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1999 (12) TMI 848 - AT - VAT and Sales Tax
Issues Involved:
1. Levy of 10% tax on the first sale of milk powder.
2. Deletion of penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959.
Detailed Analysis:
1. Levy of 10% Tax on the First Sale of Milk Powder:
The core issue is whether milk powder falls under the taxable category as per entry 103(viii) of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The assessing authority classified milk powder under this entry, making it taxable at 10%. The assessee argued that milk powder should be exempt based on previous notifications and judicial decisions, which considered condensed milk as milk and thus exempt from tax. However, the Tribunal upheld the levy of tax, referencing the decision in "Milk Food Limited v. Commercial Tax Officer, Bhowanipur Charge [1991] 81 STC 67 (WBTT)" which stated that "milk" and "milk powder" are not synonymous, and thus milk powder is not exempt.
The Tribunal also considered the specific legislative intent expressed in entry 103, which explicitly includes "milk foods including milk powder" as taxable items. The exemption notification dated January 3, 1981, was interpreted to apply only to "fresh milk, recombined milk, and milk drink" sold as beverages, thus excluding milk powder. Additionally, the reduction in tax rate from 10% to 4% in the notification dated March 17, 1986, was found to apply only to "milk food including baby milk foods," not to milk powder. Consequently, the Tribunal concluded that the levy of 10% tax on the first sale of milk powder was in order.
2. Deletion of Penalty under Section 12(5)(iii) of the Act:
The second issue pertains to the deletion of the penalty imposed under section 12(5)(iii) for not reporting the correct taxable turnover. The assessing authority initially imposed a penalty of Rs. 5,790, which was later reduced to Rs. 1,930 by the first appellate authority. The Appellate Tribunal deleted the penalty, reasoning that the turnover of milk powder was included in the accounts and there was no mala fide intention in not disclosing it as taxable turnover.
However, the Tribunal revisited this decision, emphasizing that the book turnover was the basis of assessment and that the assessee did not disclose it as taxable turnover even after being pointed out in the pre-assessment notice. No revised return was filed, and no tax was paid before the final assessment to escape the penalty. The Tribunal referred to the decision in "State of Tamil Nadu v. Mahalakshmi Textile Mills Ltd. [1996] 100 STC 269," which supports the imposition of penalty in such circumstances. The argument that the penalty order dated December 2, 1988, was issued before the assessment order dated December 29, 1988, was dismissed, as separate proceedings were taken for penalty, and the incorrect date did not vitiate the proceedings.
Conclusion:
The Tribunal dismissed the assessee's petition (T.C. (R) No. 167 of 1999) and allowed the Revenue's petition (T.C. (R) No. 2767 of 1997). The levy of 10% tax on the first sale of milk powder was upheld, and the deletion of the penalty was set aside, restoring the penalty amount to Rs. 1,930 as fixed by the Appellate Assistant Commissioner. The Tribunal ordered that this judgment be executed accordingly.