1. Petition on being called today upon hearing both sides the Tribunal ordered as follows : This original petition is against the revision of assessment by the respondent in assessment No. 209346/93-94 dated March 31, 1999. The facts leading to the present petition are as follows : Originally the assessing authority proposed to levy tax at 3 per cent as first sales under item 69(ii) of Part B of the First Schedule on the imported flax fibre not reported in the return. Though no objection was filed against the proposal, the assessing authority stated that the turnover of fibre flax is taxable at 3 per cent under the Second Schedule and not under item 69(ii) of Part B as stated in the pre-assessment notice dated February 15, 1995 and assessed the turnover to tax in the order passed by him on March 31, 1995. Subsequently, the assessing authority issued a pre-assessment notice dated March 16, 1999 proposing to assess that turnover of Rs. 1,89,60,195 representing flax fibre at 8 per cent instead of 3 per cent by stating as follows : "On a further scrutiny of assessment for the year 1993-94 it was noticed that the sales turnover amounting to Rs. 1,89,60,195 representing flax fibre was assessed at 3 per cent instead of higher rate of tax at 8 per cent. As per the clarification issued by the Commissioner of Commercial Taxes, Madras in D. Dis. Acts Cell 11/132565/93 dated May 10, 1994 vide ([1995] 97 STC (Circulars & Clarifications), page 6) the viscose staple fibre falling under Central Excise Tariff No. 56.03 is liable to tax at 8 per cent under Part D, item 63 of the First Schedule." 2. Time was granted till March 26, 1999 to file objections. The petitioner filed objections on March 26, 1999 by stating that the assessment originally made was in accordance with the clarification of the Special Commissioner and Commissioner of Commercial Taxes in D.Dis. Acts Cell II/752/94 dated May 30, 1994 and that flax fibre is produced from the plant just like cotton or jute and that it falls under item 5 of the Second Schedule to the Act whereas viscose staple fibre is a fibre extracted from tree by chemical process. He further stated that if a contrary view is taken by the assessing authority then an opportunity to demonstrate the product namely flax fibre may be given to him. While considering the objections, the assessing authority stated that as per the clarification of the Commissioner of Commercial Taxes dated May 10, 1994, viscose staple fibre is assessable to tax at 8 per cent under Part D of item No, 63 of the First Schedule. He further stated as follows : "So, also, the following clarifications were issued by the Special Commissioner and Commissioner of Commercial Taxes in D.Dis. Acts Cell II/85058/97 dated June 11, 1998 as under : "Flax fibre does not find place in any one of the entries in the Schedule to the TNGST Act and therefore it is classified as a residuary item under entry 67 of Part D of the First Schedule liable to be taxed at 11 per cent with effect from July 17, 1996. The earlier clarification issued in this office reference Acts Cell U/103278/93 dated August 2, 1994 and Acts Cell II/52/94 dated May 30, 1994 that flax fibre is taxable at 3 per cent under entry 5 of the Second Schedule are hereby withdrawn." Thus he overruled the objections and assessed the turnover at 8 per cent bringing to assessment a turnover of Rs. 1,89,60,195 at the differential rate of tax at 5 per cent (8 per cent-3 per cent) under Section 16(l)(a) of the Act. The present petition is against this revision of assessment.
3. Mr. R. Venkatraman, learned counsel for the petitioner, contended as follows : The petitioner is a dealer in flax fibre and the assessment relates to the year 1993-94. Originally, tax was levied at 3 per cent under entry 5 of the Second Schedule to the Act by relying on the clarification issued by the Special Commissioner and Commissioner of Commercial Taxes in Acts Cell II/752/94 dated May 30, 1994 which reads as follows : "Flax fibre is liable to tax at 3 per cent under entry No. 5 of the Second Schedule at the point of first sale in the State. Since the dealers who sell the imported flax fibre has to pay tax on the point of first sale in the State, the petitioner need not pay the purchase tax." 4. Subsequently revision was made on March 16, 1999 by levying tax at 8 per cent under the residuary entry 63 of Part D by stating that flax fibre sold by the petitioner is akin to staple fibre yam and reliance was placed on the clarification of the Special Commissioner and Commissioner of Commercial Taxes in Acts Cell II/132565/93 dated May 10, 1994 which reads as follows : "Viscose staple fibre falling under Central Excise Tariff No. 56.03 is liable to tax at 8 per cent under entry 63 of Part D." Though it was explained in the objection letter filed that flax fibre obtained from plants is different from viscose extracted from soft wood trees by chemical process and material evidence was produced seeking a personal hearing on March 30, 1999 still the assessing authority without affording an effective hearing as prayed for has passed the impugned order. Thus, the reassessment made by relying on the circular of the Special Commissioner and Commissioner of Commercial Taxes in Acts Cell II/85058/97 dated June 11, 1998 which was not disclosed in the original pre-assessment notice obviously shows that there is violation of the principles of natural justice. The circular dated June 11, 1998 reads as follows : "Flax fibre does not find a place in any of the entries in the Schedule to the TNGST Act and therefore it is classified as a residuary item under entry 67 of Part D of the First Schedule liable to tax at 11 per cent with effect from July 17, 1996. The earlier clarification issued in this office reference Acts Cell II/ 10003278/93 dated August 2, 1994 and Acts Cell II/752/94 dated May 30, 1994 that flax fibre is taxable at 3 per cent under entry 5 of the Second Schedule are hereby withdrawn." Thus the assessment made on the basis of material not disclosed to the petitioner and also without affording personal opportunity to demonstrate the case has to be held as a clear case of violation of principles of natural justice and on that basis the order of assessment should be quashed.
