BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 29/08/2011 CORAM THE HONOURABLE MR.JUSTICE VINOD K.SHARMA W.P.(MD)No.6599 of 2006 W.P.(MD)Nos.6600 to 6602, 7571, 7572,7934, 7935/2006 3748/2007, 5709 to 5713/2007, 257/2008 & 10246 to 10248/2009 and M.P.(MD)Nos.1 & 1 of 2006, 1,1,1,1 & 1 of 2007, 2 of 2007, 2 of 2008, 1,1,1,1 of 2009 & 2 of 2009 M/s.The Blossom Products, Represented by its Proprietor, I.M.Chellapandi, 12/4, Ayyanarpuram Main Road, Chinthamani, Mdurai-9. ... Petitioner in W.P.6599/2006 Vs. 1.The Special Commissioner and Commissioner of Commercial Taxes, Chepauk, Chennai.5. 2.The Commercial Tax Officer, Tirupparankundaram Assessment Circle, Madurai. ... Respondents in W.P.6599/2006
PRAYER in W.P.(MD)No.6599 OF 2006
Writ Petition is filed under Article
226 of the Constitution of India praying to issue a Writ of Certiorarified
Mandamus, calling for the records comprised in TNGST/6231932/2005-06, dated
20.06.2006, on the file of the second respondent and quash the same and
consequently, and direct the second respondent herein to collect tax at 4% under
Entry 14 of Part B of the First Schedule to the TNGST Act, 1959 on the sale of
BOOM Flower.
!For Petitioner
in all W.P.s. … Mr.N.Venkatraman
Senior Counsel
for R.Karthikeyan
^For Respondents
in all W.P.s. … Mrs.S.Bharathi
Government Advocate
:COMMON ORDER
The order shall be disposed of W.P.(MD)Nos.6599, 6600 to 6602, 7571, 7572,
7934, 7935/2006, 3748/2007, 5709 to 5713/2007, 257/2008 & 10246 to 10248/2009,
as the common question of law and facts are involved in all these cases. For the
sake of brevity, the facts are being taken from W.P.(MD)No.1684 of 2006.
2.The petitioner, in the writ petition, is engaged in the business of
manufacturer and selling of ‘Boom flower’, which is a chemical fertilizer,
liable to sales tax under Part-B of the First Schedule to the Tamil Nadu General
Sales Tax Act, 1959.
3.The case of the petitioners is that, on 24th January 2005, the
petitioners were informed by the Enforcement Wing Officials that their product,
‘Boom Floor’ is liable to tax at 12% under Residuary entry, being a micro
nutrient, and not falling under entry 14 of Part “B”.
4.It is submitted by the petitioners, in all the writ petitions, that
during the year 2003-04 and 2005-06, the petitioners had effected sale of Boom
Floor, by paying tax at 4%, by treating it to be chemical fertilizer, falling
under Entry 14 of Part B of the First Schedule to the Tamil Nadu General Sales
Tax Act, 1959
5.The product of the petitioners was cleared and exported, as chemical
fertilizer, under H.S.CODE 3105.90 i.e., entry for fertilizer.
6.The product of the petitioners, is sold to dealers, for fertilizers and
pesticides, for use of by the farmers. On being informed by the Enforcement
Wing, that the product of the petitioners, was taxable at 12%, under the
residuary entry, the petitioners approached the respondent No.1 for seeking
clarification qua the rate of tax, applicable on the sale of ‘Boom floor’. The
applications were moved by the petitioners in Form XIV under section 28(a) of
the Act, along with literature.
7.On the applications of the petitioners, clarification was issued, which
reads as under:–
"Commercial Taxes Department From, To, Tmt.S.Malathi,IAS., Tvl.Blossom Products Special Commissioner and Commissioner of Commercial Tax, 12/4 Ayyanarpuram, Chepauk, Chennai-600 005 Madurai 6245 009. Lr.No.L.Dis.Acts cell II/21707/06, dated 26.06.2006 Clarification:No.83/08 Sir, Sub:Tamil Nadu General Sales Tax Act, 1959 - Rate of Tax Clarification under Sec.28-A of the Act for "Boom Flower"- Clarification issued - Reconsideration of - Requested - reg. Ref: 1.CCT's D.Dis Acts Cell 11/32368/05, dated 5.7.05 2.Reconsideration petition dated 3.8.05 from the petitioners. 3.CCT's L.Dis Ac.s Cell II/47078/05, dated 3.3.08. 4.Further reconsideration petition, dated 17.04.06 from the petitioners.
