Erode Cloth Merchants ... vs The State Of Tamil Nadu
2023 Latest Caselaw 5839 Mad

                                                                          W.P.No.3904 of 2021

                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                              DATED: 09.06.2023

                                                    CORAM :

                                  THE HONOURABLE DR.JUSTICE ANITA SUMANTH

                                             W.P.No.3904 of 2021
                                                    and
                                            W.M.P.No.4455 of 2021

                     Erode Cloth Merchants Association
                     Rep. By its President Shri.K.Kalaiselvan
                     83, East Kongalamman Kovil Street,
                     Erode – 638 001.                                           .. Petitioner


                                                       vs

                     1.The State of Tamil Nadu
                       Rep. By its Secretary,
                       Commercial Taxes Department,
                       Fort St.George, Chennai.

                     2.The Principal Secretary / Commissioner
                         of Commercial Taxes,
                       (now known as Commissioner of State Tax)
                       Ezhilagam, Chepauk,
                       Chennai – 600 004.                                    .. Respondents


                     Petition filed under Article 226 of the Constitution of India praying to
                     issue a writ of mandamus forbearing the respondents herein, their
                     sub-ordinates, officers and any person working under them or for
                     them from assessing or recovering any sums under Section 13 of
                     the Tamil Nadu Value Added Tax Act, 2006 from such of the
                     members of the petitioner herein who are carrying on business as
                     proprietors, partnership firms or Hindu Undivided Family in view of
                     clarification in Letter No.Acts Cell – 3/32485/2015 dt.04.11.2015


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                                                                             W.P.No.3904 of 2021

                     issued by the 2nd respondent herein and communication in Letter
                     No.Legal Cell 5/34991/2015 dt.23.11.2015 of the 2nd respondent
                     herein.


                                  For Petitioner        :      Mrs.Hema Muralikrishnan

                                  For Respondents       :      Mr.T.N.C.Kaushik
                                                               Additional Government Pleader


                                                            ORDER

This writ petition is filed by the Erode Cloth Merchants

Association comprising 1097 members on its rolls as on 04.02.2021

when the writ petition was instituted. Of that number, 10 members

are said to be Corporates or associations of persons and the

remaining 1087 are said to be proprietorship concerns, partnership

firms or Hindu Undivided Family (HUF).

2. The writ petition has been filed by the association on

behalf of its members seeking a mandamus forbearing the

respondents, being the, State of Tamil Nadu, represented by the

Secretary to Commercial Taxes Department (in short, 'R1') and the

Principal Secretary / Commissioner of Commercial Taxes (in short,

'R2') or officers working under them from assessing or recovering

any sums under Section 13 of the Tamil Nadu Value Added Tax, Act,

2006 (in short, '2006 Act') from their members. They restrict their

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W.P.No.3904 of 2021

prayer only to the 1087 members that are proprietorship concerns,

partnership firms or HUF.

3. The preliminary objection that is raised is that of

maintainability. Mr.T.N.C.Kaushik, learned Additional Government

Pleader, who appears on behalf of the respondents would object to

the maintainability of this writ petition pointing out that the Cloth

Merchants Association cannot, by itself, be aggrieved by any action

to be initiated by the respondents, as the association is not an

assessee on the file of the Commercial Taxes Department.

4. The association, as a registered society cannot be said

to be personally affected by the action of respondents and hence

has no locus standi to have filed the present writ petition. The relief

sought for by the association should thus have been pursued by the

members individually and not by association itself. For this purpose,

he relies on a slew of judgments that shall be discussed presently.

5. The second objection in regard to the aspect of

maintainability is addressed towards the prayer itself, which is for a

mandamus as against the respondents. Learned counsel urges that

mandamus of this nature cannot / should not be considered or

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W.P.No.3904 of 2021

granted by the Court for the reason that it is an overarching relief

sought as against the statute. Thus it would not be appropriate for

the Court to consider or grant such a wide prayer that would

tantamount to directing the authorities to frame assessments in a

particular manner.

