Madras High Court
Tvl.F.M.Sales & Marketing vs The State Tax Officer on 6 October, 2021
W.P.No.21643 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 06.10.2021
CORAM
THE HONOURABLE MR.JUSTICE M.SUNDAR
W.P.No.21643 of 2021 &
WMP.No.2284 of 2021
Tvl.F.M.Sales & Marketing,
Represented by its Proprietor,
Rameshkumar Jain,
No.61, Krishnappa Agraharam Street,
Chennai - 600 001. ... Petitioner
Vs
The State Tax Officer,
Vallalar Nagar Assessment Circle,
Integrated Commercial Taxes Office Complex,
2nd Floor, Survey No.1275/3,
Elephant Gate Bridge Road,
Vepery,
Chennai - 600 003. ...Respondent
Prayer: Petition filed under Article 226 of the Constitution of India to
issue a Writ of Certiorari calling for the records on the files of the
respondent in TIN/33291162380/2010-11 dated 14.07.2021.
For Petitioner : Mr.R.Senniappan
For Respondent : Ms. Amirta Dinakaran
Government Advocate
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W.P.No.21643 of 2021
ORDER
Captioned writ petition has been filed assailing an 'order dated
14.07.2021 bearing reference TIN/33291162380/2010-11' (hereinafter
'impugned order' for the sake of brevity). This Court is informed that the
impugned order has been made under Section 27 of 'the Tamil Nadu
Value Added Tax Act, 2006, (Tamil Nadu Act No.32 of 2006)', which
shall hereinafter be referred to as 'TNVAT Act' for the sake of
convenience and clarity. Therefore, it is effectively a revision/re-
assessment order pertaining to escaped turnover / wrong availment of
'Input Tax Credit' (ITC).
2. Writ petitioner is a registered dealer in the office of the
respondent under TNVAT Act. This Court is informed that writ
petitioner effected sale of about 5000 packets of what is known as 'Hans
Chap Khaini' chewing tobacco vide a tax invoice dated 30.12.2010 to a
local buyer in Arumbakkam. In the invoice, it was mentioned that the
goods sold is non-taxable goods and exemption was claimed. This
consignment shall hereinafter be referred to as 'said goods' for the sake of
convenience and clarity. In the course of a routine physical check, the
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W.P.No.21643 of 2021
rowing squad of the respondent detained said goods i.e., aforementioned
consignment and a writ petition was filed in W.P.No.3212 of 2011 and
the Revisional Authority was directed to dispose of the matter. It may
not be necessary to dilate further on those aspects of the matter as the
impugned order has since been made.
3. Notwithstanding very many averments and several grounds
raised in the writ affidavit, learned counsel for writ petitioner made one
focused submission and that one focused submission is, the impugned
order erred in not following the order dated 05.06.2010 made in
R.P.No.11 of 2010 by the Commissioner (CT), Salem Division, in a
revision and an order dated 16.12.2010 made by this Court in
W.P.No.28080 of 2010. There was a mention about a Tax Case Order
dated 27.09.2012 made in Tax Case (Revision) Nos.2054 and 2055 of
2008 also. This order does not mention about Hans Chap Khaini
Chewing Tobacco i.e., said goods and therefore, it may not be necessary
to go into it.
4. The crucial paragraph in the impugned order to which the
attention of this Court is drawn is at Page 7 of the impugned order and
the same reads as follows:
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'Hence the dealer's claim that "Hans Chap Khaini" is a
chewing tobacco and exempted from tax, is not acceptable. I
find that the commodity "Hans Chap Khaini" is a taxable
commodity @12.5% and the exemption claimed on a turnover
of Rs.1,65,79,000.00 for the year 2010-11 is disallowed and is
assessed to tax at 12.5% as per the provisions of the TNVAT
Act 2006.'
5. Learned counsel for writ petitioner, therefore, in effect submits
that orders of higher authorities have been disregarded and on this
ground, the impugned order warrants interference in writ jurisdiction.
6. Ms.Amirta Dinakaran, who accepted notice on behalf of lone
respondent, submitted that impugned order is a reasoned order which has
been made after giving sufficient opportunity to the writ petitioner i.e.,
ample and adequate opportunity to the writ petitioner to show-cause.
