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2009 (10) TMI 884
Issues: 1. Recovery of outstanding trade tax liability from personal assets of directors of a company. 2. Applicability of the doctrine of piercing the corporate veil. 3. Responsibility of directors for financial mishandling leading to company closure.
Analysis: 1. The petitioners, former directors of a company, filed a writ petition challenging the recovery of outstanding trade tax liability from their personal assets. The company had failed to repay a loan to a bank, resulting in a debt recovery case against it. The Trade Tax Department issued recovery certificates against the company for outstanding trade tax. The petitioners argued that their personal assets should not be attached for the company's dues.
2. The counter-affidavit by the respondents claimed that the petitioners, as directors, were responsible for the company's financial matters, leading to its closure. However, the court noted that there were no allegations of fraud or illegal asset transfer by the directors. Citing the Meekin Transmission Ltd. case, the court emphasized that directors cannot be held personally liable for a company's debts unless specific statutory provisions apply or the doctrine of lifting the corporate veil is justified.
3. The court held that since there was no evidence of the petitioners misusing company assets, the recovery from their personal assets was not justified. The court reiterated that directors should not be held personally responsible for a company's debts unless exceptional circumstances warrant it. The Department was allowed to pursue recovery from the company's assets if found in possession of the petitioners.
In conclusion, the writ petition was allowed, and recovery from the personal assets of the directors was deemed inappropriate. The court clarified that if the Department finds the petitioners in possession of company assets, recovery could be pursued against those assets.
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2009 (10) TMI 883
Best judgment assessment challenged - order of assessment passed on July 7, 2009 under the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 2003-2004 challenged - Held that:- As disclosed by the file produced by the respondent that the petitioner did not challenge the first assessment order dated November 7, 2007 and that he had been successfully dodging service of notices and orders. The order dated July 7, 2009 impugned in this writ petition is only a second revision order, after an additional fact was brought to notice by the Deputy Commissioner. In such circumstances, there is no justification for this court to interfere with the order of assessment dated July 7, 2009, especially when the best of judgment assessment order dated November 7, 2007 has not even been challenged and when the petitioner can never contend violation of natural justice.
However, the petitioner has lost the opportunity of filing a statutory appeal against both the orders dated November 7, 2007 and July 7, 2009, therefore the petitioner can be given an opportunity to file an appeal, since allowing the petitioner to file an appeal, would also ensures the collection of some portion of the tax for the Revenue.
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2009 (10) TMI 882
Issues involved: Application u/s 16D of Tamil Nadu General Sales Tax Act, 1959 for assessment years 2004-05 and 2005-06 rejected by committee based on various grounds including suppression of turnover and lack of natural justice principles.
Summary:
The petitioner applied u/s 16D of the Act before the committee challenging the assessment made on them for the years 2004-05 and 2005-06. The committee rejected the application citing reasons such as issuance of notices to dealers, rejection of deviation proposal by Joint Commissioner, and alleged suppression of turnover. The petitioner contended that the assessment was arbitrary and lacked independent application of mind by the assessing authority.
The Court noted that u/s 16D, the Special Committee has the authority to examine records of assessing authority and pass orders if violations of the Act or Rules are found. The petitioner raised concerns about the assessment process and lack of proper consideration by the assessing authority. The first respondent upheld the assessment based on grounds of turnover suppression and rejection of deviation proposal.
Considering the petitioner's challenge to the assessment and the corrective role of the committee, the Court set aside the respondent's order and remitted the matter back for fresh consideration. The Court emphasized the need for the committee to thoroughly review issues raised by the petitioner and provide reasoned decisions. The writ petitions were disposed of with no costs incurred. M. P. Nos. 1, 1, 2, and 2 of 2009 were closed as a result of this judgment.
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2009 (10) TMI 881
Whether the respondent is not liable to pay sales tax under section 5(2) of the Kerala General Sales Tax Act on the resale of plastic moulded chairs under the brand name "Regal" which the respondent got manufactured by an SSI unit in Kerala?
