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VAT and Sales Tax - Case Laws
Showing 21 to 40 of 66 Records
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2023 (3) TMI 940
Reversal of Input Tax Credit (ITC) - manufacturing / invisible loss - Interpretation of statute - construction/interplay of Section 19(2)(ii) vis-a-vis Section 19 (9) of the Tamil Nadu Value Added Tax Act, 2006 - reversal of Input Tax Credit on account of manufacturing / invisible loss - validity of Circular dated 20.10.2011 by which instructions were issued stating that wastage at all levels must be considered taking into account the nature of commodity and that the credit was to be reversed in respect of manufacturing/invisible loss in terms of Section 19 (9) of the TNVAT Act.
HELD THAT:- Input Tax Credit is in the nature of a concession and is the pivot/axis around which the VAT Scheme revolves. The State legislature has under Section 19 (2) of the TNVAT Act identified circumstances under which the benefit of Input Tax Credit is granted. Importantly, Section 19(2) (ii) of the TNVAT Act provides that Input Tax Credit shall be allowed for purchase of goods made within the State from a registered dealer for use as input in manufacturing or processing of goods in the State - thus, any goods which qualifies as an “input” under Section 2(23) of the TNVAT Act and used in manufacture or processing of goods shall be entitled to Input Tax Credit. The object behind granting the benefit of Input Tax Credit in terms of Section 19 (2) (ii) of the TNVAT Act, is with a view to promote manufacturing activity within the State.
The expressions “damaged” and “destroyed” in Section 19(9)(iii) of the TNVAT Act used to deny Input Tax Credit, must be understood to have been employed by the legislature in contradistinction to the expressions “use in manufacturing or processing of goods” employed in Section 19 (2) (ii) of TNVAT Act while allowing a dealer to claim Input Tax Credit. While the expression “use” in Section 19(2)(ii) of the TNVAT Act qualifies “manufacturing or processing of goods”, the expressions “damaged” and “destroyed” employed in Section 19(9) of the TNVAT Act are not used with reference to manufacture or processing of goods - the expressions “use in manufacture or processing of goods”, employed in Section 19 (2) (ii) of TNVAT Act is meant to convey a positive act or an act performed towards / in the direction of achieving the intended purpose/desired result viz., manufacture / emergence of a different commodity / end product. The expressions ''use'' in manufacture on the one hand and “damaged” and “destroyed” are antithetical and irreconcilable with each other.
Test of quantitative requirement of inputs to manufacture desired quantity of end product - HELD THAT:- In the case of M/s.Swadeshi Polytex Ltd., Vs Collector of Central Exercise [1989 (11) TMI 131 - SUPREME COURT], rejecting the contention of the revenue that ethylene glycol not contained in the end product viz., polyester fiber but in other waste/ by-product ought to be denied the benefit of credit, the Hon'ble Supreme Court proceeded to hold that as long as it is not possible to use a lesser quantum of ethylene glycol to produce desired quantity of polyster fabric the same is entitled to the benefit of credit as having been used in the manufacture.
The Hon’ble Supreme Court in the case of Union of India Vs. Indian Aluminium Company Ltd. [1995 (4) TMI 62 - SUPREME COURT] had also applied the test of quantitative requirements of inputs for the purpose of manufacturing the desired quantity of output, to determine whether the inputs are used in the manufacture of other goods. It was held an exact mathematical equation between raw materials used and found in the finished products is irrelevant to determine whether the inputs are used in the manufacture/processing of desired end products.
Test of indispensability - HELD THAT:- The Hon'ble Supreme Court in the case of COLLECTOR OF C. EX. VERSUS BALLARPUR INDUSTRIES LTD. [1989 (9) TMI 102 - SUPREME COURT] wherein while examining the question as to what would constitute raw material while rejecting the contention that to constitute raw material it is essential that the same must form part of the end product, held that the relevant test is not its absence in the end product, but the dependence of the end product for its essential presence at the delivery end of the process. The ingredient goes into the making of the end product in the sense that without its absence the presence of the end product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus.
Applying the test of indispensability if the inputs are indispensable for the emergence of desired end product it is not open to disallow the claim of input tax credit on the ground of manufacturing/invisible loss.
Test of Technical/Practical/Commercial inexpediency - HELD THAT:- Reliance made in the case of J.K.Cotton Spinning & Weaving Mills Co.Ltd., Vs. The Sales Tax Officer, Kanpur and Another [1964 (10) TMI 2 - SUPREME COURT] wherein the scope of the expression “in the manufacture of goods” employed in Section 8(3)(b) of the Central Sales Tax Act, while extending the benefit of concessional rate of tax was examined by Supreme Court. It was held that the expression in the manufacture of goods would encompass, the entire process carried on by the dealer for converting raw materials into finished goods. The Hon'ble Supreme Court applied the test of "commercial inexpediency" to determine whether a process would fall within the expression in the manufacture of goods, while making it clear that the expression in the manufacture of goods should not be curtailed by some theoretical possibility over looking/disregarding commercial inexpediency while examining the scope of the expressions “in the manufacture of goods”. If manufacturing/invisible loss is tested applying the test of technical/practical/commercial expediency and found that it is incapable of manufacturing the end product without the input of the requisite/utilised quantity then there cannot be a denial of input tax credit alleging manufacture/invisible loss.
The above judgments leave no room for any doubt that quantitative tally between the raw material used and the end product manufactured is foreign to the concept of manufacture. The above requirement is contrary to technical/practical/commercial expediency involved in the activity of manufacture. It is clear that once input is used in the manufacture the mere fact that it is not contained in the end product may have no bearing on the dealers entitlement to input tax credit in terms of Section 19 (2) (ii) of the TNVAT Act. Thus applying any of the above tests viz., test of indispensability, quantitative requirement, commercial expediency the irresistible conclusion is that manufacturing/invisible loss which is inevitable/unavoidable/inherent part of manufacturing process cannot be denied the benefit of Input Tax Credit in terms of Section 19(2)(ii) of the TNVAT Act invoking Section 19(9) of the TNVAT ACT.
