Headnote

The Supreme Court upheld the classification of maize starch under Entry No. 61 of the Tamil Nadu General Sales Tax Act, 1959 as “starch of any kind” taxable at 4%. The Court ruled that specific tax entries prevail over general exemptions and validated retrospective clarifications issued by the Commissioner under Section 28-A.

Introduction

The Supreme Court in Santhosh Maize & Industries Limited v. State of Tamil Nadu & Anr., decided on 04 July 2023, examined whether maize starch was exempt from tax as a “product of millets” or taxable under “starch of any kind” in the Tamil Nadu General Sales Tax Act, 1959. The case also tested the legality of retrospective tax clarifications issued by the Commissioner under Section 28-A.

Facts of the Case

• The appellant manufactured and sold maize starch.

• Earlier circulars of the Tamil Nadu Commissioner exempted maize starch treating it as a maize product.

• Later, a clarification dated 08 October 1998 declared maize starch taxable at 4% under Entry No. 61 (sago and starch of any kind).

• Assessments were raised retrospectively from 17 July 1996, leading to tax demand and penalties.

• The High Court upheld the validity of the clarification. The appellant approached the Supreme Court.

Issue of the Case

1. Whether maize starch falls under the exempt category of “products of millets” or under Taxation Entry 61 as “starch of any kind”?

2. Whether the Commissioner’s clarification under Section 28-A can apply retrospectively?

Appellant’s Arguments

• Maize starch is a maize product and falls under Exemption Entry No. 8.

• Earlier circulars exempting maize starch created legitimate expectations.

• Retrospective application of the 1998 clarification was arbitrary and contrary to law.

• The omission of the word “like” in the 1994 amendment did not change legislative intent to exempt maize starch.

Respondent’s Arguments

• Maize starch is a processed product, not raw maize, hence not exempt.

• “Starch of any kind” in Entry No. 61 covers maize starch.

• Clarifications under Section 28-A are meant to resolve ambiguity and naturally operate retrospectively.

• Legislative intent was clarified by later amendments removing “maize” from exemption entries.

Judgment

The Supreme Court dismissed the appeal, holding:

• Maize starch is a processed commodity, distinct from maize, and thus falls under Taxation Entry No. 61 (“starch of any kind”) taxable at 4%.

• Exemption Entry No. 8 covers only raw maize and listed millet products.

• Specific entries prevail over general exemptions in tax law.

• The Commissioner’s 08 October 1998 clarification was validly issued under Section 28-A and operates retrospectively, since clarifications make explicit what was already implicit.

Conclusion

The Court reaffirmed that maize starch is taxable at 4% under the Tamil Nadu General Sales Tax Act, 1959. It upheld the principle that specific tax entries override general ones and validated the retrospective effect of clarifications. The judgment underscores the importance of precise classification in tax matters and the binding nature of clarifications issued under statutory authority.