6. Assessments must be framed as provided for under the

provisions of the relevant enactment and thus while assessment or

proceedings may be challenged by individual assessees, it is not for

the association to seek such an omnibus prayer directing

assessments be framed in a specified fashion.

7. Per contra, Mrs.Hema Murali Krishnan, learned counsel

appearing for the petitioner's association would point out that the

petitioner association comprises of members who are all engaged in

identical kinds of businesses. The entirety of their prayer is

premised upon a clarification issued by R1 to the effect that cloth

manufacturers that are of the status of proprietary concerns,

partnership firms or HUF are not affected by the rigour of tax

deduction at source (in short, 'TDS') in terms of Section 13(1) of

the Act.

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W.P.No.3904 of 2021

8. Thus and seeing as all members who are pursuing the

prayer are identically placed, without distinction of activity or legal

position, there is nothing to be gained by the respondents urging

that 1087 writ petitions be filed and it would far better to pursue the

matter by way of a common writ petition.

9. Incidentally, she will point out that notices, and even

orders of assessment in some cases, have been passed as against

some members. The demands raised, in most cases are quite

insubstantial, though the quantum in a few assesses, is in the

region of lakhs also. Even on this score, she would submit that it

would be a far more efficient remedy for the petitioners to file a

single writ petition, which has what has been done. She relies on a

Constitution Bench judgment of the Hon'ble Supreme Court in the

case Confederation of Ex-Servicemen Associations and Others v

Union of India and others1.

10. Having heard both learned counsel, I would agree with

the petitioner that the writ petition is maintainable. As pointed out,

not just a common, but identical cause of action has been espoused

by 1087 assesses. Though, I would hasten to add that their status

i.e., whether they are proprietorship concerns, partnership firms or 1 (2006) 8 SCC 399 https://www.mhc.tn.gov.in/judis

W.P.No.3904 of 2021

HUF constitutes a question of fact that this Court would not touch

upon, their prayer in common is based upon a circular issued by R2

and hence I find nothing untoward in they having filed a single writ

petition.

11. It is an admitted position that 1087 members who have

filed this writ petition form a significant majority of all the

association members and it is only 10, who would stand distanced

from this cause of action.

12. The Hon'ble Supreme Court in the case of Confederation

of Ex-Servicemen Associations (supra) was concerned with a

challenge by that association to service terms and conditions. Even

in that case, the Union of India had raised the objection of

maintainability. The Bench considered the position that the

Confederation was registered and was recognized even by the

Ministry of Defence.

13. That apart, they also noted the position that the cause

espoused in the writ petition by the Confederation was identical

across all members. At paragraph 22 the Bench states as follows:-

“22. We have given anxious and thoughtful consideration to the rival contentions raised by

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W.P.No.3904 of 2021

the parties. So far as the preliminary objection regarding maintainability of the petition is concerned, it may be stated that the petitioner has asserted in the petition that it is a confederation of five ex-servicemen associations formed in furtherance of a common cause. The aims and objects of the Confederation have also been annexed as set out in the MoU(Annexure P1). In the affidavit in reply filed by Under Secretary working with the Ministry of Defence, it was stated that he is “not aware” of the existence of the petitioner organization. He however stated that the organisation “does not seem” to be a registered body to represent the cause of exservicemen. The rejoinder affidavit unequivocally states that the objection raised by the Union of India is incorrect. The Confederation was registered under the Societies Registration Act, 1860. Likewise, all associations which constitute the Confederation are similarly registered individually. It is further stated that the Air Force Association and the Indian Ex-Service League are even recognized by the Ministry of Defence, Union of India. It, therefore, cannot be said that the petitioner Confederation is not registered and the petition filed is not maintainable. In vie of the fact that some of the associations have been recognized even by the Ministry of Defence, the deponent ought not to have rasied the objection regarding maintainability of the petition without ascertaining full facts and particulars. We leave the matter there holding the petition maintainable”

14. They make reference to a judgment of the Hon'ble

Supreme Court in the case of D.S.Nakara and others v Union of

India2, wherein also a similar set of facts and legal position had

2 (1983) 1 SCC 305 https://www.mhc.tn.gov.in/judis

W.P.No.3904 of 2021

been discussed and decided by the Bench in favour of those

petitioners.