On analysis of the scope and interplay between Sections 19(2)(ii) and 19(9) of the TNVAT Act, precedents dealing with manufacturing/invisible loss and the rules of construction referred above, it is found that Section 19(9) of the TNVAT Act would not get attracted to manufacturing/invisible loss which is inevitable and inherent part of manufacture and thus covered by Section 19(2)(ii) of the TNVAT Act.
The impugned Circular dated 20.10.2011 insofar as it is contrary to the law declared by this Court with regard to manufacturing/invisible loss is set-aside. Wherever the challenge is to the notice it is open to the appellants/petitioners to submit their objections which shall be decided in accordance with the law declared by this Court after affording the appellants/ petitioners reasonable opportunity of being heard - Petition disposed off.
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2023 (3) TMI 939
Penalty order - calculation of annual sales turnover - applicability of provisions of Section 4 of Andhra Pradesh VAT Act,2005 in general and sub-Section (9) of Section 4 of the Act in particular - HELD THAT:- A perusal of the order passed by the Assessing Officer shows that the Assessing Officer in the impugned order categorically discussed about the applicability of various provisions of law, including Section 4 and also explanation to Clause (d) of the sub-Section (9) of Section 4 of the Act and recorded the conclusions. It is not in dispute that immediately after receipt of the impugned orders, the present Writ Petitions came to be instituted before this Court. All these contentions now sought to be urged in the present Writ Petitions, in the considered opinion of this Court, can as well be agitated before the Contempt Court under the provisions of Section 31 of the Act.
In view of the availability of the alternative remedy, this Court is not inclined to go into the merits and de-merits of the case.
Petition disposed off.
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2023 (3) TMI 884
Zero Rate Sale against supply of SEZ versus Refund on Export - Sales of goods to a dealer located in a Special Economic Zone (SEZ) in the State - whether export is a condition precedent to constitute Zero Rate Sale or not - validity of Circular No.9/2013 dated 24.07.2013 - scope and ambit of Section 18 of the TNVAT Act.
Whether for a sale to a dealer located in a SEZ in the State to qualify as a "zero rate sale" in terms of Section 2(44) read with Section 18(ii) of the TNVATAct, the goods so purchased must be exported as such or consumed or used in the manufacture of other goods that are exported, by the dealer located in Special Economic Zone?
HELD THAT:- There is no uniformity in terms of the benefits /tax treatment extended with regard to sales to registered dealer in SEZ. The benefit of exemption being fairly uniform and the least of the benefit extended. Some States had granted the benefit of not just exemption but also the corresponding input tax credit which is otherwise not available to exempted goods/sales. Under the TNVAT Act, sales to SEZ is treated as a “Zero Rate Sale'', which is distinct from exemption - Under the TNGST Act exemption was thus granted in respect of sales tax, surcharge, resale tax and additional sales tax payable by any dealer on the sale of any goods made by such dealer to a registered dealer in SEZ for the purposes set-out in the said notification.
Apart from the notification in G.O.Ms.No.15 granting exemption in respect of tax payable under the said Act by any dealer on the sale of goods made by such dealer to a registered dealer for the purposes set out in the notification, sale of goods to any registered dealer located in Special Economic Zone was treated to be a “Zero Rate Sale” under Section 18 read with Section 2(44) of the TNVAT Act. Zero Rating was a concept introduced for the first time in relation to tax on sale of goods in Tamil Nadu under Section 18 of the TNVAT Act.
Zero Rate Sale is defined under Section 2 (44) of the TNVAT Act, to mean a "sale" on which no tax is payable but credit for input tax related to that sale is admissible - On a plain reading of Section 18 of the TNVATAct the benefit of Zero Rate under Section 2(44) of the Act, viz., that no tax is payable but credit for the Input Tax related to that Sales being admissible, is available to all three categories of sales mentioned in Section 18(1) of the TNVATAct.
The benefits extended /granted under Section 18 of the TNVAT Act viz., Zero Rating and refund are independent nor do they overlap. Refund is not part of the benefit of Zero rating as defined under Section 2 (44) of the TNVAT Act. It is not necessary that a Zero Rate must end up/culminate/ripen into a claim of a refund - Section 18(2) and 18(3) of the TNVAT Act would get attracted only when a dealer claims the benefit of refund which is an additional benefit independent and distinct from Zero Rate Sale.
From analysis of Section 18 read with Section 2(44) of the TNVAT it is clear that the order of the learned Single Judge insofar as it finds “export” to be a pre-requisite to qualify as "Zero Rate Sale" even in respect of sales covered by Section 18(1)(ii) of the TNVAT Act is without basis and contrary to the plain language of Section 18(1) of the TNVAT Act.
The order of the learned Single Judge insofar as it holds that export is a condition which ought to be satisfied for the purpose of claiming the benefit of Zero Rate in respect of sale to a dealer located in SEZ falling under Section 18 (1) (ii) of the TNVATAct i.e., a sale on which no tax is payable but Input Tax Credit in relation to such sale is admissible, is unsustainable. However, a dealer effecting zero rate sale to claim refund it may be necessary to demonstrate that the goods have been exported as such or consumed or used in the manufacture of other goods that are exported, subject to such restrictions and conditions as may be prescribed.
