2009 (9) TMI 875 - HC - VAT and Sales Tax

Whether the commodities dealt with by the petitioner are electronic equipments which are classified under entry 50 of Part B of First Schedule to the Tamil Nadu General Sales Tax Act and the correct assessable rate is only 3%? Whether the penalty levied under 12 (3)(b) is maintainable? Held that - The Tribunal has rightly held that a mere addition of memory card or software will not in any way alter the character of the goods which is intrinsically survey instruments only and therefore the commodity would clearly fall under Part F 14 and assessed to tax at 16% and not at 3% as claimed by the petitioner under the head of electronic goods. Therefore the findings given by the Tribunal is clear and correct. Therefore the two cases in respect of the assement years 1993-1994 and 1994-1995 fails and the question of law is answered against the assessee. As rightly pointed out by the Tribunal inasmuch as there is a total variation in paying the tax levy at 3% to 16% the penalty is warranted and penalty is leviable and finding of the Tribunal is in order and does not call for any interference. Hence this question is also answered against the assessee.

Summary

Issues Involved:
1. Classification of the commodity for tax purposes.
2. Applicable tax rate.
3. Levy of penalty under Section 12(3)(b).

Issue-wise Detailed Analysis:

1. Classification of the Commodity:
The primary issue was whether the electronic survey instruments dealt with by the petitioner fall under the classification of "First Schedule Part B entry 50" or "First Schedule Part F entry 14" of the Tamil Nadu General Sales Tax Act. The petitioner argued that the commodities are electronic equipment classified under entry 50, which should be taxed at 3%. The Special Government Pleader contended that the items are survey instruments classified under entry 14, taxable at 16%. The court examined the catalogue and found that the instruments are indeed survey instruments with innovative mechanical and electronic software additions. The court concluded that the instruments are intrinsically survey instruments and not merely electronic goods, thus falling under entry 14 of Part F.

2. Applicable Tax Rate:
The petitioner contended that the correct assessable rate is 3% as the items are electronic goods. The court, however, found that the instruments are survey instruments as specified in entry 14 of Part F, which are taxable at 16%. The court emphasized that the specific entry for survey instruments overrides the general entry for electronic goods. The court also noted that the instruments were declared as survey instruments before the Customs Authority, reinforcing their classification under entry 14.

3. Levy of Penalty under Section 12(3)(b):
The petitioner argued that the levy of penalty under Section 12(3)(b) was improper as there was no willful evasion or contumacious conduct. The court held that since there was a significant variation in the tax rate (3% vs. 16%), the penalty was warranted. The court found no ambiguity in the classification of the goods and upheld the penalty imposed by the Tribunal.

Conclusion:
The court dismissed the petitions for the assessment years 1993-94 and 1994-95, and the consequent challenge to the penalty order. The court upheld the order passed by the Tribunal, confirming that the instruments are taxable at 16% under entry 14 of Part F and that the penalty under Section 12(3)(b) was correctly levied.