In the reference 1st cited, it has been clarified that “Boom Flower” (in
liquid and granular form) is taxable at 12% under residuary entry No.40, Part D,
First Schedule to the Tamil Nadu General Sales Tax Act, 1959.
In the reference 2nd cited, they have filed a reconsideration petition.
After a careful scrutiny and discussion, the earlier clarification issued was
reiterated in the reference 3rd cited.
In the reference 4th cited, they have again filed a reconsideration
petition with a request that their product may be classified as an item falling
under Entry No.14, Part B, First Schedule, which is taxable at 4%.
They have also enclosed a copy of latest test report from Regional Testing
Laboratory (Department of Industries and Commerce), Madurai. This test report
vary from the earlier one which they have furnished at the time of first
reconsideration.
In this office letter, dated 18.5.06, they have been requested to explain
the reasons for such variation instead of explaining the reasons for variation,
they have sent an opinion letter from one Dr.S.Sundaresan, Research and
Development Consultant, Madurai. In the above opinion letter, he has mentioned
that the commodities involved in both the test reports are one and the same.
The issue involved is discussed as follows:
“Nitrobenzene” falls under Central Excise Tariff Heading 2904.20 which
reads as “Derivatives containing only nitro or only nitro groups”. According to
case law report in 118 STC 379(SC), Chemical Fertilizers, that is to say (xxix)
Urea (other than technical grade urea), (xxx) Urea Ammonium Phosphate, (xxxi)
Zinc Sulphate, the expression ‘that is to say’ is descriptive, enumerative and
exhaustive and circumscribes to a greater extent the scope of the entry. Apart
from the filler and carrier contents (76.5%), Zinc Sulphate (0.55) and Urea (3%)
are negligible and the predominant Nitro benzene (20%) is not falling under the
items listed under the category of chemicals fertilizers.
If there is a mixture of the sub-items in the Entry with any other foreign
substance which is not an organic manure, then it would not fall within the
scope of Entry (Entry No.14/Part B/First Schedule) as the mixed product is a
commercially different one and is not the same as components as held in Shaw
Wallace and Co. vs. State of Tamil Nadu, 37 STC 522(SC).
Manure mixture made up of various chemical fertilizers mentioned in the
Entry and sold as a different chemical product and for a different user is not
chemical fertilizer as per the decision in State of Tamil Nadu vs. Tvl.Rallis
India Ltd – 34 STC 532 (Madras).
This issue was dealt with elaborately and orders passed in the reference
3rd cited. Therefore, the contentions put forth by the petitioners deserves no
consideration. The earlier clarification issue in the reference 3rd cites
requires no change and is reiterated.
Sd/-S.Malathi
Spl. Commr. & Commissioner of Commercial Taxes.
8.On the basis of the clarification issued, the petitioners were assessed
to sale tax at 12%, by treating the product of petitioners to be falling under
Entry No.40 of Part “B”.
9.The impugned clarification and the assessment order is challenged by the
petitioners, by referring to, the Entry First Schedule of Tamil Nadu General
Sales Tax Act 1959, which reads as under:-
Prior to 1970: Item 21 of the First Schedule:-
Chemical fertilizer, that is to say-
(1)Ammonium sulphate; (2)ammonium nitrate; (3)urea; (4)ammonium chloride;
(5)sodium nitrate; (6)calcium ammonium nitrate; (7)Super phosphate single;
(8)super phosphate triple; (9) kotka phosphate; (10)di-calcium phosphate; (11)
potassium chloride (muriate of potash); (12)sulphate of potash; (13)mono-
ammonium phosphate; (14)di-ammo-nium phosphate; (15)bone-meal; (16) any mixture
of one or more of the articles mentioned in the items (1 to 15) and one or more
of the organic manures.