15. In the present case as well, the petitioner association is

registered under the provisions of the Tamil Nadu Societies

Registration Act, 1975. Though the association is not recognized as

an assessee by the Commercial Taxes Department, in my

considered view, this would not stand in the way of the

maintainability of this writ petition itself since admittedly, the cause

of action espoused by all the members before the Court is identical,

and relates to clarification dated 04.11.2015.

16. I also find merit in the contention that there is really no

necessity for this Court to entertain 1087 separate writ petitions

when there is no difference or distinction between the cause of

action that is espoused. What would differ between one case and

another relates only to the quantum of turnover in dispute. The

quantum is really immaterial for the reason that the cause of action

in the writ petition concerns only the position of law. For the

reasons as aforesaid, this writ petition is held to be maintainable on

the first score.

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W.P.No.3904 of 2021

17. Coming to the second argument on maintainability, I

agree with the respondents that mandamus of the nature sought for

is not liable to be granted. The petitioners pray for a direction that

respondents must not assess or recover any sums under Section 13

of the Act. Section 13 deals with deduction of tax at source in works

contract and fastens, on 'every person' responsible for paying any

sum to any dealer for execution of works contract, the necessity to

deduct an amount calculated at certain stipulated rates.

18. Such responsibility to deduct tax at source would not

vest in those persons defined in the explanation to under Section

13(1) to be the Central or State Government, Local Authority,

Corporation or Body established by or under a Central or State Act,

Company incorporated under the 1956 Companies Act, society

including a cooperative society, educational institution or a trust.

Thus the statutory position supports the position that the

responsibility of tax deduction falls only upon certain specified

persons and proprietorships, partnership firms and HUF stand

excluded from this responsibility.

19. In the present case, the petitioner states that 1087

members whose cause it espouses are proprietary concerns,

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W.P.No.3904 of 2021

partnership firms or HUF. This is question of fact. That apart,

individual assessee / members have received notices from the

respondents and it is for them to respond to those notices clarifying

and establishing their status, as to whether they are indeed

proprietary concerns, partnership firms or HUF. Failure to do so will

entail consequences that they must suffer. Likewise, adverse orders

of assessment could also be challenged relying upon the relevant

provisions of law. I leave this matter at that.

20. The objection raised on merits by learned counsel for

the respondent is that the clarification issued by R2 is not binding

upon the respondents for the reason that it has no statutory

sanction. To clarify, there is no provision available under the Act

that empowers the Principal Commissioner / Commercial Taxes

Department to issue a clarification, unlike in earlier Sales Tax

enactments.

21. Be that as it may, this question really does not require

an answer since all R2 has done is to extract the provisions of the

Act itself. Clarification is really not needed for this purpose as

Section 13(1) read with explanation thereto, is self explanatory.

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W.P.No.3904 of 2021

22. In light of the discussion as above, this writ petition is

disposed permitting those assessees who are in receipt of notices to

file replies before the authority establishing their status. If they do

establish their status to be either proprietary concerns, partnership

firms or HUF, then evidently they would be protected by virtue of

the statutory exclusion in the explanation to Section 13(1) of 2006

Act. It is also left open for the members of the petitioner association

to raise such other objections to the notices as they may think

tenable, including on the aspect of limitation. No costs. Connected

miscellaneous petition is closed.

09.06.2023

Index:Yes/No Neutral Citation:Yes/No ssm

To:

1.The Secretary, Commercial Taxes Department, Fort St.George, Chennai.

2.The Principal Secretary / Commissioner of Commercial Taxes, (now known as Commissioner of State Tax) Ezhilagam, Chepauk, Chennai – 600 004.

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W.P.No.3904 of 2021

DR. ANITA SUMANTH,J.

ssm

W.P.No.3904 of 2021

09.06.2023

https://www.mhc.tn.gov.in/judis