Learned counsel adds that even personal hearings have been granted to
the writ petitioner though it is not statutorily imperative. To be noted,
this Court has held in State Bank of India officers case law (vide order
dated 01.08.2019 in W.P.No.22634 of 2019) that it is not statutorily
imperative to give personal hearing as far as revisional orders under
Section 27 are concerned. This elucidation was by explaining the
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W.P.No.21643 of 2021
expression 'reasonable opportunity to show cause' occurring in common
proviso to sub-sections (2) and (1) of Section 27 of TNVAT Act. To be
noted, this order was carried in appeal by way of an intra-court appeal
vide W.A.No.4073 of 2019 and in and by judgment dated 16.12.2019, a
Hon'ble Division Bench dismissed the writ appeal. However, it is not
statutorily imperative for an Authority to give personal hearing, but in a
given case if the Authority considers it necessary (owing to the
complexity or factual controversies or other reasons) a personal hearing
can always be given and this is one such case where personal hearing has
been given and this is not subjected to any disputation or disagreement.
Personal hearing has also been captured in the impugned order. Learned
Revenue counsel goes on to state that the contentions of the respondent,
more particularly, the written submissions and the submissions made on
behalf of the dealer / writ petitioner in the personal hearing have been
considered and all this is captured in the impugned order. Learned
counsel draws the attention of this Court to a portion of the impugned
order which reads as follows:
''The Revision Petition was Remanded back to the
Assessing Authority, by the Joint Commissioner (ST) Chennai
(North) Division in R.P.No.2/2019/C1 dated 11.2.2021 stating
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W.P.No.21643 of 2021
that.
"It is seen that the dealer had contested in the Hon'ble
High Court of Madaras the issue of notice issued by the
Assistant Commissioner (ST) Vallalar Nagar Assessment
circle to disallow, the claim of exemption on the turnover
representing the sale of scented chewing tobacco under the
brand name Hans Chap Khaini for the assessment year 2010-
11 vide notice dated 31.8.2012. The Hon'ble High Court in
W.P.No.27582/2012 and M.P.No.1/2012 dated 03.11.2020
had given order as follows:
"It is incumbent upon the Petitioner to submit his
explanation with all supporting documents and comply with
the requirements as sought in the impugned order by
31.12.2020. The Third Respondent shall, after affording full
opportunity of hearing duly consider the explanation of the
petitioner, deal with the each of the contentions raised and
pass reasoned orders on merits and in accordance with law
and communicate decision taken under written
acknowledgement. In the event of any decision entailing
adverse civil consequences, it would be certainly open to the
petitioner to impeach the same before the proper forum in the
manner recognized by Law. Though obvious, it is made clear
that no opinion has been expressed by this Court on the
correctness or otherwise on the merits of the controversy
involved in the matter"
Hence the Hon'ble High Court had left the issue of
taxability of the commodity Hans Chap Khaini dealt by the
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W.P.No.21643 of 2021
petitioner to be decided by the Assessing Officer. In view of
the orders of the Hon'ble High Court, the revision petition
filed by the dealer involving the same issue is remanded to the
Assessing Authority for fresh consideration and passing
necessary orders in accordance with law."
Accordingly another personal hearing notice vide this
office TIN.33291162380/2010-11 dated 17.2.2021 was issued
to the dealer which was received on 17.2.2021 by the dealer.
However, the dealer vide their letter dated 20.2.2021
requested time till 15.03.2021 for personal hearing. Again
vide the dealer dated 15.03.2021 requested time till
25.03.2021. Further on 25.03.2021, Thiru.P.Rajavelu,
Advocate of High Court, on behalf of Tvl.F.M.Sales &
Marketing, appeared and requested to extend the time for
personal hearing till 30.03.2021
On 30.03.2021 the dealer filed their written submission
for the year 2010-11, and produced documents in support of
their claim which was acknowledged on 30.03.2021.
The reply of the dealer was verified with the following
results.'
7. Learned counsel submits that in the paragraph that follows the
above extract, the contentions of the dealer/writ petitioner have been
examined and the reasons have been given.
8. This takes us to the point as to whether principles laid down by
higher Authorities have been disregarded, but a careful perusal of the
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W.P.No.21643 of 2021
impugned order reveals that the same have been considered and those are
captured in the following manner in the impugned order:
'The Hon'ble Supreme Court in the case of Kesarwani Zarda
Bhandar Vs.State of UP and others reported in 19 VST 545 (SC)
has held that
"the distinction between "manufactured' and
"processed" may not in all situations depending upon the
nature of the statute involved. It must pass the requisite test,
viz., Whether it is a completely new item. Raw material of a
manufactured product has to be distinguished from the
manufactured product. When a new form comes into being
and in market parlance it is considered to be a new product,
the new form would be deemed to be manufactured goods as
distinguished from processed goods."