The conclusions arrived are as under:
a. Section 18 of the TNVAT Act, confers two benefits viz., Zero Rate i.e., sale on which no tax is payable but on which Input Tax Credit is admissible and the second being refund in addition to the above benefit of Zero rate. The benefits are independent of each other.
b. Export of goods is not a condition precedent or sine qua non to qualify as a Zero Rate sale as long as the sale falls within clause(ii) of Section 18 (1) of the TNVATAct.
c. To claim refund in terms of the Section 18 (2) read with 18 (3) of the TNVAT Act, export of goods is an essential condition but not the benefit of Zero Rate.
d. Zero Rate is distinct from exemption and thus the provisions of Section 19 (5) of the TNVATAct would not get attracted.
e. The impugned circular is set-aside to the extent it is contrary to the law declared by this Court.
f. The provisions of Section 18 the TNVAT Act cannot be controlled by a notification under Section 30 of the TNVAT Act inasmuch as Section 18 of the TNVAT Act confers a larger benefit. It is open to an assessee to claim a larger/ greater benefit.
g. The expression sale in Section 18 of the TNVAT Act must be understood keeping in view the definition of sale under Section 2(33) of the TNVAT Act. Thus, works contract or for that matter any of the categories of mutant sales which is deemed to be sale would fall within the meaning of the expression sale employed in Section 18 of the TNVATAct.
Matter remanded back to the Assessing Authority, who shall re-do the assessment keeping in mind the law declared with regard to the scope of Section 18 of TNVAT Act - petition disposed off.
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2023 (3) TMI 883
Violation of principles of natural justice - Validity of assessment orders - case of petitioner is that the respondent(s) has levied the tax on the respective enhanced turnover without granting an opportunity of hearing to the petitioner - HELD THAT:- Admittedly, the proposals sent by the respondents through their notices dated 02.05.2017, 05.02.2019 and 19.11.2019, 22.11.2019 and 04.02.2020, they have proposed to levy tax only at the rate of 5% on the respective taxable turnover of the petitioner. But as seen from the impugned Assessment Orders, dated 11.12.2019, 09.12.2019 and 11.12.2019, the respondent(s) has levied tax on the respective enhanced turnover, which is in excess of the respective taxable turnover mentioned in the proposals dated 02.05.2019, 05.02.2019 and 19.11.2019, 22.11.2019 and 04.02.2020.
As seen from the impugned Assessment Orders, a higher rate of tax at 14.5% on the respective turnover has been made without granting an opportunity of hearing to the petitioner. Excepting for the final notice dated 22.11.2019 issued by the respondent(s) to the petitioner which discloses that the petitioner will have to furnish correct details of the purchases made by the petitioner and also discloses that in case, the purchases were made by the petitioner from a registered dealer, the levy of tax will be at the rate of 5% and in case the purchases were made from an unregistered dealer, the levy of tax will be at the rate of 14.5%, the actual figures based on the best judgment assessment of the respondent which is proposed to be made on the petitioner has not been disclosed - The learned counsel for the petitioner would categorically contend that no personal hearing was afforded to the petitioner in the impugned Assessment Orders. Since in the impugned Assessment Orders, it is not seen as to whether personal hearing was afforded to the petitioner or not, the statement of the petitioner that no personal hearing was afforded to them in the impugned assessment proceedings has to be believed.
In the instant case, admittedly as seen from the impugned Assessment Orders, the proposal notices sent to the petitioner on different dates were for different amounts, but in the impugned Assessment Orders, the tax liability of the petitioner is much more than the figure mentioned in the proposals sent to the petitioner - this Court is of the considered view that principles of natural justice has been violated by the respondent(s) before passing of the impugned Assessment order and by non application of mind the impugned Assessment Orders have been passed, since the proposal notices sent by the respondent(s) discloses a different figure than which is determined in the impugned Assessment Orders and the figure determined in the impugned Assessment Orders are much higher than the figure disclosed in the proposal notices sent by the respondent(s).
The impugned Assessment Orders have to be quashed and the matter will have to be remanded back to the respondent(s) for fresh consideration on merits and in accordance with law - Petition disposed off by way of remand.
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2023 (3) TMI 882
Recovery of arrears of tax - criminal liability of the main accused and of the guarantor - returns filed by the first petitioner for the year 2013-14 was not complete and the returns did not tally with the actual sales reported by the first accused - HELD THAT:- Though it is true that the second accused had given an undertaking to pay taxes, if the first accused fails to pay the same that cannot be the sole reason to fix the second accused also for the default committed by the first accused. Though it might be true that the second accused also liable to pay the tax arrears in view of his undertaking or guarantee given in favour of the 1st accused to the commercial tax department. However that can be done by taking civil action for recovery. Unless the second petitioner is the assessee in the eyes of the Act he cannot be implicated as an accused for the default committed on the part of the first accused, who alone is the assessee.
Since the complaint has been given against this petitioner by presuming culpability on his part for failing to pay the tax, there is no basis for this criminal case. The undertaking or the guarantee executed by the second accused in favour of the 1st accused to the department can be at the best called as an agreement and for which the petitioner can be attached with contractual liability but not criminal liability.
In order to serve the ends of the justice and to prevent the abuse of the process of the Court, the proceedings against the second accused alone should be quashed - Petition allowed.
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2023 (3) TMI 831
Disallowance of Input Tax Credit (ITC) arising out of the alleged mismatch between the returns filed by the petitioners when compared with the returns and annexures filed by the purchasing / selling third party dealers - reversal of ITC on the allegations that there has been no actual movement of goods qua the transactions in question.
HELD THAT:- A Bench of this Court in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [2017 (3) TMI 536 - MADRAS HIGH COURT] had issued certain directions for conduct of verification and assessment in such matters. While some of these directions have been complied with in the present cases, learned counsel concur on the position that there are other conditions that have been set out under Circular No.5 of 2021 dated 24.02.2021 that yet remain to be complied.
