2014 (12) TMI 954 - HC - CST, VAT & Sales Tax

Validity of assessment order under Tamil Nadu Value Added Tax Act, 2006 – Company named Nokia India Private Ltd. engaged in the manufacturer of Mobile Phones, parts and accessories - Maintainability of the Writ Petition – Held that:- The assessee need not be relegated to avail the alternate remedy as it has been held that necessity to avail the alternative remedy may not arise and it is not a bar to exercise the jurisdiction under Article 226 of the Constitution of India - in Union of India vs. Tantia Construction Private Limited [2011 (4) TMI 1276 - SUPREME COURT] it has been held that the presence of an alternative remedy is not an absolute bar in entertaining a writ petition - the rule of exclusion of writ jurisdiction by availability of an alternative remedy, is a rule of discretion and not one of compulsion and there could be contingencies in which the jurisdiction under article 226 of the Constitution of India could be exercised in spite of availability of an alternative remedy - the question to be decided is relating to the jurisdiction, manner of exercise of power by the AO and the correctness and propriety of the decision making process and whether principles of natural justice was adhered - Therefore, the Writ Petitions are maintainable and cannot be rejected solely on the ground that as against the assessment orders, the statute provides for alternate remedy – Decided in favour of assessee.

Best judgment u/s 27(1)(c) –Whether the assessment orders are best judgement assessments while made u/s 27(1)(a) - Held that:- The AO has invoked his power u/s 27(1)(a) - the assessment is not a best judgement assessment as the AO has not rejected the accounts - the power u/s 27(1)(a) has been invoked for reopening the assessments as certain defects were pointed out during the course of audit - Therefore, it cannot be stated that merely because Section 27(1)(a) of the TNVAT Act has been referred to in the impugned assessments, they are best judgment assessments – in Commissioner Of Sales-Tax, Madhya Pradesh Versus HM Esufali HM Abdulali [1973 (4) TMI 49 - SUPREME Court] it has been held that what is true of the assessment must also be true of re-assessment because re-assessment is nothing but a fresh assessment - the contention of the assessee cannot be accepted that going by the language of section 27(1)(a), the assessment are best judgment assessments, but revision of assessments in contra distinction with best judgment assessments u/s 22(4) – Decided against assessee.

Correctness of the assessment orders and the decision making process – Held that:- The AO stated that at the time of audit, the omission was disclosed - however, the AO has failed to advert to the specific stand of the assessee that the discrepancy was noticed prior to the audit by the Dept and they suo motu disclosed the same to the audit and during the course of the audit, they had paid the entire tax along with interest - this is a very relevant factor, which should have weighed in the minds of the AO, that on the date when the audit completed the inspection, the entire tax liability along with interest have been paid – assessee is being taxed twice - the equal addition being in the nature of penalty, it does not automatically follow that in every case of non-disclosure, equal addition is warranted - there is absolutely no justification for equal addition.

Imposition of tax on capital assets – Assessee contended that the same was exported and not taxable – Held that:- Though the AO while detailing the value of assets sold, has failed to advert into the effect of the export documents produced by the assessee - this should have been examined by the assessing officer to test the correctness of the stand taken by the dealer that they were export sales, zero rated and not liable to tax - Non-furnishing of state-wise break up details to the audit officials is of non-consequence why finalising the assessment - The assessing authority being a quasi-judicial authority should adjudicate the case independently with due application of mind - the assessing authority abdicated his power and was purely guided by the opinion of the inspecting team, which obliviously were officers superior in rank to the AO – the AO should redo the assessment with regards to the tax on sale of assets as the documents produced by the dealer have not been examined by the AO - as such, the consideration is not manifest in the assessment order - the dealer is entitled to reasonable opportunity to produce all records in support of their claim - therefore, the tax levied on the sale of assets is set aside and the matter is remanded for fresh consideration of the assessing officer after affording an opportunity of personal hearing to the petitioner/dealer.

Non-payment of tax on the sale of asset to M/s. NSNPL – Held that:- The test applied by the AO to hold that the transfer is not a transfer of a business as a whole is incorrect - unless that issue has been addressed and a fact finding exercise made, the AO could not have straightaway held that the transfer was only partial and not the whole business - the effect of the assessment under the Income Tax Act with respect to this very transaction treating the same as a slump sale should have also been gone into, as it cannot be stated that the facts which were taken note of during the assessment under the Income Tax Act is wholly irrelevant while considering whether the sale was covered under Explanation III to 2(41) - the decision making process was incorrect - Therefore, the finding with regard to the non-payment of tax on sale of assets to NSNPL calls for interference and accordingly, it is set aside and the matter is remitted back to the AO to make thorough enquiry into the contentions raised by the assessee by applying proper test and to see whether the transaction would fall within the scope Explanation III to Sub Section (2) of Section 41 of TNVAT Act.

Disallowance of sales returns – Held that:- There is no discussion or finding as to why there has been disallowance of sales returns stating sales return disallowed and the rate of tax imposed is 12.5% - Thus, such disallowance was without assessing reasons - Therefore, the imposition of tax on disallowance of sales return has to be necessarily set aside and remanded to the AO to issue notice to the assessee/dealer and after hearing their objection decide the issue afresh.

Incorrect rate of tax adopted by the assessee as regards the sale of accessories and spare parts of the mobile phones or not – Held that:- The AO while considering the objections filed, held that the products sold as accessories along with mobile phones does not come under the category of Information Technology products - Parts and accessories of cellular telephone (mobile phone) specifically finds place vide Entry 13-A(f) under Part C of the First Schedule of the TNVAT Act and they have to be taxed at 14.5% and the proviso to Section 3(2) of VAT Act is not applicable. -The finding rendered by the assessing officer is perfectly justified, inasmuch as the headphones and accessories sold by the petitioner along with mobile phone falls under specific Entry 13-A(f) under Part C of the First Schedule and liable to tax at 14.5% - a specific entry would prevail over a general entry - The products/goods such as headsets of mobile phones, memory card, wireless car kit for mobiles and components and accessories of mobile phones are therefore taxable at the rate of 14.5% and this cannot be classified as information technology products – the finding rendered by the AO with regard to parts and accessories of mobile phones were being made in specific Entry 13-A(f) of Part C of the First Schedule of the TNVAT Act is valid and proper.

Imposition of penalty – and whether the imposition of penalty was justified on the entire tax demand u/s 27(3) - Held that:- The AO has not brought out the willfulness in the manner it has to be established - circulars issued by the Commissioner under the erstwhile TNGST Act are saved in terms of Section 88(3)(i) of the TNVAT Act, in so far as they are not inconsistent with the provisions of TNVAT Act or the rules made thereunder until they are repealed or amended – the AO should have borne in mind the guidelines issued in the circular which as on date is a statutory circular and deemed to be valid and binding on the AO - the reasons assigned in this order wile deleting equal addition on the probable suppression of scrap sales would come to the aid of the petitioner to justify deletion of penalty - there is no justification spelt out in the impugned assessment order to impose penalty on the entire tax demanded - the penalty imposed is deleted – Decided partly in favour of petitioner.