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2008 (3) TMI 651
Issues involved: Challenge to Tribunal's order enhancing assessment without issuing notice under rule 50(3) of OST Rules.
The High Court heard the counsel for the parties regarding a writ petition challenging the Tribunal's order dated May 4, 2007, which enhanced the assessment without issuing any notice under rule 50(3) of the OST Rules. The Court noted that the Tribunal's order lacked observance of the basic principle of natural justice and the mandatory provision of the rule. Consequently, the Court set aside the Tribunal's order, remanding the matter back to the Tribunal for fresh consideration in accordance with the law. The Tribunal was directed to hear and dispose of the appeal promptly, preferably within three months from the date of the Court's order. The writ petition was disposed of, along with Misc. Case No. 155 of 2007, and the records were returned to the counsel for the Revenue.
This judgment highlights the importance of adhering to the principles of natural justice and the mandatory provisions of rules in enhancing assessments, emphasizing the need for proper notice to be given to the assessee before making any such enhancements.
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2008 (3) TMI 650
Issues:
Recovery of value added tax on labour charges in works contract under Bihar Value Added Tax Act, 2005.
Analysis:
The judgment by the Patna High Court addressed the issue of the recoverability of value added tax in relation to labour charges in works contracts under the Bihar Value Added Tax Act, 2005. The court highlighted that Section 41 of the Act imposes an obligation on the purchaser to recover advance value added tax from the consideration payable for the transfer of property in goods, excluding labour charges. Rule 29 of the Bihar Value Added Tax Rules, 2005 explicitly states that no deduction shall be made on account of labour charges for the execution of works contracts.
The case involved a writ petitioner who had entered into a works contract with a respondent, raising composite bills that did not differentiate between the consideration for the transfer of property in goods and the labour charges for the contract execution. Consequently, the respondent started recovering advance value added tax from payments made for some bills, including labour charges, which was not permissible under the law.
The court directed the petitioner to re-submit bills segregating the consideration for the transfer of property in goods and the labour charges due, in accordance with Rule 29 of the VAT Rules. The respondent was instructed to make payments based on the segregated amounts and deduct advance value added tax only on the consideration for the transfer of property in goods. The petitioner was granted the right to seek adjustment or refund for bills that had already been paid with deducted tax.
In conclusion, the judgment clarified the application of value added tax in works contracts, emphasizing the exclusion of labour charges from tax recovery and outlining the proper billing and payment procedures to comply with the Bihar Value Added Tax Act and Rules.
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2008 (3) TMI 649
Grant of exemption in the matter of payment of tax vide annexure P16 dated September 22, 1995 refused - Held that:- The petitioner having never opted to change over from the Scheme of 1981 to the Scheme of 1986 cannot be denied the benefit for consideration under the Scheme and notification of 1981 on these grounds. That being so, this is a case where the State Level Committee and the District Level Committee have rejected the claim of the petitioner on incorrect consideration.
Accordingly, this petition is allowed and the impugned order dated September 22, 1995 (annexure P16) issued by the State Level Committee is quashed. Matter is remanded back to the State Level Committee to examine the case of the petitioner in accordance with the notification dated October 23, 1981 and after evaluating the claim and eligibility of the petitioner in the light of the provision of the said notification, decide the claim for grant of exemption in accordance with law.
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2008 (3) TMI 648
Right to appeal - Held that:- From a plain reading of section 45(1), (2) of the Act, it is evident that right of appeal is available to a dealer only. An order passed either under section 45(1) or (2) is revisable under section 46(1) of the Act, which remedy only the dealer can invoke. The Revenue has not been given any right to file appeal either under section 45(1) or 45(2) of the Act or to invoke the revisional power under section 46(1) of the Act. In the face of it, the Legislature thought it fit to provide remedy to the Revenue and made it clear that it is available only in a case when it is prejudicial to the interest of the Revenue.
In the absence of any express power given to the Revenue to file an appeal, against the order of assessment, which is prejudicial to the interest of Revenue, the Legislature has conferred suo motu power to the Commissioner to correct and pass such order as it deems fit. This in no way can be said to be discriminatory or impeding the right of a dealer guaranteed under article 14 or 19(1)(g) of the Constitution of India. It in no way affects the right under article 300A of the Constitution of India also. Thus do not find any merit in the application and it is dismissed accordingly
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2008 (3) TMI 646
Order of assessment - Revision rejected - Held that:- Finding the assessment to be made without actual sales taking place within the State of Madhya Pradesh, this petition is allowed. Orders impugned passed by the assessing authority levying commercial tax on the aforesaid twelve transactions as contained in annexure P4 dated April 29, 2005 and affirmed by the revisional authority vide annexure P7 dated December 5, 2005, and the consequential action taken for recovery of the tax so assessed are quashed.
