The Supreme Court in a case has ruled that on taxation classification if a special provision will prevail over the general provision in a statute.
Santhosh Maize & Industries Limited, the appellant, registered under the Tamil Nadu General Sales Tax Act, 1959 (“the Act”), deals in maize starch since 1975. The classification of maize starch under the Act is the subject of dispute in the first of the two appeals.
The Government of Tamil Nadu, vide a Notification (“Exemption Notification”) exempted the products of millets including maize from tax payable under the Act. The Legislative Assembly of Tamil Nadu (“Legislature”) amended Schedule I to the Act, adding Part C and including Entry No. 53 therein, which imposed a 5% tax on ‘sago and starch of any kind’w.e.f. 12th March 1993.
Later, through another amendment, ‘sago and starch of any kind’ was moved to Entry No. 61 of Part B of Schedule I (“Taxation Entry No. 61”) and the tax rate was reduced to 4% effective from 17th July 1996.
The aforesaid amendment dated 12th March 1993 sparked concerns among maize starch dealers. One of them, M/s Lakshmi Starch, sought clarification from the Special Commissioner and Commissioner of Commercial Taxes.
The Commissioner clarified that the exemption would remain in effect — a specific notification will prevail over a general entry in the Schedule. It was further stated that the process of obtaining maize starch from maize involves simple processing; therefore, maize starch will be classified as ‘maize products’ and covered by the Exemption Notification.
The appellant contended that the clarification provided by the Commissioner could not have been made applicable with retrospective effect is, without substance. The clarification vide Circular dated 8th October 1998 was issued in the exercise of the power conferred by the statute (i.e., Section 28-A of the Act).
Whenever a clarification under an application made by a registered dealer as to the applicable rate of tax is issued under sub-section (1), or the Commissioner on his own clarifies any point concerning the rate of tax under the Act, or the procedure relating to assessment and collection of tax as provided for under the Act is issued under sub-section (2), the object is to make the rate of tax explicit what is otherwise implicit.
“The contention as raised, if accepted, would defeat the object of issuing the clarification unless it were construed to have retrospective effect. What the clarification provided by the Commissioner does is to clear the meaning of the two entries which was already implicit but had given rise to confusion. A clarification of this nature, therefore, is bound to be retrospective.”, the bench observed.
The bench of Justices S. Ravindra Bhat and Dipankar Datta held that the Circular dated 8th October 1998 does not run counter to the provisions of the Tamil Nadu General Sales Tax Act, 1959.
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