Reetu | Jun 4, 2020 |
No Purchase Tax if yearly turnover was less than Rs 300 crores – Tamil Nadu VAT
IN THE HIGH COURT OF JUDICATURE AT MADRAS
The Text of the order as follows :
By this common order all the 6 writ petitions are being disposed. In W.P.Nos. 21983-87 of 2016, the petitioner has challenged the respective assessment orders dated 29.1.2016 passed by the respondent for the assessment years 2010-11 to 2014-15.
2. In W.P.No. 21982 of 2016, the petitioner has prayed for an alternate relief for a writ of mandamus to direct the respondent to accept the revised return filed by the petitioner to allow input tax credit on the purchase tax payable by the petitioner under Section 12 (2) of the Tamil Nadu Value Added Tax, 2006.
3. By the impugned assessment orders, the respondent has confirmed the demand on the petitioner under Section 12(1) of the Tamil Nadu Value Added Tax,2006 for the respective assessment years.
4. The impugned order has also imposed with penalty under Section 27(3)(c) of the Tamil Nadu Value Added Tax Act, 2006 on the petitoner.
5. The petitioner, a dealer of turmeric had locally purchased turmeric from various registered/unregistered dealers without payment of tax as their turnover were reportedly below Rs.300 crores during the respective assessment year and were therefore exempted under Section 15 read with Item 18, Part B, 4th Schedule of the of the Tamil Nadu Value Added Tax Act, 2006.
6. The purchased stock were transferred stock by the petitoner to its branches outside the State of Tamil Nadu for branding, packing and labelling and other activities and were purportedly sold from there on payment of tax.
7. Regular assessments for the respective assessment years were completed earlier. Thereafter, assessment orders were reopened under Section 22 of the Tamil Nadu Value Added Tax Act, 2006 pursuant to an investigation by the Commercial Tax Department on the ground that the petitioner had failed to pay purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006. These proceedings culminated in the impugned order of the respondent wherein the petitioner has been asked to pay the purchase tax and penalty.
8. Since demand was confirmed, the petitioner sent representations to the respondent to accept revised returns to allow input tax credit under Section 12(2) of the Tamil Nadu Value Added Tax Act,2006. Though the impugned orders confirms the demand on other issues also, the challenge in the impugned order is confined to impostion of purchase tax alone.
9. It is the contention of the petitioner that turmeric purchased by the petitioner from dealers, who were exempted from payment of tax in terms of Section 15 read with Item 18, Part B of the 4th Schedule of the Tamil Nadu Value Added Tax Act, 2006 were also exempted in the hands of the petitioner and therefore the petitoner cannot be saddled with tax liability under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006.
10. It is also the case of the petitioner that levy under Section 12(1) is attracted only if the turmeric purchased by the petitioner were liable to tax but were purchased without payment of tax under the provisions of the Tamil Nadu Value Added Tax Act, 2006.
11. According to the petitioner, since the selling dealers were exempt from payment of tax in terms of Section 15 read with Item 18, Part B of the 4th Schedule of the Tamil Nadu Value Added Tax Act, 2006, question of imposing purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 cannot be countenanced. In other words, it is submitted that since the sale was exempted, the levy under Section 12(1) of the Act was without justification.
12. In the affidavit filed in support of these writ petitions, the writ petitioner has primarily relied on the decision of this court in the following 2 cases:-
i. Hotel Shri Kannan versus State of Tamil Nadu  8 VST 97;
ii. Ruchi Soya Industries Ltd versus Commercial Tax Officer  12 VST 546.
13. Strong reliance was also placed on a clarification of the Government of Tamil Nadu dated 24.12.1999 bearing D.Dis. Acts Cell II/75893/99 as amended 4.10.2000 bearing reference D.Dis.Act Cell II/52300.
14. It is submitted that in Hotel Shri Kannan versus State of Tamil Nadu  8 VST 97, the Division Bench of this Court had set aside the assessment and permitted all the assets is to file their objections supported with material objections.
15. Alternatively, it was contended that the tax payable under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 was available by way of Input Tax Credit under Section 12(2) read with Section 19(3)( c) of the Act.
16. It is therefore contended that since input tax credit is available under Section 19 of the Tamil Nadu Value Added Tax Act, 2006 read with Tamil Nadu Value Added Tax Rules, 2007 and since the petitioner is in a peculiar situation and is unable to utilise such Input Tax Credit in absence of local sales, it should be granted refund. It is therefore submitted that the issue being revenue neutral, the petitioner was entitled to the relief in W.P.No.21982 of 2016. The petitioner relied on the decision of this court and that of the the Hon’ble Supreme Court in the following cases:-
i. KG Denim Ltd versus CESTAT 2017 (7) GSTL 442;
ii. CCE versus Coca-Cola India Private Limited 2017 (213) ELT 490 (SC);and
iii. Commissioner of Customs and Central Excise versus Textile Corporation Marathwada 2008 (231) ELT 195 (SC).
