TMI Blog2015 (6) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... ter-State sales cannot be availed of by the petitioner to claim input tax credit. No document like a project report has been placed on record to show that when the petitioner set up the plant, his intention was to sell the goods within the State of Tripura. Some material like a project report or a feasibility report should have been produced before this Court to show that when the plant was set up, it was the intention of the dealer to sell the goods within the State of Tripura. There may be a case where the dealer sets up a plant to produce some goods which can be used by some other factory within the State. If this is reflected in the feasibility report and evidence is led to show that for reasons beyond the control of the dealer, the other plant where the goods of the dealer were to be consumed has shut down, then the dealer can be heard to argue that he was forced to sell the goods outside the State of Tripura. There is no such material placed on record in this case. Court cannot get inside the mind of the petitioner. The intention of the party has to be determined from the material placed on record. In the present case, almost the entire production for the five assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers to a person appointed to assist him under section 18, and not to any other person. In the present case, the Superintendent of Taxes has been appointed under section 18(1) and, therefore, also the Commissioner had the power to delegate his authority to him. Five notices should have been issued for the five assessment years giving at least 15 days time to the assessee to respond. The manner in which the notices have been issued is not proper. The first notice was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of returns for the period 2008-09 to 2013-14 (upto 31-12-2013) is necessary. What are the reasons have not been spelt out. The Superintendent wanted to reopen the entire proceedings from the year 2008 till 2014. This notice is dated 01-02-2014 and it requires the petitioner to appear before the Superintendent of Taxes on 13-02-2014. To say the least, the manner in which this notice has been issued is highly improper. No reasons have been spelt out as to why detailed scrutiny is required and nothing is stated in the notice with regard to the nature of the inquiry. Basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical. The only difference is that the petitions relate to different assessment years, i.e. 2008-2009 to 2012-2013. 2. The petitioner-company which is duly incorporated under the Companies Act, 1956 has set up a plant in the State of Tripura where it is manufacturing rubber thread. The petitioner purchases raw rubber/latex from the growers and pays purchase tax on the same. The petitioner-firm processes/manufactures rubber thread out of raw rubber. A large amount of this rubber thread is being sold outside the State either by transfer of stock on F form or by means of inter-State sale on C form. Value added tax @ 12.5% per annum was leviable on the sale of rubber thread sold in Tripura upto 03-05- 2011 and thereafter @ 13.5% per annum w.e.f. 04-05-2011. 3. Notice was issued to the petitioner under section 31(1) of the TVAT Act, 2004 to produce the books of account and other relevant documents. The Assessing Officer found that a very small proportion of the produce was being sold in Tripura and a major portion of the manufactured product was sold outside the State of Tripura. The case of the revenue is that the petitioner purchased raw rubber from the dealers and paid tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62,75,856.61 Add: Penalty at 150% as discussed 1,08,20,442.43 Net due 2,43,09,927.33 Rounded off 2,43,09,927.00 2009-10 Particulars Inter-State sale C Form produced TOR 51,13,47,329.87 TOD 51,13,47,329.87 Tax collected 1,02,39,546.55 Tax payable 1,02,39,546.55 Less: Tax paid Nil Balance 1,02,39,546.55 Add: Interest for 46 months at 18% PA 70,65,287.11 Add: Penalty at 150% as discussed 1,53,59,319.82 Net due 3,26,64,153.48 Rounded off 3,26,64,153.00 2010-11 Particulars Inter-State sales C form produced Inter-State sales C form not produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,30,46,733.03 8,19,449.39 Tax payable 1,30,46,733.03 55,31,283.40 Total Tax payable 1,85,78,016.43 Less :Tax paid Nil Balance 1,85,78,016.43 Add: Interest for 10 months at 18% PA 27,86,702.46 Add: Penalty at 150% as discussed 2,78,67,024.64 Net due 4,92,31,743.53 Rounded off 4,92,31,744.00 The main issue is whether the petitioner is entitled to claim benefit of input tax credit and, therefore, set off the CST collected by it against the purchase tax payable by it. 6. We have heard Sri B. Debey, learned counsel appearing for the petitioner-company and Dr. A.K. Saraf, learned Sr. Counsel appearing for the revenue-State. 