5. Mr. R. Venkatraman, learned counsel further stated that the petitioner did not collect tax at 8 per cent on sales, and thus the petitioner is seriously prejudiced because of revision of assessment and in a similar case the Taxation Special Tribunal in the decision reported in MM. Toys Industries v. Commercial Tax Officer, Kilpauk Assessment Circle [1998] 110 STC 68 has observed in the head note as follows : "Admittedly, during the relevant time the assessments having been made by accepting the rate of 3 per cent, the manufacturers did not collect sales tax at the rate of 8 per cent from the consumers. To this extent, they would be seriously prejudiced, if the assessment orders were revised." 6. On that basis the impugned order of assessment was cancelled.
Similarly in the present case also, the order of assessment has to be cancelled. The learned counsel for the petitioner referred to the decisions reported in V.G. Textiles (P) Ltd. v. Commercial Tax Officer, Udumalpet (North), Udumalpet [1997] 106 STC 123 (Mad.), Commercial Tax Officer v. T.V. Swdaram lyengar & Sons Ltd. [1998] 108 STC 471 (Mad.), J.J. Spinners Ltd. v. Commissioner of Commercial Taxes, Orissa [1998] 109 STC 289 (Orissa), Engine Valves Limited v. Union of India [1993] 90 STC 84 (Mad.) and Kaveri Oil and Fertilizers v. Deputy Commercial Tax Officer [1999] 113 STC 119 (Mad.) for the proposition that the order has to be quashed when there is gross violation of the principles of natural justice.
7. Thiru R. Mahadevan, learned Government Advocate, contended that the true nature of the product has to be understood so as to classify the item for levying the correct rate of tax. When the statutory remedy is available, then the assessee should not by-pass the statutory remedy and approach this Court in writ jurisdiction and in this connection, he referred to the decision of the Supreme Court reported in State of Goa v. Leukoplast (India) Ltd. 8. I have considered the rival contentions. In the original assessment, the assessing authority proposed to levy tax on the sale of flax fibre under item 69(ii) of Part B of the First Schedule, However, while passing the assessment order, though no objections has been filed, the assessing authority stated that the item flax fibre would fall under the Second Schedule to the Act taxable at 3 per cent. Later, while proposing to revise the assessment on the ground that the commodity namely flax fibre was assessed at lower rate of tax, the assessing authority stated that the commodity flax fibre is assessable at 8 per cent instead of 3 per cent assessed originally and this is on the basis of the understanding as per the clarification of the Commissioner of Commercial Taxes dated May 10, 1994. When objections were filed apart from referring to the basis for the revision as stated in the notice, the assessing authority further stated that the clarification issued subsequently by the Commissioner of Commercial Taxes dated June 11, 1998 also confirms this position. The words "so also" employed by the assessing authority clearly show that the reference made to the clarification on June 11, 1998 was only to confirm the original stand taken in the revision notice dated March 16, 1999 wherein the assessing authority relied on the clarification of the Commissioner of Commercial Taxes dated May 10, 1994 in respect of viscose staple fibre. Therefore, the plea that the assessment was made on the basis of the clarification dated June 11, 1998 which was not disclosed to the petitioner and therefore there is violation of principles of natural justice has no force at all. The Section 16(l)(a) of the Act contemplates only a reasonable opportunity to show cause against the revision of assessment and personal hearing is not contemplated therein. Had the petitioner really wanted to furnish further evidence he ought to have presented such facts before the assessing authority in time. The assessing authority has referred to the letter dated March 25, 1999 which was received by him on March 26, 1999, and there was no mention about the letter dated March 30, 1999 wherein permission was sought to demonstrate the product as already stated in the letter dated March 25, 1999. Thus, as regards the revision of assessment order dated March 31, 1999, there is no violation of any principles of natural justice as contended by the petitioner. In [1998] 110 STC 68 in the case of MM.Toys Industries v. Commercial Tax Officer, the Taxation Special Tribunal has first interpreted the liability to tax in respect of electronic toys with reference to entry 50 of Part B of the First Schedule to the Act and thereafter only reference was made to the clarification of the Commissioner of Commercial Taxes in this regard.
