commercial Taxes, Chennai and others, (2005) 140 STC 97, where the Division Bench, in paragraph 30, has opined as follows:- "30. In our opinion, though the circular issued by the Commissioner under section 28-A is not binding on the assessing authority or appellate authority, yet we cannot overlook the fact that since the Commissioner is a superior authority to the assessing officer or appellate authority, it would be impracticable to expect the subordinate authority to take a view contrary to the view expressed by the Commissioner. Hence, in our opinion, the plea of alternative remedy cannot be accepted in such a case, and if the petitioner contends that the clarification has been issued contrary to the provisions of the Act or Rules made thereunder, it will always be open to question the same under article 226 of the Constitution of India." 6. In fact, the Division Bench also considered a judgment of another Division Bench in Amul Polycure Industries Ltd., v. Tamil Nadu Taxation Special Tribunal, (2004) 134 STC 526 (Mad.) and held that the said judgment did not lay down the correct position of law, in view of the judgment of the Supreme Court in Filterco v. Commissioner of Sales Tax, (1986) 61 STC 318 (SC) holding that the writ petitions could be entertained when the circulars issued by the authorities are not followed and the remedy of appeal or revision would be futile and consequently they will not be efficacious. As on today, it is well settled that the clarifications issued or the circulars for that matter, would be certainly binding on the officials of the revenue, provided those circulars are in conformity with the provisions of the statute. The claim of exemption has been negatived by the assessing officer solely on the basis of the order of the Appellate Assistant Commissioner made in respect of an earlier assessment year, which was questioned before the Tribunal and such appeal is still pending. In our opinion, the assessing officer should independently consider the claim, as the consideration would be in respect of each assessment year, and with regard to the goods in question for the assessment year for which exemption is claimed. Moreover, when the very same order of the Appellate Assistant Commissioner is under challenge before the Tribunal, the rejection of tax exemption solely on the ground of that order is totally https://hcservices.ecourts.gov.in/hcservices/ unsustainable and such disposal would not amount to a disposal which the assessing officer is expected to do. 7. In view of the above, without expressing any opinion on the claim of the appellant with regard to tax exemption, particularly with reference to the clarifications, we set aside the orders of the assessing officer impugned in the writ petitions and consequently the order in the writ petitions as such, and remit the matter to the assessing officer for reconsideration of the claim of the appellant for the assessment year 2005-2006. We make it clear that inasmuch as the order of the first appellate authority relating to the assessment year 2003-2004 is now pending before the Tribunal, that cannot be a ground for rejection of the claim for exemption and, therefore, the assessing officer should consider the claim of the appellant without reference to the said order, but on other grounds, particularly the clarifications which are sought to be relied upon by the appellant- assessee. With these observations, both the writ appeals are disposed of. Consequently, M.P.Nos.1 of 2008 are closed. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ss To The Commercial Tax Officer Ayanavaram Assessment Circle Chennai + 1 cc to Spl. Govt., Pleader, (Taxes) SR 4875 W.A.Nos.231 & 232 of 2008 TEJ (CO) RH (4.2.10) https://hcservices.ecourts.gov.in/hcservices/