7. The main grounds raised by the petitioner are that since the manufactured rubber was sold outside the State of Tripura and was meant for sale outside the State of Tripura, no VAT under the TVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the TVAT Act do not in any manner provide that input tax credit is available in respect of inter-State sales. Dr. Saraf contends that a taxing statute has to be interpreted in the context of the language of the Act and if the Act does not permit grant of benefit of input tax credit on inter-State sales, then merely because of the concept of VAT the same cannot be granted. The legal provisions: 9. To appreciate the various arguments raised by the petitioner, it would be pertinent to refer to certain provisions of the Tripura Value Added Tax Act and Rules. Relevant provisions of the Tripura Value Added Tax(TVAT) Act:- 10. Sections 2(13) and 2(28) read as follows:- 2(13). Input-Tax means the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods in Tripura in the course of business for resale or for the manufacture of taxable goods or for use as containers or packing material or for the execution of works contract; 2(28). Tax means the tax payable under this Act. 11. Section 10 deals with Input tax credit and the relevant portion of section 10 reads as follows:- 10. Input tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter giving sufficient reasons in writing, reject the method adopted by the registered dealer in a year to determine the extent to which goods are used, consumed or supplied or intended to be used, consumed or supplied, in the course of making taxable sales and calculate the amount of input tax credit after giving the registered dealer concerned an opportunity of being heard. 12. Sections 18(1), 31(5) and 85 read as follows:- 18(1). The State Government may, for carrying out the purposes of this Act, appoint a Commissioner of Taxes, and such other persons to assist him as it thinks fit. xxx xxx xxx 31(5). If the Commissioner is satisfied that the dealer, in order to evade or avoid payment of tax (a) has failed to furnish without reasonable cause, returns in respect of any period by the prescribed date; or (b) has furnished incomplete and incorrect returns for any period; or (c) has availed himself of tax credit to which he is not entitled to ;or (d) has followed such method of accounting which does not enable the Commissioner to assess the tax due from him, he shall, after giving the dealer reasonable opportunity of being heard, direct him to pay, in add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section. 15. Having made reference to the various legal provisions, we now propose to deal with the contentions raised before us. At the outset, it may be stated that Dr. Saraf, learned Senior Counsel appearing for the State, fairly admitted that the State has no legislative competence to tax inter-State sales. It is also not disputed before us by the parties that the tax now sought to be recovered is the amount collected on account of inter-State sales. Interpretation of Taxing Statutes: 16. We have quoted all the legal provisions hereinabove and since these provisions are to be interpreted, it would be relevant to refer to the law relating to interpretation of taxing statutes. 17. With regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Monmouthshire Canal and Railway Companies, cases which have decided that Taxing Acts are to be construed with strictness, and that no payment is to be exacted from the subject which is not clearly and unequivocally required by Act of Parliament to be made, probably meant little more than this, that, inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the taxpayer and the taxing authority, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act and therefore, the taxpayer had a right to stand upon a literal construction of the words used, whatever might be the consequences. 29. The true implication of the principle that a taxing statute must be construed strictly is often misunderstood and the principle is unjustifiably extended beyond the legitimate field of its operation. Indeed, the more well-expressed the principle as in the Cape Brandy case (supra), greater the reluctance to see its limitations. In that famous passage marked by a happy turn of phrase, Rowlatt, J. said, there is no equity about a tax. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. IRC:(1921) 1 KB 64 and Federation of A.P. Chambers of Commerce Industry Ors. v. State of A.P. Ors.). In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: CST v. Modi Sugar Mills Ltd.: AIR 1961 SC 1047). We now propose to interpret the various provisions in line with the aforesaid judgments of the Apex Court. Whether the petitioner is entitled to the benefit of input tax credit by taking benefit of the CST payable in respect of inter-State sales: 20. Input tax has been defined to mean the tax paid or payable under the Act. Obviously, the word Act has to mean the Tripura Value Added Tax Act, 2004 as per the definition of the word Act contained in section 2(1) of the Act. Therefore, input tax is relatable to the tax paid or payable only under the TVAT Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a proviso to subsection 10(1). We have to read section 10(6) along with section 10(1) and when both of these parts of the section are read harmoniously, then even if a person is entitled to benefit of input tax credit under section 10(1) but is excluded under section 10(6), he would not be entitled to get the benefit of input tax credit. Clause (ix) of section 10(6) provides that input tax credit will not be available in respect of transfer of stock, other than by way of sale outside the State of Tripura. This by no stretch of imagination can be interpreted to mean that under Clause (ix) of sub-section (6), such benefit has been given in respect of inter-State sales. Such an interpretation would defeat the very purpose of the legislation. When the language of the legislation is clear, we cannot do violence to the language and misinterpret it in such a manner that the purport and intention of the legislature is defeated by such interpretation to the Act. 24. On reading all the provisions of the Act, we have no doubt in our mind that benefit of input tax credit is only available in respect of taxes collected and payable under the TVAT Act. The benefit of input tax credit is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the market, the goods are sold outside the State of Tripura that cannot be read to mean that the intention of the dealer was not to sell goods within the State of Tripura. On the other hand, Dr. Saraf urges that intention has to be gathered from the final action and not by the mere ipse dixit of the assessee. 28. We are not at all impressed with the argument raised on behalf of the petitioner. No document like a project report has been placed on record to show that when the petitioner set up the plant, his intention was to sell the goods within the State of Tripura. Some material like a project report or a feasibility report should have been produced before this Court to show that when the plant was set up, it was the intention of the dealer to sell the goods within the State of Tripura. There may be a case where the dealer sets up a plant to produce some goods which can be used by some other factory within the State. If this is reflected in the feasibility report and evidence is led to show that for reasons beyond the control of the dealer, the other plant where the goods of the dealer were to be consumed has shut down, then the dealer can be heard to argue that he was forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the course of inter-State trade or commerce shall be levied by the Government of India but shall be collected by the Government of the State from which the movement of the goods commenced. It is not disputed that the movement of the rubber thread commenced from Tripura. Therefore, the authorities in the State of Tripura are entitled to collect the tax. Sub-section (2) makes it amply clear that the authorities empowered to assess, reassess, collect and enforce payment of any tax under the sales tax law of the appropriate State shall on behalf of the Government of India asses, reassess, collect and enforce payment of tax including interest and penalty payable by a dealer under the Central Act. This leaves no manner of doubt that the Commissioner of Taxes, Tripura had the authority to pass the impugned orders and, therefore, this contention is also without any merit and hence, rejected. Non-mention of provisions of CST: 32. It has further been urged by Sri Dubey that in the notices issued to the assessee, there is no mention of the Central Sales Tax Act much less section 9(2) of the Act. He submits that this is not a case of mere non-mentioning of section but from the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tends that only the Commissioner can exercise powers under section 31(5) of the TVAT Act. According to him, in the present case the powers have been exercised by the Superintendent of Taxes and, therefore, also the order is without jurisdiction. On the other hand, Dr. Saraf has drawn our attention to the notification dated 01-04-2006, whereby, in exercise of the powers conferred under section 85 of the TVAT Act, the Commissioner of Taxes has delegated the powers of the Commissioner to the Superintendent of Taxes under various sections and one of such section is section 31 of the Act. The said notification reads as follows:- No.F.1-1(2)-TAX/92/5125-186 GOVERNMENT OF TRIPURA OFFICE OF THE COMMISSIONER OF TAXES KAR BHAWAN : AGARTALA. Dated, Agartala, the 01st April, 2006. NOTIFICATION In exercise of the powers conferred by section 85 of the Tripura Value Added Tax Act, 2004 (Tripura Act No.1 of 2005) the powers of the Commissioner of Taxes under section 10, 19, 20, 21, 22, 24, 25, 27, 30, 31, 32, 34, 36, 37, 38, 39, 40, 43, 44, 46, 48(4), 48(5), 49, 52, 53(3), 59, 60, 66(2), 75, 77 and 80 of the said Act are hereby delegated to the Superintendent of Taxes w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making the taxable goods. Under sub-section (7) the Commissioner has the power to determine whether the method is right or wrong. In the present case, the impugned order has not been passed under subsection (7) but has been passed in exercise of the powers vested in the Commissioner under section 9(2) of the Central Sales Tax Act. It would also be pertinent to mention that sub-section (7) would come into play only where the benefit of input tax credit is available. If no input tax credit is available under law, then the question of determining the correctness of the method does not arise. 