Held that:- There is nothing to indicate in the agreement that the manufacturer in Kerala was entitled to produce and market plastic chairs in the brand name "Regal" which was the brand name exclusively used by the respondent, and that is the reason why they got stickers printed with brand name affixed on the chairs before marketing the same. In fact, not only brand name was affixed but rubber bushes were also fixed to the chairs after purchase by the respondent.
Obviously, the respondent wanted to maintain a distinct quality for the product sold under their brand name and that is why improvements were made like fixing of rubber bushes to the chairs before sale by them. We are therefore of the view that after being unsuccessful in challenge against statutory provisions, the respondent distorted the facts and misled the Tribunal to get favourable orders. We therefore, allow the S. T. Revisions filed by the State by reversing the order of the Tribunal and by restoring the assessment confirmed in first appeal.
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2009 (10) TMI 880
Issues: Rate of tax applicable for spray oil - Whether spray oil is a petroleum product or a pesticide/fungicide.
Analysis: The case involved a dispute regarding the classification of spray oil for tax purposes. The Department contended that the spray oil sold by the respondent was a petroleum product, while the respondent argued that it was a pesticide or fungicide. The Tribunal, by majority, ruled in favor of the respondent, prompting the State to file a revision.
The High Court scrutinized the arguments and evidence presented. It was observed that for an item to qualify as a pesticide or fungicide, it must be manufactured under a license obtained under the Insecticides Act, 1968. The respondent failed to demonstrate that the spray oil sold was manufactured and sold under such a license. The Court noted that while oil-based fungicides are used in rubber plantations, they are toxic and not suitable for preventing fungus on edible commodities like pepper. The Tribunal's acceptance of the argument that the spray oil was the same for both pepper and rubber plantations was deemed misleading.
In a previous similar case, the Court had remanded the matter to the assessing officer to allow the assessee an opportunity to prove the identity of the oil. In line with this precedent, the High Court allowed the sales tax revision, setting aside the Tribunal and first appellate authority's orders. The matter was remanded to the assessing officer to provide the assessee with an opportunity to substantiate their case or else to reassess the tax at a higher rate if necessary.
In conclusion, the judgment clarified the requirements for classifying an item as a pesticide or fungicide, emphasizing the need for proper licensing under the Insecticides Act. It highlighted the importance of providing evidence to establish the identity of a product for accurate tax assessment, ultimately ensuring compliance with tax regulations and fair treatment for all parties involved.
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2009 (10) TMI 879
As per section 2(1)(b) of the Act, 'arrears' relate to tax, penalty and interest for which assessment has been made prior to April 1, 2002 and pending collection on the date of filing of application. If the applicant went on appeal against the entire demand and if the appeal resulted in 'remand' subsequently, i.e., after April 1, 2002, after fresh assessment is made, whether the dealers are eligible under the scheme? - Held that: - When the entire assessment had been set aside on appeal or revision even though the assessment had been made prior to April 1, 2002 it becomes non est since any fresh assessment made and demands raised thereupon subsequently after April 1, 2002 would not be eligible to be covered under this scheme - petition allowed.
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2009 (10) TMI 878
Constitutional validity of sub-section (5A) of section 14 of the Act 15 of 1963 as amended by the Kerala Finance Bill, 2004 questioned
Held that:- The Division Bench of this court, while sustaining section 14(1) of the Kerala General Sales Tax Act prescribing fees for registration at different levels, on the basis of the turnover (the maximum of which was ₹ 10,000 in 1993 and ₹ 20,000 in 1996), had only observed that there was no rationale in demanding the very same extent of fees for the purpose of renewal also, to be done on yearwise basis and it was accordingly, that sub-section (5) as it existed earlier for collecting such amount was set aside as unreasonable and unconstitutional. Unlike this, the position as it stands now, it only such that the fees payable for renewal, under sub-section (5A) in respect of Kerala general sales tax registration is ₹ 500; whereas in the case of dealers having "Kerala general sales tax and Central sales tax " registration, it is ₹ 1,500. This court does not find it as exorbitant, arbitrary or shockingly disproportionate to the extent of service being provided in connection with the steps for renewal of registration and as such, no interference is called for.