Present Entry 14 of Part-B:
Chemical fertilizers, that is to say-
(i)Aluminium chloride, (ii)Ammonium molyddate, (iii)Ammonium phosphate
sulphate of any description (iv)Ammonium sulphate (v)Ammonium sulphate nitrate
(vi)Bone meal (vii)Borex (Sodium Fetroborate0 (viii) Calcium ammonium nitrate
(ix)Chelated iron as Fe-EDTA (x)Chelated zinc as Zn-EDTA, (xi) Copper Sulphate,
(xii)Di-ammonium phosphate (xiii)Di-calcium phosphate (xiv)Ferrous sulphate
(xv)Fused calcium magnesium phosphate (xvi)Kotka phosphate (xvii)Manganese
sulphate (xviii) Micro nutrient (xix)Mineral gypsum, (xx)Mono ammonium
phosphate, xxi)Nitro phosphate of any description (xxii)N P K complex of various
grades (xxiii)Potassium chloride (Muriate of potash) (xxiv)Rock phosphate,
(xxv)Solubor (xxvi)Sulphate of potash (xxvii)Super phosphate single
(xxviii)super phosphate triple (xxix) Urea (other than technical grade urea)
(xxx) Urea ammonium phosphate (xxxi)Zinc sulphate and (xxxii) Any mixture of two
or more of the articles mentioned in items (i) to (xxxi) above with or without
the addition of other articles (on the turnover relating to components thereof
which have no already suffered tax).
Present Entry 40 of Part D:
All other goods not specified elsewhere in any of the schedules. ”
10.The contention of the learned Senior counsel for the petitioners is
that the impugned clarification goes contrary to entry 14 of the Part-B, as the
product of the petitioners is Zinc Sulphate, falling under only (xxxix) and Urea
Ammonium Phosphate falling under only (xxxi) along with mixture Nitro benzene
and Nitro.
11.The learned Senior counsel appearing on behalf of the petitioners,
contends that once the product falls under Entry 14, Part B, it could not be
treated to be under residuary entry. Therefore, the impugned clarification,
being arbitrary to the provision of the Statute, cannot be sustained.
12.It is also the contention of the learned Senior Counsel for the
petitioners that the respondent No.1 wrongly treated the product of the
petitioners to be falling under residuary entry, merely because, it contains of
Nitro and Nitro benzene added to the Urea and Zinc Sulphate.
13.The contention of the learned Senior counsel for the petitioners
deserves to be accepted, in view of the decision of this court, in the case of
Transelektra Domestic Products P. Ltd., vs. C.T.O, 1993 (90) STC 436, wherein
this Court was pleased to lay down as under:-
“On going through the decision of the Tribunal, I am in entire agreement
with the line of reasoning adopted therein. Even that apart, the entry No. 66 of
the First Schedule to the Act while describing the various commodities as
falling within it refers to insecticides generally and not with or of any
particular percentage of combination or composition. As a matter of fact, the
concluding portion of the entry “and combinations thereof” without prescribing
any particular percentage is an indicator that what was envisaged therein is
that the product may be an insecticide simpliciter or a combination of an
insecticide to bring it within the meaning of the entry and it need not
necessarily be of any particular percentage of combination of any one or more of
the category of goods referred to in the entry. The stand taken to the contra
for the Revenue is wholly misconceived. The other aspects regarding the right of
the department to revise the classification administratively by the circulars
and the efficacy of the same need not be gone into by me in view of the
conclusion of mine that the product, for the reasons stated already, falls
squarely within the meaning of entry 66 of the First Schedule to the Act. The
principle of “ejusdem generis” therefore, has no applications to the case on
hand. Consequently I see no merit in the stand taken by the respondents and
there shall be a declaration, instead of mandamus as prayed for, that the
product of the petitioners, viz., mosquito mats under the brand name “Good
Knight” falls under entry 66 of the First Schedule to the Tamil Nadu General
Sales Tax Act, 1959. The writ petition shall stand ordered accordingly. No
costs.”
14.The learned Senior counsel for the petitioners also contended that the
respondent No.1 wrongly placed reliance on the judgment of this Court, in the
case of the State of Tamil Nadu vs. Rallis India Ltd., 1974 (34) STC 532 and
the judgment of the Hon’ble Supreme Court, in the case of Shaw Wallance & Co.