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2008 (3) TMI 645
Cancelling assessment pertaining to capital gains on sale of land and building - Held that:- Tribunal and the first appellate authority went wrong in just relying on the statement in cross-examination and in accepting the case of the respondent that the hospital building and large extent of over 1 acre of land was sold for the price declared in the document. We therefore reverse the order of the Tribunal and that of the first appellate authority on this issue and hold that capital gains has to be computed on the sale price at ₹ 71 lakhs. However, since the other issues, namely, base-year market value of the land for determining long-term capital gains and the contest against quantum assessment, were not gone into by the first appellate authority, we set aside the order of the Tribunal and that of the first appellate authority and remand the matter to Commissioner of Income-tax (Appeals) for rehearing and for decision afresh on other issues in the appeal. We make it clear that the assessee will be entitled to apply for waiver of interest under sections 234B and 234C, etc. Appeal allowed.
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2008 (3) TMI 644
Interest on refund - Held that:- An assessee is entitled to interest on refund at the prescribed rate, if a refund is not made within 90 days from the refund order. Section 44B is not at all attracted to the facts of the present case. The petitioner is therefore, entitled for interest on delayed refund for a period from July 1, 1997 till the date of actual payment, i.e., February 6, 2004.
During this period, the prescribed rate of interest was nine per cent per annum and hence, we direct the respondents to pay simple interest at the rate of nine per cent per annum on amount of ₹ 79,00,000 for the period from July 1, 1997 to February 6, 2004.
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2008 (3) TMI 643
Whether, on the facts and in the circumstances of the case, it is within the jurisdiction of the Tribunal to change the facts regarding the date of passing assessment order from April 10, 1997 to March 31, 1997?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in granting interest under section 43A of the BST Act, 1959 even when the said section was incorporated with effect from April 1, 1995 and was not operating during the assessment period 1993-94?
Held that:- As far as the first question is concerned there are two dates just below the body of the assessment order. A date March 31, 1997 is typed. The signature of the assessing officer does not contain any date thereunder. Yet, another date is shown as April 10, 1997 on the left hand side below the judgment but there is no signature therein above. In our view, only a disputed question of fact and no question of law arises in this case. The second date April 10, 1997 as shown below the judgment is not below the signature of the assessing officer. There is no date below the signature of the assessing officer. On facts, the view taken by the Tribunal is a possible view and therefore, in our view, the first substantial question of law as framed does not arise.
Also an attempt appears to have been made by the assessing officer to deprive the assessee of the benefit of a refund. This is a very serious matter and therefore, we direct the Commissioner of Sales Tax, Maharashtra State to conduct an enquiry into the matter and take steps to fix the responsibility and initiate departmental proceeding against the erring officer.
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2008 (3) TMI 642
Auction sale on "as-is-where-is" basis - Condemned articles - Whether cannot be treated as scrap? - Held that:- In the present cases, B & C plant had become unusable and the factory had been closed and the factory licence had been surrendered and it had been sold only with the condition that the purchaser will dismantle and sell it. The fact that it is described as B & C plant and machinery will in no way, make it either as a plant in running condition or the plant should be shifted to any other place for use. The intention of the parties was to sell it only as a scrap and even in the gate pass, it is described only as a scrap. Further, the authorities themselves have initially directed that it was taxable at four per cent and accordingly, the parties have also paid that amount. Thereafter, without there being any real basis to describe it as first sale, to refuse to accept it as scrap by the impugned order is clearly impermissible.
Writ petitions will stand allowed as prayed for and the respondents are hereby directed to restore the tax at four per cent and refund the balance to the appropriate parties.
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2008 (3) TMI 641
Constitutional validity of section 61(1) and the Explanation thereto, of the Maharashtra Value Added Tax Act, 2002 challenged
Held that:- The challenge based on article 14 is to be rejected as Chartered accountants by reason of their training have special aptitude in the matter of audit. An income-tax practitioner does not have the same expertise as the chartered accountants in the matter of accounts. The argument therefore, that the effect of such a provision will be to exclude all other categories of authorised representatives except the chartered accountants from carrying on their profession is liable to be rejected, as they constitute two distinct class having a nexus with the object of the provisions, which is prevention of evasion of tax dues.