The second issue relating to movement of goods has been the subject-matter of detailed deliberations in a batch of cases in W.A.No.2607 of 2021, wherein orders have been reserved by the Tax Bench on 01.12.2022. In the interregnum, the Hon'ble Supreme Court has also had occasion to pronounce judgment in the case of THE STATE OF KARNATAKA VERSUS M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED [2023 (3) TMI 533 - SUPREME COURT] on the same issue, though in the context of the Karnataka Value Added Tax Act - thus, there is direction to the assessing authority to await decision in W.A.No.2607 of 2021 and complete the assessments thereafter in light of the judgment of the Hon'ble Supreme Court in Ecom Gill Coffee Trading Private Limited and the decision of the Division Bench within a period of 12 weeks from date of pronouncement of the decision in W.A.No.2607 of 2021.
These writ petitions are disposed off.
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2023 (3) TMI 830
Validity of order of passed by the Revisional authority - Non-speaking order - Refund of the excess amount paid - jurisdictional error in completing the assessment, on the part of Commissioner of Taxes - case of petitioner is that the Commissioner of Taxes without assuming jurisdiction under Section 70(1) of the Act the order has been passed - HELD THAT:- In the case in hand, there is no jurisdictional error in the assessment of the assessing authority, and accordingly, the respondent no. 2 has acted beyond section 70(1) of the Act. This casual approach of the respondent no. 2 cannot be permitted since he is trying only to prevent the payment of refund amount to the petitioner.
The respondent authorities acting as quasi judiciary authority by invoking the power under statute are expected to act judiciously, but they are not expected to work as money generating authority. Very often it is noticed by this court that the orders are passed by the respondent authorities in an arbitrary manner which is driving the Tax-payers/dealers to file appeals by depositing 50% of the disputed tax while filing statutory appeals. But for the casual approach of the respondent-authorities, a Tax-payer/dealer cannot be put to hardship. Such action of the respondent-authorities cannot be appreciated. The impugned order dated 21.05.2020 is due of its nature. This is nothing else, but a burden on the business class. This court finds that the officers need to be more vigilant and tax-payers friendly. Accordingly, a cost of Rs. 25,000/- is imposed upon the revisional authority, and the said amount to be paid from his salary to the credit of Tripura High Court Bar Association for passing such orders.
Petition allowed.
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2023 (3) TMI 829
Legality of default assessment framed by the VATO - levy of penalty - sales of SKO were exempted from tax or not - alleged clerical error in reported sale in return - contravention to provision of Section 86(10) of DVAT Act - Opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- The Appellate Tribunal accepted the appellant’s contention that it was not afforded any opportunity to clarify the doubts that had crept in the mind of OHA regarding genuineness of transportation of goods for the reason that the Value Added Tax Inspectors (hereafter ‘VATI’) were unable to verify the transportation of goods by some transporters. The Appellate Tribunal was of the view that it would be in the interest of justice to afford the appellant an opportunity to substantiate its claims regarding inter-state sales. Accordingly, the Appellate Tribunal remanded the matter to the OHA for consideration and decide afresh. Similarly, the Appellate Tribunal also remanded the matter to OHA to consider the movement of goods in respect of invoice dated 20.05.2005.
The question regarding levy of penalty under Section 86(10) of the DVAT Act with regard to inter-state sales was also remanded for consideration afresh by the OHA.
Whether the Arbitral Tribunal had erred in not accepting that there was a clerical error in reporting the sales as ₹1,38,82,000/- instead of ₹13,82,000/-? - HELD THAT:- It is relevant to note that there is no dispute that the tax computed in the said returns was commensurate with the turnover of ₹13,82,000/-. The appellant claims that the same was correctly computed. Thus, prima facie, the contention that a typographical error had crept in the sales figure as reported is not insubstantial - More importantly, it is not disputed that the appellant had produced his books, which were subjected to audit. The same would have clearly revealed the sales turnover as recorded in the books of accounts.
The appellant had also filed a revised return which was produced before the Appellate Tribunal. In addition, the appellant had also filed a chartered accountant’s certificate confirming that the turnover as reflected in the books of account for the relevant period is ₹13,82,000/- - this Court is unable to concur with the decision of the Arbitral Tribunal to disregard the revised returns or the chartered accountant certificate, which are undeniably relevant for deciding the question whether a typographical error had crept in the returns.
The impugned order, to the extent that it outrightly rejects the appellant’s contention that its turnover was erroneously reported at ₹1,38,82,000/- instead of ₹13,82,000/-, is set aside. This issue is remanded to the OHA to consider afresh - appeal disposed off.
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2023 (3) TMI 796
Validity of assessment orders - levy of interest u/s 7(5) of Orissa Entry Tax (OET) Act, on the balance unpaid entry tax for the period prior to 2017 inasmuch as the amount of 1/3rd was treated as “deposit” till pronouncement on 28.03.2017 - Whether, pursuant to direction of this Court the Committee having recommended not to enforce penalty for non-payment or withholding of entry tax, except in cases of suppression, the taxable persons/dealers are liable to pay interest under Section 7(5) for the period from 2010 (interim Order dated 03.02.2010 being passed by the Supreme Court in STATE OF ORISSA & ORS. VERSUS M/S. RELIANCE INDUSTRIES LTD. & ORS. [2010 (2) TMI 1305 - SUPREME COURT] to 2017 (till 28.03.2017, i.e, date on which the Division Bench of Supreme Court allowed the appeals of the State of Odisha)?
HELD THAT:- Harmonious reading of the various provisions along with charging provision, i.e., Section 3 of the OET Act gives clear indication that whereas the entry tax is exigible on entry of goods— specified in the Schedule appended to the OET Act— into the local area for consumption, use or sale therein and return disclosing “tax payable” is required to be furnished as per sub- section (1) of Section 7. It is provided under sub-section (10) thereof that each and every return is to be scrutinized by the Assessing Authority. If mistake is detected as a result of scrutiny, the Assessing Authority is vested with power to proceed with the matter against the dealer as provided under sub-section (11). Thus, it is explicit that detection of mistake in return upon scrutiny triggers action against the dealer asking it “to make payment of the extra amount of tax along with the interest as per the provisions of this Act”. The OET Act provides for levy of interest under sub-section (5) of Section 7. No other provision empowering Authority to levy interest is brought to the notice of this Court by any of the parties.
