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Order on entry tax has only prospective application: HC
October, 28th 2006

A clarification dated August 23, 2005 by the Special Commissioner & Commissioner of Commercial Taxes, Tamil Nadu, that entry tax was leviable on imported lay flat tubing and PP bags would have only prospective application, the Madras High Court has ruled.

Responding to a writ appeal by a Tirupur plastic unit challenging the order dated April 25, 2003 of the Special Commissioner, the First Bench, comprising Chief Justice Mr A.P. Shah and Mr Justice K. Chandru, held that the appeal partly succeeded. The said clarification would have only prospective application and consequently impugned order was quashed and set aside, the Bench ruled.

According to the appellant, the first respondent (Deputy Commercial Tax Officer, Tirupur) issued a notice proposing to levy entry tax on the two products imported by appellant, Om Plastics, Tirupur. The appellant countered saying that there could be no levy of the tax as the products were essentially from polypropylene.

The first respondent, however, confirmed tax and demanded payment holding that products fell under Entry 24 of schedule to the TN Tax on Entry of Goods into Local Areas Act, 2001. The first respondent relied on clarification dated August 19, 2005 of the Principal Commissioner.

The appellant contended that it was well settled by judgments of the apex court that revenue could withdraw earlier clarification issued with prospective effect and not retrospective effect.

On a query by appellant (petitioner), Special Commissioner clarified that words `in all forms' contained in Entry 24 denoted raw material only and did not include finished products. Special Government Pleader said that the two products would fall under the entry. The Bench pointed out that in view of an order in Mohan Breweries case (237 ITR 889) it was clear that clarification dated August 23, 2005 of Special Commissioner could not affect prejudicially assessee.

The Bench referred to another order of the Division Bench in Mohan Breweries case (139 STC 477), and said that even though clarification was executive in nature, it was binding on authorities till concessions given to petitioner under clarification were withdrawn, which could be done only prospectively.

The First Bench said in the result, the writ petition partly succeeded. The clarification dated August 23, 2005 would have only prospective application, and hence, impugned order dated April 28, 2006 was quashed and set aside. The writ appeal did not survive, and it was dismissed.

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