The contention that such a provision brings in an oppressive restriction is also liable to be rejected as auditing accounts is a specialised job. Legal practitioners and chartered accountants are equal for the purpose of representation of assessees before assessing authority but they are not equals for the purpose of compulsory audit. In the light of this object, chartered accountants and others cannot be said to be similarly situate. The qualifications and eligibility to be enrolled as income-tax practitioners are entirely different from that of chartered accountants from the point of view Of auditing.
Merely because, apart from dealers whose turnover is more than 40 lakhs, dealers dealing in liquor trade have also to get their accounts audited does not make the provision arbitrary. Such dealers are a class by themselves as they are carrying on a trade which is res extra commercium.
Section 29 of the Advocates Act till date has not been brought into force. Apart from that one fails to understand the stand of the Bar Council after the decision of the Supreme Court in T.D. Venkata Rao [1998 (12) TMI 6 - SUPREME Court] wherein the Supreme Court has accepted the fact that chartered accountants by the reason of their training have special aptitude in the matter of audit. The act of maintaining accounts is neither pleading, practice nor acting. For the reasons already discussed, we find that the challenge to the constitutional validity of the legislation under articles 14 and 19 at the instance of the Bar Council will also have to be rejected.
Under section 82, there are a class of persons from whom a dealer can obtain services for being represented before the authorities under the Act. Under section 61, he is bound to select one of the class of accountants also. This is for a category of dealers whose turnover is more than 40 lakhs. The amount of fee which has to be paid is the amount to be decided between the dealer and that person, whom he selects from amongst the accountants that are available. This cannot be said to amount to compulsory levy amounting to tax. That being the case, the challenge under article 265 must also fail.
Similarly, the question of article 301 being attracted, does not arise. The challenge on that count also has to be rejected as the right claimed by the petitioner or their members or by the dealer is that advocate and sales tax practitioner cannot carry out audit in terms of section 61 in the State of Maharashtra. The enactment is pursuant to the power of the State legislation to make law within its competence. This does not attract article 301. Appeal dismissed.
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2008 (3) TMI 640
Violation of principle of natural justice - Whether the transporter is liable to pay sales tax if he is not a dealer? If so, to what extent is his liability? - What is the effect of failure on the part of the transporter to account for the goods he is carrying and whether the STO is justified in demanding ₹ 90,152 from the petitioner to avoid seizure of goods and the revisional authority is also justified to uphold such order of the STO?
Held that:- As per the provisions of sub-section (2) of section 3 of the Entry Tax Act, 1999, any person who brings or causes to be brought into a local area any Scheduled goods on his account or on account of the principal or customer he is liable to pay entry tax. The transporter having caused the entry of goods into the local area of Cuttack is liable to pay entry tax.
After giving our thoughtful consideration to the submissions made by the counsel of the respective parties, we are of the view that the STO has not committed any illegality in demanding ₹ 90,152 which he calculated applying the basis indicated in the second proviso to sub-section (5) of section 16D and entry tax leviable on entry of such goods into local area of Cuttack without seizing and confiscating the goods loaded in the vehicle.
The revisional authority has rightly upheld such order of the STO. Appeal dismissed.
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2008 (3) TMI 639
Form 18 declaration - Held that:- The State has rightly agitated the matter before the Tribunal. The Tribunal while disposing of the appeal and further remanding the matter to the assessing authority had made observations about the form 18 declaration which were unnecessary for the disposal of the appeal. We say so, for the reason, that, when the assessing authority while reconsidering the claim of the assessee will be bound by the observations made by the Tribunal and he will not be in a position to apply his mind independently while reconsidering the matter.
The revision petition is disposed of.The assessing authority will take form 18 declaration filed by the petitioner on record and pass fresh orders in accordance with law without being influenced by the observations made by the Tribunal insofar as the claim of the assessee for concessional rate of tax is concerned.
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2008 (3) TMI 638
Whether the non-exhaustion of statutory remedy can be a bar in this case for this court to exercise its jurisdiction under article 226 of the Constitution?
