2018 (1) TMI 744 - HC - VAT and Sales Tax

Notional deduction from sales price - sale of footwear - Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that it is not necessary to show the sale price separately in the invoice and that is sufficient if it is shown separately in the books of accounts? Held that - the sales tax had been collected as such on the said transaction and it has to be allowed as a deduction in computing the taxable turnover - the Court held that the legal position, therefore, seems to be clear that for claiming deduction in terms of section 7(1)(b) and 7(2)(a)(ii) of the Act, all that is necessary is that there must be evidence, not necessarily only the sale memos, to indicate that apart from the sale value of the goods sold, an amount had been collected by way of sales tax as such. If such evidence is available with the dealer, and it is found by the department to be a piece of acceptable evidence, the claim must be allowed. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of Section 2(r) Explanation 1-A of the Tamil Nadu General Sales Tax Act regarding the deduction of tax elements in sales invoices.
2. Justification of penalty under Section 12(3)(b) of the Act related to the assessment year.

Analysis:

Issue 1: Interpretation of Section 2(r) Explanation 1-A
The case involved a dispute regarding the deduction of tax elements in sales invoices by a footwear dealer. The assessing officer disallowed the deduction claimed by the dealer on the notional value of tax, leading to a penalty under Section 12(3)(b) of the Act. The Tribunal allowed the dealer's appeal, emphasizing that showing the tax separately in the books of accounts was sufficient compliance with Explanation 1-A to Section 2(r). The State challenged this decision, arguing that the tax should be shown separately in the sale bills. The High Court referred to a similar case and held that for claiming deduction, evidence indicating the collection of sales tax must be available, not necessarily only in the sale memos. The Court concluded that the Tribunal's decision was correct, as the legislative intent was met by showing the tax separately in the accounts, even if not on the sale bills.

Issue 2: Justification of Penalty
The second issue pertained to the justification of the penalty imposed under Section 12(3)(b) of the Act for the assessment year. The Tribunal had deleted the penalty levied by the assessing officer. The State contended that the penalty should have been upheld due to the dealer's failure to show the tax elements separately in the sale bills. However, the High Court, after considering relevant statutory provisions and previous orders, upheld the Tribunal's decision. It referenced a previous case involving the same assessee and concluded that there was no manifest illegality in the Tribunal's order. As a result, all substantial questions of law were answered against the Revenue, and the Tax Case Revision was dismissed without costs.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that showing the tax separately in the books of accounts sufficed for claiming deduction under Explanation 1-A to Section 2(r) of the Act. The penalty under Section 12(3)(b) was also deemed unjustified, leading to the dismissal of the Tax Case Revision.