In this context, it is relevant to refer to the following observations in MM. Toys Industries v. Commercial Tax Officer [1998] 110 STC 68 at page 71 which read as follows : "I am clearly of the opinion that entry 50 quoted by me is wide enough to include electronic toys manufactured by the petitioners.
Admittedly, during the relevant time the assessments having been made by accepting the rate of 3 per cent the manufacturers did not collect sales tax at the rate of 8 per cent from the consumers. To this extent, they will be seriously prejudiced, if the assessment orders are revised. No doubt it is not a ground for interpreting entries in favour of the assessee. On the other hand, I have interpreted the entries first and I have found that the interpretation sought to be placed by the petitioners is justified." 9. Thus only after interpreting the relevant entry in regard to the rate of tax on the commodity in question reference was made to the clarification of the Commissioner of Commercial Taxes. In this connection, it is relevant to refer to the observation of the Supreme Court in the case of Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47 wherein the following observations have been made in regard to the clarifications/circulars : "Clarifications/circulars issued by the Central Government and/or the State Government represent merely their understanding of the statutory provisions. They are not binding upon the courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law. There can be no estoppel against the statute. The understanding of the Government, whether in favour or against the assessee, is nothing more than its understanding and opinion. It is doubtful whether such clarifications and circulars bind the quasi-judicial functioning of the authorities under the Act. While acting in a quasi-judicial, capacity, they are bound by law and not by any administrative instructions, opinions, clarifications or circulars." 10. Thus, in this case also the question to be answered is how the product namely flax fibre was understood and treated in the market namely in the ordinary commercial sense as rightly referred to by the learned Government Advocate Mr. R. Mahadevan, in the Supreme Court in the case of State of Goa v. Leukoplast (India) Ltd. [1997] 105 STC 318 wherein head note at page 319 reads as follows : "Held, setting aside the decision of the High Court, that in order to decide the question whether the products manufactured by the assessee could be treated as 'drugs and medicines' it had to be found out how those products were understood and treated in the market, viz., whether, in the ordinary commercial sense, those articles were considered as drugs and medicines. The question whether the products manufactured by the assessee could be treated as 'drugs or medicines' could not be answered straightaway. Their medical contents, if any, had to be ascertained. Their curative function was to be found out. It had to be decided whether they could be called medicament at all, and whether they were used to cure or alleviate or prevent disease or to restore or preserve health. These were basically questions of fact which should have been agitated before the statutory appellate authority. There was no reason for the assessee to by-pass the statutory remedy and approach the court with a writ petition and the High Court ought not to have allowed the assessee to by-pass the statutory remedies where the questions could have been properly agitated and ascertained."Assistant Commissioner of Sales Tax, Kerala v. P. Kesavan & Co. [1996] 100 STC 514 while considering the claim of exemption in respect of caristrap rayon cord strapping has observed that "where intricate technical processes are involved, it is proper that the writ court should direct the writ petitioners to agitate their grievances before the statutory authorities who are more competent to assess the merits thereof". Therefore, in the present case also, the correct rate of tax in respect of sale of flax fibre is to be determined after considering the materials particularly the process to manufacture involved in the product in question. This question cannot be determined in the writ jurisdiction as observed by the Supreme Court decision cited supra. A change of opinion to reassess the turnover at the correct rate of tax cannot be said to be illegal and this view is confirmed by the decision of the Supreme Court in S.L.P. Civil No.10324 of 1991 in the case of State of Andhra Pradesh v. Ratna Sree Box Makers 12. As explained supra no violation of principles of natural justice is involved in passing the reassessment, and the various decisions quoted by Mr. R. Venkatraman, the learned counsel for the proposition that there is violation of natural justice and therefore the order of reassessment has to be set aside have no relevance at all. Thus, I find that there is no case to interfere with the order of assessment in writ jurisdiction under Article 226 of the Constitution of India when the petitioner has an alternative remedy by way of filing statutory appeal against the order of revision passed on March 31, 1999. Thus, reserving the right of filing statutory appeal, this original petition is dismissed. Time spent in pursuing this petition before this Special Tribunal shall be excluded in calculating the time for filing appeal before the statutory appellate authority. Original papers if any filed shall be returned to the petitioner.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 25th day of June, 1999.