Hence raw tobacco when it is cut into small pieces by
shearing machine, the resulting tobacco is called "nice tobacco".
The "nice tobacco" is allowed to dry for few days and then
flavouring essence are being sprinkled on it and this stage this
tobacco is known as 'Chewing Tobacco'. Then thereafter, menthol,
geru, lime and spices, etc, are being homogeneously mixed with the
same, either from electric machine or by the manually operated
machine. The items get inseparably mixed with the processed
tobacco and the resulting tobacco is called 'Zafrani Zarda' and
'Zafrani patti'. In this way, the raw tobacco loses its original
identity and its physical and chemical properties are changed. It is
a different commodity in the commercial world as well as amongst
the consumers. The quality, cost and liking amongst the consumers
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W.P.No.21643 of 2021
vary according to the material mixed with it.
In the instant case the commodity scented khaini by brand
name "Hans Chap Khaini" is having ingredients such as Tobacco,
Lime water, oil, Menthol,Mixed spices, Natural & Artificial
flavours with are homogeneously manufactured is not an ordinary
chewing tobacco. It is not chewed but to be kept between lips and
teeth and sucked. It is not edible and should not be eaten or
swallowed. It is in a powder form after several manufacturing
process. The manufacturer has also paid excise duty for this
product. It is different commodity on the lines of Zarda, Hans, etc.,
which are not exempted commodity but taxable at 12.5% as held in
the later part of the judgment cited above.'
9. A perusal of the aforesaid portion of the impugned order makes
it clear that the matter turns on facts and Hans Chap Khaini is only a
brand and it is not a product. Whether the product would qualify as
'Tobacco' is a matter which turns on facts and in the considered view of
this Court, in the light of the aforementioned extracts in the impugned
order, the reasoned impugned order does consider the principles qua
earlier orders and the same stand distinguished.
10. To be noted, with regard to Tax case order, which has already
been alluded to supra, it does not mention about Hans Chap Khaini and
therefore that does not fall for consideration.
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W.P.No.21643 of 2021
11. This takes us to the order of this Court in a writ petition being
order dated 16.12.2010 made in W.P.No.28080 of 2010, paragraph 5.1 of
order of the Hon'ble single Judge is of relevance and the same reads as
follows:
'5.1. On the other hand, on instructions, it is the contention
of Mr.R.Mahadevan, learned Additional Government Pleader
(Taxes) appearing for the respondents that on the face of it the
decision of the Joint Commissioner is not valid in law and the
exemption granted as per the government order cannot be
extended to the said commodity viz., Hans Chap Khaini Chewing
Tobacco. He would submit that the Joint Commissioner has
exceeded his limit by even referring to the various items like
Zarda, Sukha, Surki and Khara Masala as the commodities
produced by mixing tobacco leave cuttings with lime, spices and
some flavoring agents and that the Department has taken steps to
file appeal against the said order.'
12. Learned counsel for writ petitioner fairly submits that it is not
clear as to whether the order of Joint Commissioner has been assailed.
Therefore, these are all matters which (at best) have to be considered in
an appeal. In other words they do not warrant interference in writ
jurisdiction.
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W.P.No.21643 of 2021
13. This takes us to the alternate remedy rule. In the case on hand,
there is no disputation or disagreement that the impugned order is
appealable. In other words, statutory appeal qua impugned order is
available to the writ petitioner, which will be under Section 51 of
TNVAT Act.
14. Regarding alternate remedy rule, the law is well settled that it
is not an absolute rule and it is a discretionary rule. While holding it is
not an absolute rule i.e., a discretionary rule and a self-imposed restraint
qua writ jurisdiction, Hon'ble Supreme Court in a long line of authorities
starting from Dunlop India case [Assistant Collector of Central Excise,
Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and others
reported in (1985) 1 SCC 260], Satyawati Tandon Case [United Bank of
India Vs. Satyawati Tondon and others reported in (2010) 8 SCC 110]
and K.C.Mathew case [Authorized Officer, State Bank of Travancore
Vs. Mathew K.C. reported in (2018) 3 SCC 85] has held that the
alternate remedy rule has to be applied with utmost rigour when it comes
to fiscal statutes. Relevant paragraph in Dunlop India case is paragraph
3 and relevant paragraph in K.C.Mathew case is paragraph 10, which
read as follows:
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W.P.No.21643 of 2021
Paragraph 3 of Dunlop India case
'3. ....... Article 226 is not meant to short-circuit or
circumvent statutory procedures. It is only where statutory
remedies are entirely ill-suited to meet the demands of
extraordinary situations, as for instance where the very vires
of the statute is in question or where private or public wrongs
are so inextricably mixed up and the prevention of public
injury and the vindication of public justice require it that
recourse may be had to Article 226 of the Constitution. But
then the Court must have good and sufficient reason to
bypass the alternative remedy provided by statute. Surely
matters involving the revenue where statutory remedies are
available are not such matters. We can also take judicial
notice of the fact that the vast majority of the petitions under
Article 226 of the Constitution are filed solely for the purpose
of obtaining interim orders and thereafter prolong the
proceedings by one device or the other. The practice certainly
needs to be strongly discouraged.'