In the cases at hand, it is the consistent pleading of the petitioners that as this Court observed at RELIANCE INDUSTRIES LIMITED VERSUS STATE OF ORISSA (AND OTHER CASES) [2008 (2) TMI 825 - ORISSA HIGH COURT] that the State of Odisha is not competent to levy entry tax on the goods brought from outside and not manufactured or produced within the State, the dealers are not required to pay entry tax. However, on the basis of STATE OF ORISSA & ORS. VERSUS M/S. RELIANCE INDUSTRIES LTD. & ORS. [2010 (2) TMI 1305 - SUPREME COURT]of the State of Odisha by the Supreme Court they were required to “deposit” 1/3rd of tax due as disclosed in the returns. The Hon’ble Court made it clear that such payment is treated to be “deposit”, but not “tax”.
It seems there is obvious reason for not undertaking scrutiny of returns during 2010-17. The Hon’ble Supreme Court granted stay of operation of paragraph 30 of said Judgment of this Court to the extent which spelt out that ‘The State has no jurisdiction to impose tax on such goods imported from outside and are not manufactured within the State of Orissa. Therefore, the opposite parties may make scrutiny of the same and not realize entry tax on such goods’. Though said interim order suffered modification vide Order dated 03.02.2010 by directing the dealers to deposit 1/3rd of the tax liability shown in the returns, the Assessing Authorities have not taken up “each and every return” for scrutiny.
Therefore, it is not justified on the part of the Assessing Authorities to issue demand notice(s) in Form E-24 prescribed under Rule 10(6)(b) of the OET Rules as a result of scrutiny under sub-sections (10) and (11) of Section 7 of the OET Act that too in violation of observations made in Toyo Engineering [[2011 (9) TMI 888 - ORISSA HIGH COURT]].
Following the ratio of Toyo Engineering (supra), this Court would have to remit the matter to the Assessing Authority, but considering that the same would not serve fruitful purpose at this distance of time holds that issue of notice in Form E-24 under Rule 10(6)(b) of the OET Rules is not in conformity with the statutory requirement. Since the balance amount of tax due as per disclosure made in the return(s) is known to the petitioner, setting aside the notice in Form E-24 and remanding for computation of tax liability to the Taxing Authority would enure to the benefit of none. Therefore, the petitioner is required to determine its own liability as per self-assessed return(s) already filed.
Levy of interest under Section 7(5) of the OET Act - HELD THAT:- It is trite that provision for interest is to be construed as substantive law and not machinery provision. Ordinarily charging section which fixes liability is to be strictly construed. But the rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must be so construed as would effectuate the object and purpose of the statute and not defeat the same. Any provision made for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law.
There is no ambiguity in holding that in the presence of the expression “without sufficient cause” in sub-section (5) of Section 7 of the OET Act and the petitioner(s) having justified by showing sufficient cause for failure to deposit amount of tax due along with the return, which cannot be treated as admitted tax in view of legal position contained in paragraph 30 of Reliance Industries Ltd., of Orissa High Court, interest under Section 7(5) of the OET Act is not chargeable on such turnover falling within ambit of portion the said Judgment.
Whether Court can grant interest in exercise of jurisdiction under Article 226 of the Constitution of India? - HELD THAT:- Interest is compensatory in character. Since by virtue of order of the Court entire amount of tax due was not discharged, such order should prejudice none. In the present case the petitioner(s) withheld 2/3rd of the tax due as disclosed in the return(s). The Hon’ble Supreme Court while passing Order dated 03.02.2010 clarified that if State of Odisha loses, it would refund the amount deposited by the dealers along with interest. However, there was no proposition with regard to eventual losing of the petitioner(s). Nonetheless, the fact remains that the petitioner(s) could not succeed in the ultimate before the Supreme Court. Thus, there is warrant for an order from this Court granting compensation on the amount withheld since 2010 till 2017.
Applying the principles for grant of interest at a rate fixed as compensation, this Court is of the considered opinion that since by virtue of interim orders of the Supreme Court of India and the orders in writ petition(s) by this Court following such interim orders, the State of Odisha was deprived of recovering 2/3rd of tax due relating to September, 2009 to February, 2017, the petitioner(s) is required to compensate the State of Odisha by making payment towards interest in the interest of justice and equity. Hence, writ of mandamus is liable to be issued in exercise of extraordinary power under Article 226 of the Constitution of India.
Petition disposed off.
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2023 (3) TMI 795
Audit assessment under Section 34(2) of the Value Added Tax Act, 2003 - main plank of the challenge to the notice and the consequential order dated 1.9.2022 and 16.9.2022 respectively that the powers were invoked under Section 34(8A) of the Act despite the fact that no proceedings were pending - HELD THAT:- Section 34 of the Act deals with the audit assessment. It says that subject to the provisions of Sub section (2), the amount of tax due from registered dealer shall be assessed in the manner provided, separately for each year during which the registered dealer is liable to pay tax.
The clinching aspect is that the condition precedent for exercising powers under Section 34(8A) has not been satisfied, namely that any proceedings under the Act are not pending so as to invest the authority with the power to proceed under Sub section (8A) of Section 34. When the Section expressly contemplates that the assessment under the said provisions could be resorted to only during the proceedings under the Act, the powers has to be exercised in that manner only and upon fulfillment of the said condition.