Whether a dealer is liable to pay tax on the ground that he admitted to pay tax on a certain transaction even if the said transaction is not taxable within the provisions of the OST Act?
Whether the lease rental received by the petitioner from IMFA is exigible to tax under the provisions of the OST Act?
Held that:- It is not possible for a statutory Tribunal to read down the provision of an Act in order to save it from being struck down. A statutory Tribunal is to give a literal interpretation of the statute. That is why in this case the writ petition is maintainable even without the exhaustion of the statutory remedy.
Coming to question No. (ii), this court holds that there is no estoppel against statute. If a person is not liable, within the four corners of statute, to pay tax on any transaction, he cannot be assessed to tax merely because he previously admitted his liability on a wrong notion. Liability to pay tax has always to be imposed by law: it cannot be imposed on admission.
Deemed sales including leases were to be treated exactly on the same footing as ordinary sales and were subjected to the same restrictions contained in article 286 of the Constitution of India. Neither ordinary sale nor deemed sale could be subjected to tax by a particular State if such sale or deemed sale was either in the course of inter-State trade or was effected outside the State. Therefore, the Explanation to section 2(g)(iv)(a)(i) of the Orissa Sales Tax Act which stipulated that the sale or purchase of goods shall be deemed to take place inside the State if the goods are within the State at the relevant time would have to be read down to the effect that it would not be applicable to a deemed sale which was an outside-State sale or an inter-State sale or a sale in course of import of the goods into or export of the goods outside India.
For the reasons aforesaid, the order of assessment dated March 31, 2004 for the assessment year 2000-2001 challenged in W.P. (C) No. 9062 of 2004, order of assessment dated February 25, 2005 for the assessment year 2001-2002 challenged in W.P. (C) No. 4716 of 2005 and orders of assessment dated March 20, 2006 for the assessment years 2002-2003 and 2003-2004 challenged in W.P. (C) Nos. 10544 and 10550 of 2006 are all quashed.
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2008 (3) TMI 637
Continuance of the waiver scheme of the deed of the agreement, dated July 12, 2006 entered into between the Government of Tamil Nadu and the petitioner and for further orders
Held that:- If the petitioner had already exercised their option to continue under the waiver scheme, but simultaneously resorted to collection of tax contrary to rule 16(4) of the TNVAT Rules, 2007, and the terms of the agreement, etc., then, this court cannot approve such action of the dealer, for the reason that court cannot read anything into a statutory provision, substitute or rewrite the provision, which would snap the VAT chain from January 1, 2007 onwards.
Neither the terms of the agreement nor the statutory provisions under section 33(1) of the TNVAT Act read with rule 16(4) of the VAT Rules, contemplate operation of waiver/deferral schemes in different spells, while implementing the provisions of the VAT Act and the Rules framed thereunder and such a situation would certainly create anomaly. As stated supra, liability to pay is statutory, failure to remit in time entails penal action under the taxing statutes. Retention of Government money collected towards tax attracts penal action and therefore, there is no need to issue any show-cause notice and provide an opportunity of hearing before taking recourse to realise the dues. Having availed the waiver scheme, the petitioner ought not to have collected tax from the dealers and therefore, they are liable to remit the same to the Government.
In view of the above,do not find that there is any abuse of the statutory provisions by the respondents to extract money from the assessee. In the result, the writ petition is dismissed.
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2008 (3) TMI 636
Mosquito repellent - whether be taxed at 12.5 per cent? - learned single judge declining to interfere with the combined reassessment and penalty orders
Held that:- Mosquito repellent is an "insecticide". Further, it is not in dispute that the mosquito repellents were manufactured by the said company, viz., Godrej Sara Lee Ltd., of which the assessee has been an agent, under the licence obtained under the provisions of the Insecticides Act, 1968 and "insecticide" is listed under List 23 of the Third Schedule to the KVAT Act. Therefore, we are of the considered view that the mosquito repellent squarely falls within the ambit of entry 23 of the Third Schedule annexed to the KVAT Act and as such, the learned assessing authority committed serious error in law in holding that the turnover in respect of the sales of mosquito repellents has to be taxed at 12.5 per cent on the ground that the mosquito repellents fall within the residuary entry of clause (b) of sub-section (1) of section 4 of the KVAT Act. Therefore, the orders impugned in the said writ petition at annexures A and A1 to A6 deserve to be quashed so far they relate to levy of tax and penalty on the sales of mosquito repellents at 12.5 per cent.
