2016 (5) TMI 182 - HC - VAT and Sales Tax

Settlement application - Taxability and imposition of penalty - Section 3B and 12(3)(b) of the Act - Full service maintenance agreement charges - Held that - the application of the assessee for settlement was accepted in terms of one of the Clauses of Section 7 of the Tamil Nadu Sales Tax (Settlement of Arrears) Act 2010. It was done only after the assessee paid the entire arrears of tax together with 25% of the interest computed on the entire arrears at the rate of 6% per annum. Once a certificate is issued in terms of Section 8 of the Act the assessee stands discharged of any further obligations by virtue of Sub-Section (1) of Section 8. Unfortunately the Tribunal thought that the application for settlement was only in respect of the arrears of tax and that it was not in respect of penalty. That is a misconception. Therefore the order of Tribunal is set aside. - Revision petition allowed

Summary

Issues:
1. Interpretation of the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010.
2. Application of settlement provisions to tax arrears and penalties.
3. Discharge of obligations upon issuance of settlement certificate.

Analysis:
The High Court of Madras heard a tax case revision filed by the assessee under Section 38 of the Tamil Nadu General Sales Tax Act, 1959. The case pertained to the assessment year 2001-02, where a demand and penalty were imposed by the Commercial Tax Officer. The Appellate Assistant Commissioner remanded the matter to determine the actual cost of repairs and canceled the penalty, stating that the turnover was available in the books of accounts. Subsequently, the assessee filed a second appeal before the Sales Tax Appellate Tribunal challenging the remand order and the taxability of full service maintenance agreement charges. The Department also appealed against the cancellation of the penalty.

During the pendency of the appeals, the assessee utilized the provisions of the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010, by filing an application for settlement. The application was accepted, and the assessee paid the entire arrears of tax along with 25% interest. A certificate was issued under Section 8 of the Act, leading to the dismissal of the assessee's main appeal by the Tribunal but allowing the Department's appeal on the penalty issue. Consequently, the assessee filed a revision challenging the Tribunal's decision.

The High Court clarified that the settlement application covered both tax arrears and penalties, contrary to the Tribunal's misconception that it only applied to tax arrears. Upon issuance of the settlement certificate under Section 8, the assessee was discharged from further obligations. Therefore, the Court allowed the revision, set aside the Tribunal's order, and closed the case without costs.