17. In this connection reliance was also placed on the decision of the Hon’ble Supreme Court in Formica India Division versus Collector of Central Excise 1995 (77) ELT 501 wherein benefit of all exemption and deduction was allowed to the assessee as tax was held payable.
18. It is further submitted that the issue being revenue neutral, question of imposition of penalty also cannot be countenanced and in this context the lands was placed on the following decisions:-
i. R.E.M. Ramakutty Nadar vs The State Of Madras 1973 (31) STC 44 (Mad);
ii. The Deputy Commissioner (C.T.) vs V.S.R. Ramaswami Chettiar 1976 (38) STC 382 (Mad); and
iii. Deputy Commissioner of Commercial Taxes vs Adam And Company 1979 (43) STC 508 (Mad);
19. The learned counsel for the petitioner further submitted that the decision of the Hon’ble Supreme Court in The State of Tamilnadu Vs M.K.Kandaswami (1975)4 SCC 745 cannot be read in the manner in which the respondent seeks to rely upon to uphold the demand.
20. In this connection reference was also made to the decision of the Supreme Court in Commissioner of Income Tax versus Sun Engineering Works (P) Ltd (1992) 4 SCC 363 when it was held that a judgement must be read as a whole and the observation from the judgement have to be considered in the light of the questions which were before the court.
21. It was further submitted that a decision of the court takes its colour from the question involved in the case in which it was rendered and while applying the said decision to later case, the court must carefully try to ascertain the true principal laid down by the decision of the court and should not pick out words and sentences from the judgement divorced from the context of the question under consideration.
22. A further reference was made to the decision of the Hon’ble Supreme Court in S J. Pande versus P.K Balakrishnan (1993) 3 SCC 297 in this context.
23. The learned counsel for the petitioner also referred to the decision of the Supreme Court in Govind Saran Gunga Saran Vs Commissioner of Sales Tax 1985 (Suppl) SCC 205 wherein the Court identified the components which are factored while taxing namely:-
(i) the character of the imposition known by its nature which prescribes the taxable event attracting the levy;
(ii) a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax,
(iii) the 3rd the rate at which the taxwhich is imposed, and
(iv) the 4th the measure of value to which the rate will be applied for computing the tax liability.
24. Learned Counsel submitted that if those components are not clear and definitely ascertainable, it is difficult to say that the levy exist in point of law.
25. It is submitted that any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.
26. It was submitted that levy of purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 was vague and therefore the demand was not sustainable.
27. He further submits that tax administration is a complex objects and consists of several aspects. The government is therefore required to strike a balance while imposing tax for collection of revenue with a business friendly approach. It is submitted that interpretation of a tax entry being a quasi-judicial function, the Government invariably works through its senior officers in the matter of difficulties which the business may face, particularly in matters of tax administration.
28. Learned Counsel therefore drew attention to the decision of the Hon’ble Supreme Court in State of Kerala Versus KurianAbraham Private Limited and Another (2008) 3 SCC 582 which recognised the role of the Board of Revenue.
29. The learned Counsel for the Petitioner therefore submits that the Government of Tamil Nadu vide its clarification dated 24.12.1999 of as modified by clarification dated 04.10.2000 has clarified the position under Section 7A of the TNGST Act, 1959 and therefore submits that the said if the said clarification was applied to the facts of the case, the impugned orders were liable to be set aside.
30. As for as rate of tax is concerned, a reference was made to paragraph 11 of the Decision of the Hon’ble Supreme Court in Thermax Private Ltd. Versus Collector of Customs (1992) 4 SCC 440.
31. Learned counsel for the petitioner drew a comparison between the provisions of the Customs Tariff Act, 1975 and the Central Excise Tariff Act, 1985 for the purpose of payment of additional duty of customs equivalent to central excise duty with Section 3 and 12 of the Tamil Nadu Value Added Tax Act, 2006.
32. He submits that the Hon’ble Supreme Court observed that for determining the rate of additional duty of Customs equivalent to central Excise duty, the Hon’ble Supreme Court had held that one has to forget that the goods are imported and imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay.
33. Thus, if a person using the goods is entitled to the remission, the importer will also be liable to pay additional duty of customs such concessional rate of duty and will be entitled to ask for refund, if he had paid more.
34. The learned counsel for the petitioner submits that same analogy can be adopted in the context of payment of purchase tax and the appropriate rate of tax would be under Item 18, Part B, IV Schedule and not under Item 52 , Part B to the I Schedule of the Tamil Nadu Value Added Tax Act, 2006.
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