In the result, the present writ appeal is allowed. The impugned order of the learned single judge dated April 2, 2007 passed in W.P. No. 5507 of 2007 is hereby set aside.
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2008 (3) TMI 635
Pre-deposit 10 per cent of the additional demand as pre-condition for entertaining the appeal filed by it against the order of assessment - Held that:- The authorities below, while taking into consideration the prima facie case, balance of convenience and irreparable loss, have ordered that the petitioner will pay only 10 per cent of the additional demand and furnish surety bond for the balance amount.
The requirement to pay 10 per cent of the additional demand will not cause hardship, which can be termed as undue financial hardship, as 10 per cent of the additional demand is very nominal. Appeal dismissed.
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2008 (3) TMI 634
Assessment on calculated basis - Held that:- Admittedly, the petitioner-corporation are the manufacturers of common salt and they purchase the common salt within the State and sell within the State as well as outside the State of Tamil Nadu. Further it is seen that the assessments made by the second respondent have been calculated based on the relevant provisions under the Rules contemplated. However, there were objections by the petitioner, but those objections have to be considered only after affording an opportunity of personal hearing to the petitioner and therefore, non-affording of opportunity of personal hearing to the petitioner has vitiated the proceedings of the second respondent and on that sole ground, the impugned proceedings cannot be sustained and therefore, they are liable to be set aside. However, after providing an opportunity of personal hearing to the petitioner, the matter has to be decided afresh taking note of the assessments made as well as the objections submitted by the petitioner.
In view of the above, the writ petitions are allowed and the impugned orders passed by the second respondent are set aside and the matter is remanded back to the respondents.
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2008 (3) TMI 633
Whether the authorities below have correctly assessed the petitioner and justifiably imposed the penalty? - Held that:- The assessing officer as well as the higher authorities have proceeded on wrong premises with regard to imposition of penalty. It is wellsettled in law that the penalty necessarily follows from the determination of tax and nature of transaction. Be it placed on record that it is the sacrosanct duty of the Tribunal and authorities to examine the relevant facts and appreciate the legal provisions while deciding such question. In the case at hand, the assessee-petitioner had been contending that the transactions are branch transfer and thereafter the goods were utilised in the works contract. The provisions of sections 3 and 6A of the CST Act, 1956 cannot co-exist simultaneously since the provisions are contra-indicative. The onus is on the department to show that the transaction is an inter-State sale while the onus is on the dealer to show that the transaction is a branch transfer. Similarly for showing that the goods have been used in a works contract the necessary agreement either expressed or implied has to be looked into and scanned. While imposing penalty the show-cause notice was not given. A plea has been taken in the return there has been waiver.
The concept of penalty has to be strictly construed and, therefore, the facet of imposition of penalty should not have been lightly dealt with by the authorities. Appeal allowed.
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2008 (3) TMI 632
Whether maize and flattened maize (maize poha) are one and the same commodity so as to be covered by the term "maize" under the heading "cereal" in entry No. 9 of the Second Schedule to the Kerala General Sales Tax Act, 1963 or a different commodity liable to be assessed as an unclassified item taxable under the residuary entry?
Held that:- Having regard to the employment of the words "that is to say", we cannot expand the scope of the entries. In doing so, we would be unjustifiably interfering with the power of the State to levy tax on a commodity which is commercially different from cereal in question, namely, maize. Undoubtedly, maize poha is the product of manufacture. What was not edible is transformed into the edible form. As found by the Tribunal, it differs in size, shape and structure. It has a higher utility. We also find merit in the finding of the Tribunal that the raw material is consumed.
We would accordingly hold that maize and maize poha are commercially different commodities, and maize poha is not covered by the term maize under "cereal" in entry 9 of the Second Schedule to the KGST Act. Accordingly, we reject these revision petitions and confirm the orders passed by the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode.
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2008 (3) TMI 631
Scheme of rehabilitation - Recovery of tax arrears seeked to be stayed - Held that:- Having regard to the totality of the circumstances and considering the principles laid down by various judgments, we are of the considered opinion, despite the laudable preventive, ameliorative and remedial measures to be taken by the Board, for rehabilitation, the safeguard guaranteed under section 22(1) of the Act against action for execution, distress, or like against the properties of the industrial unit, etc., have been grossly misused by the petitioner.
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