In the facts of the case there is no gainsaying that any proceedings are not pending so as to justify the assessment proceedings under Section 34(8A) of the Act. When learned Assistant Government Pleader was confronted with the aforesaid aspect and non-compliance of the condition precedent for exercise of powers of assessment, he was entirely at his receiving end.
Since the basic condition ‘during the course of any proceedings under the Act’ of Sub section (8A) of Section 34 of the Act is not satisfied and no proceedings under the Act are pending, the impugned notice dated 1.9.2022 and the assessment order dated 16.9.2022 stands without jurisdiction. It is an incurable jurisdictional defect and illegality rendering the notice and the order liable to be set aside - Petition allowed.
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2023 (3) TMI 794
Violation of principles of natural justice - personal hearing was granted to the petitioner only on 18.02.2020 and not on 16.02.2020 as reflected in the impugned assessment orders - No fresh notice was also issued to the petitioner by the respondent, intimating a fresh date of personal hearing - HELD THAT:- Since the personal hearing has not been afforded to the petitioner, it is clear that principles of natural justice has been violated by the respondent. Hence, the impugned assessment orders have to be quashed and the matters will have to be remanded back to the respondent for fresh consideration on merits and in accordance with law.
This Court deems it fit to fix the next date of personal hearing of the petitioner before the respondent as 14.03.2023 and on that date the petitioner shall appear before the respondent at 10:30 a.m. without fail - the impugned assessment orders dated 29.04.2021 and 27.04.2021 passed by the respondent are hereby quashed and the matters are remanded back to the respondent for fresh consideration on merits and in accordance with law - Petition disposed by way of remand.
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2023 (3) TMI 734
Non-deletion of Tax free and First Point Tax Paid goods turnover from the taxable turnover - receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act or not - receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act or not.
Whether the learned Tribunal is justified in not deleting the Tax free and First Point Tax Paid goods turnover from the taxable turnover and as such the order is illegal and arbitrary? - HELD THAT:- The Court is of the view that if indeed SAIL was unable to produce materials to show to what extent the canteen sales included sale of tax-free goods and first point tax paid goods, remanding the matter to the AO will be a futile exercise. In the absence of SAIL producing records relevant to the issue, even in this Court, the estimation that 70% of the sales was of cooked food items and 30% of tea, coffee and snacks etc. cannot be said to be arbitrary. Consequently, in this aspect the Court is not inclined to accept the plea of SAIL and remand the matter to the AO. In other words, the question is answered in the affirmative i.e. in favour of the Department and against the Assessee.
Whether the learned Tribunal is justified in holding that the receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act? - whether the receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act? - HELD THAT:- Whether in fact the Tribunal asked SAIL to produce the full contract is not clear from the impugned order of the Tribunal. On its part, with SAIL having offered to produce the entire contract, the Tribunal could have asked SAIL to produce it before deciding the issue - With SAIL offering to produce the entire contract and the matter any way being remanded to the AO as regards the other questions, the Court considers it appropriate to refer questions also to the AO for being considering afresh by examining the complete text to the contract to be produced by SAIL as undertaken by it - the Court while setting aside the orders of the AO, the ACCT and the Tribunal on both issues and remands them to the AO for a fresh determination.
Petition allowed by way of remand.
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2023 (3) TMI 733
Rejection of request of the petitioner for rectification of assessment sought for under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - rejection of rectification request on the ground that there was no discussion about this in the order - difference of opinion between the parties was that the petitioners claim that one of their products, TANG was existable to taxes at the rate of 4% and thereafter 5%, whereas it is the stand of the respondents that the rates applicable would be 12.5% and thereafter 14%.
HELD THAT:- The petitioner sought rectification under Section 84 that has come to be rejected by the officer on 15.11.2019 on the ground that there was no discussion in the order dated 03.05.2019 and hence no rectifiable error. This conclusion of the appellate authority is clearly contrary to law insofar as the very non-consideration of submissions dated 23.01.2019, would constitute an error apparent on record liable to be rectified under Section 84 of the Act. In light of this, the impugned orders need to be set aside.
The petitioner will appear before the appellate authority on 24.03.2023 at 10.03 a.m. with materials in support of the request of rectification and without anticipating any notice afresh for the hearing scheduled as aforesaid. After hearing the petitioner, orders shall be passed on the Section 84 application within a period of four weeks from the date of personal hearing as fixed aforesaid.
Petition allowed.
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2023 (3) TMI 732
Validity of assessment orders - rate of G.P. added was 10 – 11% on the purchases made - Enforcement Wing was of the opinion that this modus operandi is incorrect and required re-consideration by adding gross profit of the respective years as per Profit and Loss (P&L) accounts and on the basis of the audited financials - opportunity of personal hearing to be provided, before such increase in the GP - principles of natural justice - HELD THAT:- The issue in this case relates to adoption of Gross Profit, whether at 10 – 11 % as put forth by the petitioner, or at the rate proposed by the Officers. There are any number of submissions that could have been put forth by the petitioner in support of the rate propounded by it, pursuade to the Assessing Officer, had only such opportunity been granted.
The petitioner, in its wisdom and based on trade practice, has adopted a certain rate of GP and it is in my view, not appropriate for the Assessing Officer to have adopted a substantially higher rate, without affording the petitioner an opportunity to explain the rates adopted by it - In fact, the conclusion in the impugned orders, is that no materials were provided by the petitioner in support of the G.P. adopted by it. Such failure is a direct consequence of the failure of the authority to have granted an opportunity to the petitioner.
That apart, it is a settled position that the reports of the officials of the Enforcement Wing cannot be adopted mutatis mutandis by the Assessing Officer who are expected to apply their minds, independently to the matter though having regard to the opinion of the Enforcement officials as well. In the present case, it is an admitted position that the authority has had nothing new to bring to the table but has merely adopted the rate as put forth by the Enforcement Officers.