Ltd., vs. The State of Tamil Nadu, 1976 (37) STC 522(SC), to record a finding
that it is a content of all ingredients, which determine the product for entry
under the Sales Tax Act. Whereas, in the said judgments, the issue was not with
respect of the ingredients of a particular product, but “whether when a new
product formed by mixture of two products, and sold as a different product then
would attract tax or would be exempted, under the Tamil Nadu General Sales Tax
Act 1959”.
15.There is force also in this contention of the learned Senior counsel
appearing for the petitioners. The reading of the judgments referred to above,
do not show that, the question decided was to consider a product, under the
particular entry, in view of its ingredients, but deals with the question as to
whether the product, created by mixture of two products can be treated to be
same or different.
16.The respondent No.1, was error, in relying on these judgments, to hold
that the product of the petitioners will fall under residuary item, only because
the contents of Nitro-benzene was higher then of Zinc Sulphate and Urea.
17.The reading of 14-B does not show that any such ratio has been fixed
for categorizing a product, under particular entry, therefore, in view of the
law laid down by this court in case of Transelektra Domestic Products P. Ltd.,
vs. C.T.O, (supra), the product of the petitioner cannot be treated to be
falling under residuary item.
18.The learned counsel for the respondents State, did not dispute the
proposition, as raised, but contended that the points raised do not arise, in
the present writ petitions, for the simple reason that the clarification given
by the Commissioner is not adjudicatory order, which may call for interference
by this court. This court cannot go into the correctness of the clarification,
in exercise of any jurisdiction. In support of this contention, reliance is
placed on the judgment of this court, in the case of Amul Ploycure Industries
Ltd., Vs. T.N.T.S.T, [2004)134 STC 526.
19.This contention of the learned counsel for the State deserves to be
noticed to be rejected, in the view of the judgment of the Constitutional Bench
of the Honourable Supreme Court, in the case of Filterco and another vs.
Commissioner of Sales Tax, Madhya Pradesh and another, [1986 (61) STC 318,
wherein the Hon’ble Supreme Court, was pleased to lay down, as under:-
“We are of opinion that the High Court should have examined the merits of the
case instead of dismissing the Writ Petition in limine in the manner it has
done. The order passed by the Commissioner of Sales Tax was clearly binding of
the assessing authority under Section 42B(2) and although technically it would
have been open to the appellants to urge their contentions before the appellate
authority namely, the Appellate Assistant Commissioner, that would be a mere
exercise in futility when a superior officer namely, the Commissioner, has
already passed a well considered order in the exercise of his statutory
jurisdiction under Sub-section (1) of Section 42-B of the Act holding that 21
varieties of the compressed woolen felt manufactured by the appellants are not
eligible for exemption under Entry 6 of Schedule I of the Act.”
20.The learned counsel for the State, thereafter, contended that the
product of the petitioners is not a chemicals fertilizer, therefore, was rightly
placed under residuary item, as it is a Micro Nutrient, which does not fall
under the Fertilizer Control Order.
21.This contention of the learned counsel for the State, again deserves to
be noticed to be rejected, as the Honourable Supreme Court, in the case of
Commissioner of C.EX., Bangalore vs. Karnataka Agro Chemicals,
2008(227)E.L.T.12(S.C.), has been pleased to lay down, that is generic sense
“micro-nutrients” are also a kind of fertilizer, in the functional sense.
Though, in the said case, it was held that it was not be so treated for the
purposes of Central Excise Act, in view of its exclusion under Excise Act.
Whereas in the present case, it is not in dispute that the product was sold and
exported under HS CODE 3105.90, which deals with the fertilizer.
22.It is also well settled that if two interpretations are possible, in
that case, the one favouring the assess is to be followed.
23.For the reasons stated, all the writ petitions are allowed, and
impugned orders in all the writ petitions are set aside.
24.Connected Miscellaneous Petitions are closed. No costs.
er
To,
1.The Special Commissioner &
Commissioner of Commercial Taxes,
Chepauk,
Chennai.5.
2.The Commercial Tax Officer,
Tirupparankundaram Assessment Circle,
Madurai.