With regard to the maintainability of the writ petition, even though it has been stated in the opening paragraph of the writ petition that the same has been preferred in a "representative capacity " (for and on behalf of more than 800 dealers enlisted in exhibit P2), absolutely no document has been produced before this court to show that the petitioners have been authorised by all such persons to file the proceedings on their behalf as well. Merits having already been answered against the petitioners, the writ petition fails
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2009 (10) TMI 877
Rectification application - Held that:- The contention of the learned counsel for the petitioner that it was a case of mistake is also not correct for the simple reason that if the authority assuming wrongly or incorrectly proceeded to determine the tax liability of the petitioner-dealer in terms of the provisions of section 8(2)(a) of the Act and though Sri Kamath, the learned counsel for the petitioner, would vehemently urge that it was a clear case to which provisions of section 8(2)(b) of the Act apply that was not the subjectmatter for rectification, but is only subject-matter for appeal or revision and such an error of law could not have been sought for being rectified in an application under section 25A of the Act.
Thus we have no doubt in our mind that section 5 or section 14 of the Limitation Act cannot be invoked in respect of the application filed beyond the period of five years invoking the jurisdiction under section 25A of the Act. Appeal dismissed.
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2009 (10) TMI 876
Constitutional validity of section 17D of the Kerala General Sales Tax Act, 1963 challenged - Held that:- We are of the view that the provision under sub-section (5) of section 17D providing for remittance of full assessed tax for filing appeal is perfectly tenable. We see no merit in the challenge against the validity of section 17D of the Act, which as already held by us is beneficial provision. Therefore, we uphold the constitutional validity of section 17D.
Since in all these cases assessments are completed by issuing pre-assessment notice by individual officers, we feel that the procedure contemplated and stated by us above is not strictly followed and so much so, orders passed cannot be sustained under the provisions of section 17D. We, therefore, allow the writ appeals and writ petitions in part by vacating the impugned assessment orders, but with direction to the assessment team to complete the assessment afresh under section 17D within a period of three months from date of receipt of copy of this judgment, after issuing notice to all parties and after hearing their objections
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2009 (10) TMI 875
Levy of penalty under section 16(2)(d) of the TNGST Act - imposition of penalty by a separate order - the assessment based on the book turnover - Held that: - reliance was placed in the decision in the case of The Deputy Commissioner (C. T.), Coimbatore Versus VSR. Ramaswami Chettiar and Bros. [1975 (8) TMI 114 - MADRAS HIGH COURT], where it was held that under section 16(2) of the Act, the assessing authority has no jurisdiction to impose penalty by a separate and independent order - petition allowed - decided in favor of assessee.
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2009 (10) TMI 874
Reassessment orders - Whether the rate of tax originally charged was proper and as the declarations were supplied to him by the purchasing dealer, he was obliged to accept the said declarations?
Held that:- In the present case, undisputedly the goods were supplied by the petitioner and he had charged the concessional rate of tax in view of the declaration supplied by the purchasing dealer. If that be so then the original assessment made by the assessing authority was absolutely justified and the assessment could not be reopened on the basis of an audit objection. The approach of the authority that particular items are not included in the entry, therefore, the concessional rate would not be applicable, could not be used as a handle against the petitioner for reopening of the assessment.
For the reasons aforesaid, we are of the opinion that the orders of reassessment passed by the assessing officer and confirmed by the revisional authority are bad. The said orders deserve to be and are accordingly quashed.
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2009 (10) TMI 873
Whether the Tribunal was justified in declining the concessional rate claimed by the petitioner at four per cent for the work executed for KSE Board under notification S.R.O. No. 1091/99?
