Value Added Tax – Change in Law – By Substitution to Earlier Entry – Takes Effect From the Date of Earlier Entry, section 3 of The Tamil Nadu Value Added Tax ( Amendment) Act 2008.
FACTS
Under the provisions of the Tamil Nadu General Sales Tax Act, 1959 chilly, coriander and turmeric were exempted goods, falling under serial No. 16 of Part B of the Third Schedule to the Tamil Nadu General Sales Tax Act with effect from July 17, 1996. By G. O. (D) No. 383, dated October 22, 1998, the Government granted exemption to chilly powder, pepper powder and coriander powder. And the matter was further clarified by the Department by way of a clarification issued on December 9, 2002 in exercise of power u/s. 28A of the Tamil Nadu General Sales Tax Act. The Tamil Nadu Value Added Tax Act, 2006 was brought in by the Government with effect from January 1, 2007 under which what was serial No. 16 of Part B of the Third Schedule to the Tamil Nadu General Sales Tax Act was incorporated as serial No. 18 of Part B of the Fourth Schedule to the 2006 Act and the word “powder” in relation to the goods in question was not specifically mentioned therein. In the year 2008, Fourth Schedule to the 2006 Act was amended by section 3 of the 2008 Act which came into force on April 1, 2008 by substituting serial No. 18 of Part B of the Fourth Schedule to the 2006 Act to restore the position as it was prior to January 1, 2007. The petitioners engaged in the business of manufacture and sale of masala powder, turmeric powder, chilli powder and coriander powder and of buying and selling thereof from the manufacturers, sold chilly powder, coriander powder and turmeric powder as exempted goods and filed returns claiming exemption from payment of tax for the turnover of sale of such goods before the assessing officer and the returns so filed were accepted u/s. 22(2) of the VAT Act. The department issued notice for reassessment and levied tax on sale of chilli powder disallowing the claim of exemption from payment of tax for the period prior to the date of substitution of the said entry from April 1, 2008. The dealer filed Writ petition before the Madras High Court against the said re assessment orders.
HELD
The plea arising for consideration is, whether the substitution in serial No. 18 of Part B of the Fourth Schedule by Act 32/2008 will be with effect from April 1, 2008 as pleaded by the respondent/Department or it will have effect from January 1, 2007 as pleaded by the petitioners. In Government of India vs. Indian Tobacco Association [2005] 5 RC 379; [2005] 7 SCC 396, by referring to the decision in Zile Singh vs. State of Haryana [2004] 8 SCC 1, it has been clearly held that substitution would have the effect of amending the operation of law during the period in which it was in force. In this case, substitution in serial No. 18 of Part B of the Fourth Schedule has been made by the Government apparently to bring into force amended serial No. 18 of Part B of the Fourth Schedule by Act 32/2008 from the time of operation of the law, namely, serial No. 18 of Part B of the Fourth Schedule to the Act 32/2006. If the intention of the State prior to coming into force of Act 32/2006 is to grant exemption to powder form of chilly, turmeric and coriander and that is confirmed by the substitution made in serial No. 18 of Part B of the Fourth Schedule to the Act 32/2008, it is evident that the substitution made is only to state the obvious, namely, to fill up the lacunae for the period from January 1, 2007 to March 31, 2008. The old entry has been substituted by the new entry into Act 32/2006. It is not a case of insertion or addition of a new entry. What is substituted would stand substituted from inception, (i.e.), with effect from January 1, 2007 whereas insertion or addition will be relevant to the date of amendment, (i.e.), April 1, 2008. By substitution, the amended serial No. 18 of Part B of the Fourth Schedule replaces old serial No. 18 of Part B of the Fourth Schedule to the Act 32/2006. The old serial No. 18 of Part B of the Fourth Schedule becomes dead letter for all purposes. “Substitution” means put one in the place of another. This is exactly what has been done in the present case. The amendment serves the cause of exemption granted under Act 32/2006. The contention of the learned Additional Advocate-General that substitution effected will be operative from April 1, 2008 and not with effect from January 1, 2007 cannot be the intention of the Legislature and in any event, if there was an omission or a specific statement to that effect, the court, is empowered to give a constructive meaning to the intention of the Legislature and give it the force of life. The Court, from the facts of the present case, held that there is justification for this court to iron out the creases by interpreting the word “substitution” to mean that the intention of the Legislature was to replace the old serial No. 18 of Part B of the Fourth Schedule with new serial No. 18 to have effect for the period from January 1, 2007 and March 31, 2008. The understanding of the Department prior to coming into force of Act 32/2006 and from April 1, 2008, the date of coming into force of Act 32/2008, to state the obvious, is that the powder form of chilly, turmeric and coriander continues to be exempted goods for all purposes. If during the interregnum period, namely from January 1, 2007 to March 31, 2008, there appears to be an omission, that omission is sought to be corrected by way of substitution. The court clearly held that substitution has the effect of replacing the old serial No. 18 of Part B of the Fourth Schedule to the Act 32/2006 and the substitution will therefore entail goods described in serial No. 18 of Part B of the Fourth Schedule of Amending Act 32/2008 the benefit of exemption as is applicable from the inception of Act 32/2006. The new replaces the old and that is substitution and as a consequence, exemption becomes inevitable. The Department’s plea that the exemption will not apply to the period from January 1, 2007 to March 31, 2008 cannot be accepted, as substitution in this case will have to relate back to January 1, 2007 itself when Act 32/2006 came into force.
Further, the court held that that the goods, namely, powder form of chilly, turmeric and coriander, continue to enjoy the benefit of exemption despite their being a specific omission of the powder form from January 1, 2007 to March 31, 2008. The benefit of exemption granted based on returns filed is in order. Accordingly, the High Court allowed writ petition filed by the dealer and the reassessment orders passed by the authority were set aside.