(Underlining made by this Court to
supply emphasis and highlight)
Paragraph 10 of K.C.Mathew case
'10. In Satyawati Tondon the High Court had
restrained further proceedings under Section 13(4) of the Act.
Upon a detailed consideration of the statutory scheme under
the SARFAESI Act, the availability of remedy to the aggrieved
under Section 17 before the Tribunal and the appellate remedy
under Section 18 before the Appellate Tribunal, the object and
purpose of the legislation, it was observed that a writ petition
ought not to be entertained in view of the alternate statutory
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remedy available holding: (SCC pp.123 & 128, Paras 43 &
55)
“43. Unfortunately, the High Court overlooked the
settled law that the High Court will ordinarily not entertain a
petition under Article 226 of the Constitution if an effective
remedy is available to the aggrieved person and that this Rule
applies with greater rigour in matters involving recovery of
taxes, cess, fees, other types of public money and the dues of
banks and other financial institutions. In our view, while
dealing with the petitions involving challenge to the action
taken for recovery of the public dues, etc., the High Court
must keep in mind that the legislations enacted by Parliament
and State Legislatures for recovery of such dues are a code
unto themselves inasmuch as they not only contain
comprehensive procedure for recovery of the dues but also
envisage constitution of quasi-judicial bodies for redressal of
the grievance of any aggrieved person. Therefore, in all such
cases, the High Court must insist that before availing remedy
under Article 226 of the Constitution, a person must exhaust
the remedies available under the relevant statute.
55.It is a matter of serious concern that despite
repeated pronouncement of this Court, the High Courts
continue to ignore the availability of statutory remedies under
the DRT Act and the SARFAESI Act and exercise jurisdiction
under Article 226 for passing orders which have serious
adverse impact on the right of banks and other financial
institutions to recover their dues. We hope and trust that in
future the High Courts will exercise their discretion in such
matters with greater caution, care and circumspection.'
(underlining made by this Court to supply
emphasis and highlight)
15. To be noted, the aforementioned paragraph 10 in
K.C.Mathew's case, Satyawati Tondon principle has been reiterated and
therefore relevant paragraph in Satyawati Tondon is not being extracted
and reproduced separately.
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W.P.No.21643 of 2021
16. Very recently in Commercial Steel case law [The Assistant
Commissioner of State Tax Appellant(s) and Others Vs.M/s
Commercial Steel Limited] being order made by Hon'ble Supreme
Court on 03.09.2021, Hon'ble Dr Dhananjaya Y Chandrachud speaking
for a three member Bench of the Hon'ble Supreme Court, dealt with this
Alternate remedy rule and to be noted ,this is qua an appeal under
Section 107 of 'The Central Goods and Services Tax Act, 2017'
(hereinafter 'C-GST Act' for the sake of brevity and convenience) {to be
noted, a fiscal statute again} relevant paragraphs are paragraphs 11 and
12, which read as follows:
'11 The respondent had a statutory remedy under
section 107. Instead of availing of the remedy, the respondent
instituted a petition under Article 226. The existence of an
alternate remedy is not an absolute bar to the maintainability
of a writ petition under Article 226 of the Constitution. But a
writ petition can be entertained in exceptional circumstances
where there is: (i) a breach of fundamental rights; (ii) a
violation of the principles of natural justice; (iii) an excess of
jurisdiction; or (iv) a challenge to the vires of the statute or
delegated legislation.
12 In the present case, none of the above exceptions
was established. There was, in fact, no violation of the
principles of natural justice since a notice was served on the
person in charge of the conveyance. In this backdrop, it was
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CA 5121/2021 7 not appropriate for the High Court to
entertain a writ petition. The assessment of facts would have
to be carried out by the appellate authority. As a matter of
fact, the High Court has while doing this exercise proceeded
on the basis of surmises. However, since we are inclined to
relegate the respondent to the pursuit of the alternate
statutory remedy under Section 107, this Court makes no
observation on the merits of the case of the respondent.'