Held that:- What is clear from the provision contained in the contract is that the parties have agreed that the work executed is a works contract mentioned in the KGST Act and the contract is loaded with tax component in full and it is for the contractor to pay the actual tax for the works contract. In other words, the purchaser for whose benefit concessional rate is provided under notification has not claimed the concessional rate. The beneficiary has not claimed because the contract does not provide payment of tax at concessional rate which means that full rate of tax is loaded in contract amount. We therefore hold that the petitioner's claim is neither bona fide nor tenable. Consequently, we uphold the order of the Tribunal confirming the assessment and dismiss the S.T. Revision cases.
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2009 (10) TMI 872
Whether, in the facts and circumstances of the case, the Tribunal is legally correct in treating the turnover representing loading charges, transport charges, unloading charges of fly ash as not includible in the purchase turnover for the purpose of levy of tax under section 7A of the Tamil Nadu General Sales Tax Act, 1959?
Held that:- As it is quite natural and legal that the sale comes to an end the moment the sale price is paid by the dealer to the thermal power station and the delivery is accepted by the dealer at that point of time ex-site itself. Therefore, whatever expenses which the dealer incurs thereafter for the purpose of drying and then transporting to his place is quite natural and it can only be post-sale expenditure and at no stretch of imagination, it could be concluded or arrived at as pre-sale expenditure. When this question of fact, which has been clearly upheld by both the appellate authorities concerned, we have no hesitation in accepting the question of fact and there is no need to make our interference with the finding of fact.
As decided in Gwalior Rayon Silk Manufacturing and Weaving Co. Ltd. v. State of Tamil Nadu [1980 (9) TMI 262 - MADRAS HIGH COURT] the transport charges, which was incurred by the assessee, in respect of delivery of goods from the Forest Department, would not attract levy of charges under section 7A.In favour of the assessee and against the State.
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2009 (10) TMI 871
Whether the materials supplied by the petitioner to the Chief Engineer, Power and Electricity Department during the year 2008 shall not be subjected to assessment for payment of VAT?
Held that:- Liability of the petitioner is to be ascertained from the facts that the supply orders were placed at the registered office of the writ petitioner at Guwahati (Assam) and the goods were manufactured and supplied from the factory at Barapani (Meghalaya) to Aizawl. This is evident from annexure I, the invoice, annexed at with the affidavit of the respondents. Neither is there any averment in the affidavit of the respondents that the writ petitioner had any office in the State of Mizoram nor is there any evidence that the goods were actually purchased by the writ petitioner from any dealer in the State of Mizoram and then supplied it to the respondents to take a view that it was an intra-State sale or purchase.
On the other hand, the facts of this case clearly show that it was out and out an inter-State transaction and the writ petitioner is not liable to pay VAT under MVAT Act, 2005. W.P. allowed.
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2009 (10) TMI 870
Tax levied on sale of used beer and liquor bottles - Validity of the assessment orders - Held that:- While input tax credit is to be allowed to a dealer for the tax charged in respect of purchase of taxable goods, if such goods are used in his business, no input tax credit can either be allowed on purchase of goods specified in the Sixth Schedule or with respect to the goods detailed in rule 20(2). As a result, "liquor, bottled and packed under the provisions of the A.P. Excise Act" is not entitled for input tax credit. Such goods are, however, not liable to tax on its second and subsequent sale within the State of Andhra Pradesh. These limitations/exemptions apply as long as liquor continues to remain packed in bottles as specified under the provisions of the A.P. Excise Act. Once liquor is removed from its container, i.e., bottles, neither "liquor" nor "empty bottles" constitute goods falling under item 1 of the Sixth Schedule to the Act. No provision has been brought to our notice whereby a VAT dealer is disentitled from availing of the benefit of input tax credit on sale of packing material, including empty bottles, even when he fulfils the conditions prescribed under the Act and the Rules made thereunder.
Levy of tax on sale of empty bottles at four per cent, under section 4(3) read with item 90 of the Fourth Schedule, is, therefore, valid. The writ petitions are, accordingly, dismissed.
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2009 (10) TMI 869
Issues: Claim for interest on delayed refund of excess input tax paid by petitioner-company.