37. It was next urged by Sri Dubey that under section 31 the audit assessment does not cover method and he submits that no assessment can be reopened unless the conditions of sub-section (7) of section 10 are fulfilled. Again we find no merit in this submission. The basic issue is whether the assessee is entitled to claim benefit of input tax credit in respect of the tax collected/paid or payable for inter-State sales. If such benefit is available, then the petitioner is entitled to the same. However, if such benefit is not at all available and the petitioner has collected the Central Sales T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of returns for the period 2008-09 to 2013-14 (upto 31-12-2013) is necessary. What are the reasons have not been spelt out. The Superintendent wanted to reopen the entire proceedings from the year 2008 till 2014. This notice is dated 01-02-2014 and it requires the petitioner to appear before the Superintendent of Taxes on 13-02-2014. To say the least, the manner in which this notice has been issued is highly improper. No reasons have been spelt out as to why detailed scrutiny is required and nothing is stated in the notice with regard to the nature of the inquiry. 41. The second notice is dated 12-02-2014 and it is couched in identical language but the date of appearance has been fixed as 21-02-2014. It appears that this notice was issued because no hearing was to be held on 13-02-2014. Thereafter, third notices were issued on 22-02-2014 wherein for the first time some reasons are given and there is mention of penalty. This notice reads as follows:- No. 16180012046/586 GOVERNMENT OF TRIPURA OFFICE OF THE SUPERINTENDENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the years 2011-12 and 2012-13, since there is some dispute with regard to the C forms and we are of the opinion that no proper opportunity was given to the petitioner, the assessment orders are set aside and the proceedings shall now commence from the stage of filing of reply by the petitioner. Penalty: 43. It is lastly contended by Mr. Dubey that the maximum penalty of 150% has been imposed without giving any reasons as to why penalty should be imposed. 44. We have perused the orders in question and find that no reason has been given by the assessing authority as to why maximum penalty of 150% should be imposed. 45. We are clearly of the view that as far as the present cases are concerned, though the petitioner may be wrong in claiming the benefit of input tax credit, but it cannot be said that the action of the petitioner was so illegal or devious in nature that the maximum penalty should be imposed upon him. The petitioner while claiming input tax credit had not hidden any facts. The assessing authority with respect to the years 2008-09, 2009-10 and 2010-11 has found that all the C forms have been produced and there is no difference between the tax collected an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unjust to impose the maximum penalty of 150%. This is a fit case where the minimum penalty of 10% alone should have been imposed. Directions: 48. In view of the above discussion, we dispose of the writ petitions by upholding the order of assessment of tax and interest for the assessment years 2008-09, 2009-10, and 2010-11. 49. As far as the assessment years 2011-12 and 2012-13 are concerned, according to the Superintendent of Taxes, certain C forms were not produced. In view of the fact that the notices issued by the respondent to the petitioner did not give an adequate opportunity to the petitioner to produce all the documents, we set aside the assessment orders and remit the matters for the years 2011-12 and 2012-13 to the Assessing Officer who shall afford reasonable opportunity to the petitioner to produce all documents and shall take into consideration any other C forms which may be produced. Thereafter, the tax payable as well as interest shall be calculated. 50. We further hold that in view of the peculiar facts and circumstances of the case, there was no intention on behalf of the assessee to evade or avoid taxes and, therefore, levy of penalty @150% is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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