Judgment:
ORDER
R. Jayasimha Babu, J.
1. Petitioner sought a clarification from the Commissioner invoking Section 28-A of the Tamil Nadu General Sales Tax Act, 1959. The clarification sought was with respect to the product manufactured by the assessee called 'Makka Poha'.
2. It was the assessee's contention that the product is not a food item as it is in raw form, and it required frying before it can be consumed. The assessee also claimed that the product is properly taxable under item No. 8 of Part B of the Third Schedule which deals with all products of millets, rice, flour, brokens and bran of cholam, cumbu, ragi, thinai, varagu, samai, kudiraivali, milo and maize. Those products mentioned in item No. 8 are exempted from the levy of tax under the Act.
3. In that application the dealer sought an opportunity of personal hearing. Without affording him any such hearing, an order was passed by the Commissioner holding that the item is classified as 'food' falling under entry 12, Sub-clause (iii) in Part 'C' of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 which lists goods which are taxable at the rate of eight per cent at the point of first sale.
4. Petitioner's challenge to the clarification was rejected by the Tribunal. It held that the clarification does not bind the appellate authority, though it may bind the assessing authority.
5. There is no compulsion on the dealer to seek clarification. When he does so, the order made on that application by the Commissioner, will have fairly far-reaching consequences inasmuch as it binds the assessing officer who is certainly under the control of the Commissioner and under Section 28-A, Sub-clause (3) clarifications issued by the Commissioner are binding on 'all persons working under the control of the Commissioner of Commercial Taxes'.
6. The appellate authority to whom an appeal will lie from the order of the assessing authority, cannot be regarded as an officer working under the control of the Commissioner, as he is required to deal with the validity of the assessments, in a quasi-judicial capacity and while discharging such a function his discretion is not controlled by the Commissioner, except that, if the clarification issued is one which is in favour of the assessee/dealer, even the appellate authority functioning under the Act would be bound, having regard to the law laid down by the Supreme Court in the case of UCO Bank v. Commissioner of Income-tax : [1999]237ITR889(SC) .
7. The case considered by the apex Court in that decision was one which arose under the provisions of the Income-tax Act. The court was concerned with the effect of the circular issued by the CBDT. It was held by the apex Court that, Section 119 of the Income-tax Act under which circular was issued by the Board, conferred power to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers which are binding on the authorities in the administration of the Act. It was observed by the court that power given under Section 119 was therefore a beneficial power for proper administration of fiscal law, so that undue hardship may not be caused to the assessee and fiscal laws may be correctly applied. The object of the provision was to ensure a uniform and proper administration and application of the Income-tax Act.
8. Although the language employed in Section 119, Income-tax Act is not identical to that found in Section 28-A of the Tamil Nadu General Sales Tax Act, nevertheless having regard to the purpose for which the section has been introduced, viz., to ensure uniform administration and application of the Act, it would be in the interest of justice that a clarification issued by the Commissioner under Section 28-A, if it is one which is beneficial to the assessee should be regarded as binding on the revenue in all proceedings under the Act.
9. While in the normal course, an assessee will have the opportunity to present his view point before the assessing officer, the assessee has also been provided with an option, by the introduction of Section 28-A to seek a clarification from the head of the authorities, concerned with the enforcement of the Act, namely, the Commissioner so that the assessee is enabled to arrange its affairs in accordance with such clarification with the further assurance that the clarification so given by the Commissioner will bind, and will be followed by the authorities functioning under the Act.
10. In cases where the clarification given is one which is adverse to the assessee such clarification would still bind the assessing authority. However, it would, as far as assessee is concerned, still be open to him to challenge the correctness of that clarification in appellate proceedings as, though the clarification may bind the revenue it would not bind the assessee in cases where it is adverse to him. It would then become necessary for the appellate authority to go into the question as to whether the stand of the assessee is right and in accordance with the provisions of the Act, notwithstanding the fact that the clarification contrary to the stand taken by the assessee, has been issued.
11. Though Section 28-A does not in terms require a hearing be given to the dealer who seeks the clarification, in cases where the dealer seeks such personal hearing, such a dealer should be afforded personal hearing in all cases where the Commissioner proposes to record a finding which is adverse to the dealer/applicant. Had the dealer not applied for clarification and the matters were to be examined by the assessing officer at the time of assessment, the assessee certainly would have been entitled to notice of hearing before the final assessment. The assessee cannot be placed in a disadvantageous position merely because he invoked Section 28-A and sought clarification from the Commissioner. Any order adverse to the assessee therefore, is only to be made after giving the assessee a hearing.
12. The impugned order of the Commissioner was one which was clearly adverse to the petitioner. Though petitioner had sought personal hearing no such hearing had been given. Though this point does not seem to have been canvassed before the Tribunal, having regard to the consequences which flow from the order of the Commissioner, we have permitted counsel to urge this point before us. The impugned order of the Commissioner being vitiated by reason of the failure of the Commissioner to provide a hearing to the assessee, the same is required to be, and is set aside. The assessee shall be given a hearing by the Commissioner before he makes any fresh order on the request for clarification submitted by the petitioner.
13. The writ petition is allowed.