Analysis: The petitioner sought a writ to quash endorsements refusing to pay interest on delayed refund. The petitioner made purchases from a company and paid input tax at 12.5%, later selling the goods and being liable for 4% tax. The excess input tax paid was refunded by the respondents in 2008, but interest on delayed refund was denied, leading to the writ petitions. The key dispute was whether the respondents were obligated to pay interest at 6% per annum on the delayed refund to the petitioner. The respondents had collected 12.5% input tax from the seller but were only entitled to retain 4% tax and consequent interest on delayed payment, penalty, and refund the excess input tax with interest as per the relevant statutes. The court allowed the writ petitions, quashed the endorsements, and directed the respondents to calculate and pay the interest on refunded input tax promptly, not later than six weeks from the date of the order.
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2009 (10) TMI 868
Levy of tax under section 7A on the purchase turnover of edible oil(i.e., covered under the conditional exemption at the time of purchase) - Held that:- In view of the request made by the learned counsel for the petitioner and as there is no serious objection raised by the learned counsel appearing on behalf of the respondent, the petitioner is permitted to file its objections before the respondent, with regard to the impugned notice, dated July 30, 2007, within a period of four weeks from the date of receipt of a copy of this order and on receipt of the said objections, the respondent is directed to pass appropriate orders thereon, on merits and in accordance with law.
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2009 (10) TMI 867
Incomplete or incorrect information furnished in the return furnished for the period 2005-06 onwards - locking the Tax Identification Number - Held that:- None of the grounds conferring power under rule 51A of the Rules are available nor it could be shown at the time of hearing that the dealer had failed to pay any tax, penalty or interest payable under the Punjab Value Added Tax Act, 2005 or has failed to furnish a return or annual statement by the prescribed date or has filed incomplete or incorrect return, etc.
Therefore, the continuation of locking TIN is absolutely unwarranted and the grounds given in the show-cause notice does not exist on record. Therefore, we are of the view that the continuation of locking of TIN is not germane to the grounds available under rule 51A of the Rules and, therefore, the action of the respondents cannot be sustained. This petition succeeds. The respondents are directed to open the TIN of the petitioner immediately.
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2009 (10) TMI 866
Interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 demanded for assessment years 1992-93, 1993-94, 1994-95, 1995-96 and 1996-97
Held that:- Suppose a dealer was assessed to tax in the first instance and he also makes payment of the tax so assessed. But later on, if the tax assessed is found to be in excess, the refund of the excess amount is to be made within 90 days, failing which the Government is also liable to pay interest to the dealer, by virtue of section 24(4). Though the interest payable by the dealer under section 24(3) is higher than the interest payable by the Government under section 24(4), the choice is with the dealer, either to make full payment and claim refund under section 24(4) or to make part payment and run the risk of being imposed with a penal interest under section 24(3). W.P. dismissed.
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2009 (10) TMI 865
Release of vehicles and goods detained by respondent No. 2 on the intervening night of 3/4 September, 2009 demanded as the petitioners have already furnished the bank guarantees and cash securities as demanded by respondent No. 2, Excise and Taxation Officer (Mobile Wing), Chandigarh and who has passed the release orders also.
Held that:- The present petition lacks merit and deserves to be dismissed. No doubt, the petitioners have furnished the requisite bank guarantee and cash securities under the provisions of the VAT Act. However, in view of registration of an FIR No. 363 dated September 8, 2009 (annexure P/4) against the petitioners, before the release of the goods detained under the provisions of the VAT Act, the release order dated September 8, 2009 (annexure P/3) passed by respondent No. 2 will only facilitate the petitioners to get their vehicles released under the provisions of VAT Act but will not help the petitioners to get their vehicles released for committing alleged offences under sections 420/465/467/468/471 and 120B IPC as that is a separate cause of action and the only remedy available to the petitioners is to get their vehicles released under the provisions of section 451 of the Cr. P.C. Since the vehicles and the goods are case property in the aforesaid FIR, the appropriate remedy for the petitioners would be to move an application before the appropriate court to seek release of the vehicles/goods on superdari and it would not be appropriate for this court to order release of the goods in the present petition filed under articles 226/227 of the Constitution.
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