Petition allowed.
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2023 (3) TMI 688
Lifting of attachment on properties - right to service of assessment orders - revenue averred that the allegation of not furnishing of copies of assessment orders passed, was an after-thought, to thwart the proceeding initiated by the respondent for recovery of tax dues - HELD THAT:- The High Court’s reasoning is based entirely on the effect of Rule 64 of the rules. There can be no doubt that when any statutory or administrative order, visits a citizen or entity with adverse consequences, such an order has to be served upon the concerned person; especially so, when that order is appealable or subject to revision by higher authorities. That is the substance of the requirement under Rule 64. The High Court, in the present case, drew a distinction between two periods; for AY 2005-06 to 2008-09 it was held that the assessments could not be called in question. So far as AY 2009-10 and 2010-11 were concerned, the court held that the attachment orders were invalid, since the assessment orders were not served.
The findings of the High Court, on the facts would not normally have required a second look by this court; however, the peculiar circumstances of this case compel scrutiny. After the disposal of the writ petition filed by the assessee (on 15.04.2010) concededly, it made no attempt to file objections or even deposit the amounts the court had required it to. As a regular dealer, it had filed returns not only for AY 2005-06 to 2008-09 but also later periods (i.e., AY 2009-10 and 2010-11) - The revenue however, pointed out to the High Court, that the representations never alleged that assessment orders were not served and that the attachments were therefore not compliant with provision of law.
In the present case, arguendo if the assessee was unaware, in the first instance regarding the issuance of assessment orders against it, at least when the revenue filed a writ petition complaining about Canara Bank’s proposal to auction the assessee’s properties, it had impleaded the assessee too - The High Court, with due respect, fell into error, in holding that since the subject matter of the revenue’s writ petition (W.P. No. 25943/2011) was different, the assessee could not be faulted for highlighting that it had not received a copy of the assessment order. In fact, the entire premise of that writ petition was that the assessee owed tax dues, to the extent of ₹5,59,58,758/- and that the bank could not sell the assessee’s properties.
The revenue’s appeal has to succeed - Appeal allowed.
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2023 (3) TMI 687
Validity of order of tribunal in Review Appeal - Denial of benefit which was allowed earlier - Power to Review - Penultimate sale - Disallowance of claim of exemption and levy of penalty - Inter-State stock transfer of goods purchased for foreign country export - declaration accompanied with appropriate Form-H not present, instead goods were transferred accompanying Form-XX and Form-H only - also, dealer at Tamil Nadu for the purchase within Tamil Nadu from unregistered dealer and subsequent transfer of goods to its Branch Office, has not produced agreement or order for or in relation to such export, which is mandatory for giving exemption from tax under Section 5(3) of CST Act, 1956.
HELD THAT:- On review the Tribunal has found that the reasoning given by the Appellate Authority is incorrect and the judgment cited by the dealer and relied by the Appellate Authority are not relevant. It held that the Appellate Authority has come to an erroneous conclusion that the purchase within the State of Tamil Nadu and transport of the coffee seeds to Karnataka are not two distinct acts of the dealer and it has to be considered as inseparable continuous action.
The Tribunal has taken note of the fact that the dealer has raised purchase bills while procuring coffee seeds from the planters in Tamil Nadu and thereafter, the goods were transported to the Branch Office at Kushal Nagar, Karnataka, under Form-XX Delivery Note issued to the dealer in the State of Tamil Nadu. Therefore, the contention of the dealer as well as the reasoning of the Appellate Authority was held to be factually incorrect - The actual portion of the raw seeds procured in Tamil Nadu, transported to Karnataka and thereafter, exported to foreign after processing, has not been specifically stated under Form-H, which would reflect the quantum of the seeds procured actually transported to the foreign countries. In the absence of purchase order from the Karnataka Branch and export order from foreign buyer or contract between foreign buyer and Karnataka Unit, exemption cannot be granted to the dealer.
On considering the order passed in Review Appeal, it is found that a new fact on verifying the CST files of the assessee, the inconsistent stand of the assessee under the State Act and the Central Act has come to light. This is not a case of intra-State transaction or transfer of goods uninterrupted to the exporter, based on specific agreement for export. The legal position of transaction of this nature is well explained by the Tamil Nadu Taxation Special Tribunal in Razack Trading Co. Vs State of Tamil Nadu [1999 (2) TMI 720 - TAMIL NADU TAXATION SPECIAL TRIBUNAL] where it was held that By declaring the penultimate sale or purchase in the State as a sale in the course of export, the powers of the State Legislature to tax the transactions completed within its territory was taken away and to this extent, this sub-section infringes on these powers. The validity of Subsection (3) of this section was upheld by the apex Court in CONSOLIDATED COFFEE LTD. VERSUS COFFEE BOARD, BANGALORE (AND OTHER CASES) [1980 (4) TMI 278 - SUPREME COURT] on the ground that this sub-section does not create a legal fiction but only lays down a principle of general applicability in accordance with Article 286(2) and hence it is valid.
Therefore, this Court holds that the Review by the Tribunal in exercise of the power under Section 36(6) of TNGST Act is maintainable, since important facts has come to light after verification of CST files and it was not been brought to the notice of the Tribunal when the order dated 18.10.2004 in M.T.S.A.No.382 of 2004 came to be passed.
It is clear that for exemption from levy of tax, the dealer is bound to furnish the agreement or order for or in relation to the export. In this case, the dealer has failed to furnish any agreement or order. The transfer of goods from Tamil Nadu to Karnataka done only by furnishing Form-XX and not by furnishing Form-H. Therefore, on facts also, the dealer cannot seek exemption from tax liability for its turnover of Rs.2,24,00,783/-.
The Tax Case is dismissed.