17. A perusal of the aforementioned paragraphs makes it clear that
the case on hand does not fall under any of the aforementioned
exceptions. The above is the obtaining position of law qua alternate
remedy rule qua fiscal Statutes. Though obvious, for the purpose of
completion of this narrative, discussion and dispositive reasoning, this
Court deems it appropriate to mention that exceptions qua alternate
remedy rule have been adumbrated in Whirlpool case law [Whirlpool
Corporation Vs. Registrar of Trade Marks, Mumbai and others
reported in (1998) 8 SCC 1] and Harbanslal principle [Harbanslal
Sahnia and another Vs. Indian Oil Corpn. Ltd., and others reported in
(2003) 2 SCC 107]. Relevant paragraphs in Whirlpool case is paragraph
15, which reads as follows:
'15. Under Article 226 of the Constitution, the High
Court, having regard to the facts of the case, has a discretion
to entertain or not to entertain a writ petition. But the High
Court has imposed upon itself certain restrictions one of
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which is that if an effective and efficacious remedy is
available, the High Court would not normally exercise its
jurisdiction. But the alternative remedy has been consistently
held by this Court not to operate as a bar in at least three
contingencies, namely, where the writ petition has been filed
for the enforcement of any of the Fundamental Rights or
where there has been a violation of the principle of natural
justice or where the order or proceedings are wholly without
jurisdiction or the vires of an Act is challenged. There is a
plethora of case-law on this point but to cut down this circle
of forensic whirlpool, we would rely on some old decisions of
the evolutionary era of the constitutional law as they still hold
the field.'
18. This Court deems it appropriate to not to burden this order with
further extracts from Harbanslal case also. Suffice to say that
exceptions to alternate remedy rule are set out i.e., adumbrated in
Whirlpool case (come to be known and has come to stay as 'Whirlpool
exceptions' in litigation parlance). Suffice to say that captioned writ
petition does not fall under any of the exceptions adumbrated in
Whirlpool case. On the contrary, in the considered view of this Court,
this is a case which has to be dealt with by Appellate Authority if the
writ petitioner / dealer chooses to prefer an appeal as it turns heavily on
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facts. As already alluded to supra, 'Hans Chap Khaini' is a brand name
and though the written submission talks about packets, it is understood
that it is effectively sachets. The contents of sachets have to be
necessarily gone into. One of the aforementioned extracts from the
impugned order makes it clear that the respondent in the impugned order
has clearly gone into the ingredients and has even gone into process and
making of 'nice tobacco'. Respondent has gone into and examined that
products such as menthol, geru, lime an spices etc., are homogeneously
mixed with the same either by a electric machine or by a manually
operated machine. As all these details turn on facts, it would be
appropriate that the Appellate Authority examines this if the writ
petitioner chooses to file an appeal and therefore, this Court refrains itself
from expressing any opinion on these aspects of the matter in this order.
This is more so as this Court is relegating the writ petitioner / dealer to
the alternate remedy of an appeal.
19. Captioned writ petition is therefore dismissed albeit leaving a
window open to the writ petitioner / dealer to file an appeal under Section
of 51 of TNVAT Act if the writ petitioner chooses to do so. If the appeal
is entertained subject to limitation and other conditions ingrained therein
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(conditions such as pre-deposit), Appellate Authority shall deal with the
appeal on its own merits and in accordance with law uninfluenced or
untrammeled by any observations that might have been made in this
order.
Captioned writ petition is dismissed albeit preserving the limited
rights of the writ petitioner in the aforesaid manner. Consequently,
connected WMP is disposed of as closed having become unnecessary.
There shall be no order as costs.
06.10.2021
Index: Yes/ No
Speaking/Non-speaking Order
gpa
P.S: After the order was passed, Mr.R.Senniappan, learned counsel on record
for the writ petitioner on instructions submitted that he would pursue
appeal/revision and requested for the original impugned order to be returned.
Registry to return the original of the impugned order forthwith to the counsel
on record for the writ petitioner (under due acknowledgement).
To
The State Tax Officer,
Vallalar Nagar Assessment Circle,
Integrated Commercial Taxes Office Complex,
2nd Floor, Survey No.1275/3,
Elephant Gate Bridge Road,
Vepery,
Chennai - 600 003.
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W.P.No.21643 of 2021
M.SUNDAR,J.
gpa
W.P.No.21643 of 2021 &
WMP.No.2284 of 2021
06.10.2021
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