2020 (7) TMI 383 - HC - VAT and Sales Tax

Reopening of assessment - rectification of mistake - error apparent on the face of record - Section 55 of the Tamil Nadu General Sales Tax Act 1959 - exemption from payment of sales tax - Government vide G.O.Ms.No.528 Commercial Taxes and Religious Endowment Department dated 21.11.1997 - levy of penalty. Whether the power under Section 55 of the Act could have been invoked and Section 55 of the Act gives power to rectify any error apparent on the face of the record? - HELD THAT - The intention of the Legislature was to grant power to the Assessing Officer or the Appellate Authority or the Tribunal to rectify its orders when there is an error apparent on the face of the record. Hence the power under Section 55 of the Act cannot be used to review an order of assessment by reopening an assessment. Such power has not been conferred on the Authority under Section 55 of the Act - In the instant case the Assessing Officer while passing the revised assessment orders dated 28.7.2009 reviewed the earlier assessment orders which is impermissible in law by invoking Section 55 of the Act. The mistake should be apparent on the face of the record. Only if all these features are available the assessment can be reopened by invoking the power under Section 55 of the Act. Therefore the revision of assessment dated 28.7.2009 is wholly without jurisdiction - Hence the issue is decided in favour of the petitioners and against the Revenue. Whether the Tribunal was right in denying the benefit of exemption largely by referring to the decision of the Hon ble Supreme Court in the case of COASTAL CHEMICALS LTD. VERSUS COMMERCIAL TAX OFFICER AP AND OTHERS (AND OTHER APPEALS) 1999 (10) TMI 599 - SUPREME COURT and the decision of the Kerala High Court in the case of TEAKTEX PROCESSING COMPLEX LIMITED VERSUS STATE OF KERALA 2002 (10) TMI 761 - KERALA HIGH COURT ? - HELD THAT - In view of the factual position in the decision in the case of Coastal Chemicals Limited wherein the question involved was as to whether the natural gas fell within the meaning of the word consumables in Section 5B(1) of the Andhra Pradesh General Sales Tax Act 1957 based on which the decision was rendered we find on facts that the said decision cannot be of any assistance to the case of the Revenue. The most important aspect which is to be noted is that the exemption has been granted by the State Government for sale of certain items of goods to 100% EOUs in the State and the units located in Chennai Export Processing Zone. Therefore the object of exemption is to promote exports. The Tribunal proceeded largely by examining as to what would be the meaning of the term consumable and referred to the two decisions and held that though the carbide tip inserts lose their utility they do not lose identity. The Tribunal should have interpreted the expression consumable goods and if the same is done the nature of the goods supplied and whether the same gets consumed would be required to be examined. The exemption notification has to be interpreted in a strict manner without adding any words to it. As mentioned earlier the object of the Legislature is to promote exports. Therefore if viewed from the purchasers point of view the carbide tool becomes useless after it loses its utility. So far as the sellers are concerned on sale of the goods and use by the purchasers if it loses its utility it can no longer be termed as a tool or a cutting device. Hence viewed from the angle of both the purchasers and the sellers the carbide tip tools are to be treated as consumable goods and are entitled to the benefit of exemption - the issue is answered in favour of the petitioners. Revision allowed.

Summary

Issues:
1. Legality of reopening assessment under Section 55 of the Tamil Nadu General Sales Tax Act, 1959.
2. Entitlement to exemption from sales tax for sales made to 100% Export Oriented Units (EOUs).

Analysis of Issue 1:
The first issue involved in this case was the legality of reopening the assessment under Section 55 of the Tamil Nadu General Sales Tax Act, 1959. The Assessing Officer had issued notices proposing to disallow the exemption on sales to 100% EOUs based on certain defects pointed out during inspections. The dealers objected to this proposal, stating that they sold consumable items exempted for sales to EOUs. However, the Assessing Officer proceeded to reopen the assessment, claiming that the exemption was erroneously granted. The High Court held that the power under Section 55 is for rectification of errors apparent on the face of the record and not for reviewing assessments. The court found that the revision of assessment in this case was without jurisdiction as the mistake was not apparent on the face of the record.

Analysis of Issue 2:
The second issue revolved around the entitlement to exemption from sales tax for sales made to 100% EOUs. The dealers supplied various items to EOUs, claiming exemption as the goods sold were consumable and fell under the exemption granted by a Government Order. The Assessing Officer attempted to deny the exemption by invoking Section 55 of the Act, which was found to be impermissible. The High Court analyzed the meaning of "consumable goods" and emphasized that the exemption aimed to promote exports. The court disagreed with the Tribunal's interpretation that carbide tip inserts, even after losing utility, retained their identity. It held that once the carbide tip tools lost their utility, they could no longer be considered tools or cutting devices. The court concluded that the dealers were entitled to the benefit of exemption for supplying consumable goods to EOUs, as per the strict interpretation of the exemption notification. The court also noted that the dealers had been enjoying this exemption post the implementation of the Tamil Nadu Value Added Tax Act, 2006.

In conclusion, the High Court allowed the tax case revisions, setting aside the orders passed by the Tribunal and restoring the orders of the First Appellate Authority dated 09.4.2010. The judgment clarified the legal aspects regarding the reopening of assessments and the entitlement to exemption for sales to 100% EOUs, providing a detailed analysis of the issues involved in the case.