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2023 (3) TMI 632
Attachment of petitioner's Bank Account - even without passing an assessment order for the respective assessment years, the impugned proceedings has been issued by the first respondent, exercising its power under Section 45 of the TNVAT Act 2006, which according to the petitioner is arbitrary and illegal.
HELD THAT:- Admittedly, only after passing the assessment orders, any coercive recovery proceedings can be initiated by the first respondent against the petitioner - This Court requested the learned Government Advocate appearing for the first respondent to get instructions as to whether any assessment orders were passed in respect of the respective assessment years prior to issuing the impugned proceedings dated 30.01.2023.
Unless and until the assessment orders are passed in respect of all the assessment years, for which the attachment order has been passed, which is the subject matter of challenge in this writ petition, the first respondent cannot exercise its power under Section 45 of the Tamil Nadu Value Added Tax Act, 2006 to enforce the sums alleged to be due and payable by the petitioner towards tax liability. If at all, the first respondent can take coercive steps against the petitioner under Section 45 of the TNVAT Act only in respect of the assessment years, where the assessment orders are passed. But being a single proceeding dated 30.01.2023, covering all the assessment years right from 2006-07 to 2016-17, it/the proceeding has to be declared as invalid as in respect of some of the assessment years, mentioned in the impugned proceeding dated 30.01.2023, no assessment orders were passed by the first respondent prior to the issuance of the impugned proceedings.
The petitioner also categorically contends that in respect of all the assessment years, for which the impugned proceedings dated 30.01.2023 has been passed, the respondents have not passed any assessment order. Necessarily for the aforementioned reasons, the impugned proceedings dated 30.01.2023 passed by the first respondent has to be quashed and the writ petition will have to be allowed.
Petition allowed.
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2023 (3) TMI 631
Works contract of the Tyre Retreading Division - expenses incurred for payment of labour charges and other labour related charges like, P.F., F.P.F., and E.S.I etc. (tyre division) - Permissible deduction under Section 3-B(2)(e) of the TNGST Act, 1959 or not - HELD THAT:- The non-production of supporting document is a question of fact and not a question of law as claimed by the revision petitioner. Nowhere the authorities have declined the entitlement of exemption of the expenses incurred towards labour or incidental charges. They have only pointed out the absence of supporting document from the assessee, the request to grant exemption is untenable.
This Court finds no error in the said reasoning, since no substantial question of law involved in this Tax Case Revision, this Tax Case Revision is dismissed.
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2023 (3) TMI 572
Exemption from payment of sales tax on the sales turnover of finished products namely molasses, bagasse and filter mud - G.O. No. CI 30 SPC 96 dated 15-03-1996 read with notification No. FD 32 CSL 96 (I) dated 15-11-1996 - Revenue’s specific case is, the exemption notification specifically mentions the word ‘manufacture’, hence, the by-products cannot be considered as products manufactured.
Whether the petitioner is entitled for exemption from payment of tax on molasses, bagasse and filter mud under 1996-2001 Industrial Policy?
HELD THAT:- It is not disputed that the activities of both petitioner and Chamundeshwari are identical. There is no pleading on behalf of the State Government that the benefit is denied to the petitioner based on the interpretation of the words ‘manufacture’ and ‘production’. It is only at the time of final hearing of this writ petition the learned Additional Advocate General sought to justify the action of the State Government by placing reliance of Arihant Tiles. The indubitable fact remains that, according to both petitioner and the State Government, the activities of petitioner and Chamundeshwari are one and the same. The State Government’s action amounts to conscious discrimination between two similarly situated industrial units.
It is relevant to note that Chamundeshwari Industry was granted sales tax exemption on sale of by-products of sugar under Industrial Policy 1993-98 and it also enjoyed the benefit of deferral of purchase tax as interest free loan from 2000 to 2010.
The petitioner being similarly situated as that of Chamundeshwari shall be entitled for exemption from payment of sales tax on by-products namely molasses, bagasse and filter mud - petition allowed.
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2023 (3) TMI 533
Input Tax Credit (ITC) - Genuineness - Onus to prove / burden of proof - Interpretation of statute - Section 70 of the Karnataka Value Added Tax Act, 2003 - Input Tax Credit claimed by the respective purchasing dealers - HELD THAT:- The provisions of Section 70, in its plain terms clearly stipulate that the burden of proving that the ITC claim is correct lies upon the purchasing dealer claiming such ITC. Burden of proof that the ITC claim is correct is squarely upon the assessee who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bona fide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such a burden of proof cannot get shifted on the revenue. Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc.
The genuineness of the transaction has to be proved as the burden to prove the genuineness of transaction as per section 70 of the KVAT Act, 2003 would be upon the purchasing dealer. It is observed and held that mere production of the invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70 of the Act, 2003.
In the present case, the respective purchasing dealer/s has/have produced either the invoices or payment by cheques to claim ITC. The Assessing Officer has doubted the genuineness of the transactions by giving cogent reasons on the basis of the evidence and material on record. In some of the cases, the registration of the selling dealers have been cancelled or even the sale by the concerned dealers has been disputed and/or denied by the concerned dealer - over and above the invoices and the particulars of payment, the purchasing dealer has to produce further material like the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods including actual physical movement of the goods, alleged to have been purchased from the concerned dealers.
In absence of any further cogent material like furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. and the actual physical movement of the goods by producing the cogent materials, the Assessing Officer was absolutely justified in denying the ITC, which was confirmed by the first Appellate Authority. Both, the second Appellate Authority as well as the High Court have materially erred in allowing the ITC despite the concerned purchasing dealers failed to prove the genuineness of the transactions and failed to discharge the burden of proof as per section 70 of the KVAT Act, 2003.
The impugned judgment(s) and order(s) passed by the High Court and the second Appellate Authority allowing the ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside - Appeal allowed.
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