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2015 (12) TMI 1386 - MADRAS HIGH COURT

2015 (12) TMI 1386 - MADRAS HIGH COURT - TMI - Rejection of applications for settlement under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2011 - Failure to produce the Books of Accounts and other connected records, despite service of summons on them - Held that:- In cases of settlement of disputes, the quantum of demand and the quantum of admitted amount may vary. Therefore, the parties may strike a deal for resolving the dispute and it is this deal that becomes known as settlement. Bu .....

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tment. Therefore, as per the agreement and the interest free deferral scheme, they were liable to pay interest from the date of filing of monthly returns. The emphasis on bonafide conduct of an assessee made by the Division Bench in EID Parry is completely absent in this case. This case is governed not merely by the statutory provisions relating to payment of interest, but also by the agreement executed by the appellant with reference to the interest free deferral scheme. A person who had collec .....

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Mr K Chellapandian, Addl.Advocate General, assisted by Mr R Karthikeyan, Addl Govt Pleader JUDGMENT V. Ramasubramanian, J. These writ appeals are by the assessee under the Tamil Nadu General Sales Tax Act, 1959 (in short "TNGST Act") and the Central Sales Tax Act, 1956 (in short "CST Act"), challenging the dismissal of their writ petitions questioning the rejection of their applications for settlement under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2011, (in shor .....

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l Scheme" for a period of nine years, upto a ceiling of ₹ 420.62 lakhs, granted on the basis of an Eligibility Certificate issued by SIPCOT Limited. The appellant entered into an agreement with the Assistant Commissioner (Commercial Taxes), as per which the sales tax payable during the period from 01.07.1999 upto 30.06.2008 would stand deferred. The repayment was to commence only from 01.07.2008 and run upto 30.06.2017. 5. Though the period for which the appellant was entitled to defe .....

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the agreement and demanding the payment of the entire tax. 7. Challenging the cancellation, the appellant filed a writ petition in W.P.No.11095 of 2005 on the file of this Court. But, the appellant could not get any tangible relief in the said writ petition. 8. While things stood thus, the appellant continued to file monthly returns in Form-A1 under the TNGST Act and in Form-I under the CST Act, reporting the total and taxable turnovers for the Assessment Years 1999-2000 to 2006-2007. However, t .....

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10.2010, 20.10.2010 and 11.11.2011 under the CST Act, relating, respectively, to Assessment Years 1999-2000, 2000-2001, 2003-2004, 2004-2005, 2005-2006 and 2006-2007. 11. Likewise, the Assessing Officer passed separate orders dated 20.10.2010, 20.10.2010, 11.11.2010 and 11.11.2010 under the TNGST Act, relating to the Assessment Years 2003-2004, 2004-2005, 2005-2006 and 2006-2007. 12. As against the six assessment orders passed under the CST Act and the four assessment orders passed under the TNG .....

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r Section 16-D in relation to the Assessments under the CST Act and remanded the matter back to the Assessing Officer to enable the assessee to file objections and also to produce declaration forms. 14. Likewise, by independent orders, all passed on 04.11.2011, the applications in relation to the assessments under the TNGST Act for the assessment years 2003-2004 and 2004-2005 were allowed and the matter remanded back to the Assessing Officer. But, applications relating to the assessment years 20 .....

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rs of remand passed by the Special Committee, the appellant chose to file applications in Form-I under Section 5(1) of T.N.Act 29/2011. Along with the applications, the appellant remitted 40% of the admitted and disputed tax together with interest at 7.5%, in terms of Section 7(a) of T.N.Act 29/2011. 17. Pointing out that the appellant ought to have paid 100% of the tax as admitted in their returns, for a consideration of their applications under the Samadhan Scheme, the Joint Commissioner, Comm .....

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nder T.N.Act 29/2011, in relation to the CST Act, the appellant filed six writ petitions in W.P.(MD)Nos.4189 to 4194 of 2015. Challenging the four orders relating to the TNGST Act, the appellant filed four writ petitions in W.P.(MD)nos.4156 to 4159 of 2015. By a common order, dated 24.03.2015, all the 10 writ petitions were dismissed by a learned Judge of this Court. Therefore, the appellant has come up with these 10 writ appeals. 19. Before we look into the grievance of the appellant, it is nec .....

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application for settlement of arrears of tax, penalty or interest, if they relate to the Assessment Years upto 2006-2007, could be made, provided the assessment has been made prior to 01.08.2011 and also subject to the further condition that an appeal or revision is not pending before any court on the date of filing the application. 20. Section 5 speaks about the method of filing an application for settlement. Section 6 indicates the method of determination of amount payable by an applicant. In .....

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yable by the applicant and to be waived shall be determined as follows:- (a) Where it relates to arrears of tax which was assessed on the best of judgment due to non-production of accounts with corresponding arrears of penalty and interest, the applicant shall pay forty per cent of arrears of tax pending collection on the date of application along with interest calculated at seven and a half per cent per annum thereon and on such payment of tax, the balance of tax and interest and the entire pen .....

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est and the entire penalty shall be waived. (c) Where it relates to arrears of tax, which was admitted as tax due as per returns filed for the year with corresponding arrears of penalty and interest the applicant shall pay the entire arrears of tax pending collection along with interest at seven and a half per cent per annum and on such payment, the balance of interest and the entire penalty shall be waived. (d) Where it relates to arrears of penalty or interest or both and where there is no cor .....

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ng with the same. 23. As we have stated earlier, Section 7 indicates the amount payable by an applicant and the amounts that could be waived. The four situations contemplated under Section 7 and the amount payable under each one of those situations for entertaining an application under the Scheme are presented in a Tabular Column, as follows. Sl. No. Situations Amount payable 1. Where it relates to arrears of tax assessed on the best of judgment due to nonproduction of accounts. 40% of arrears o .....

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4. Where it relates to arrears of penalty or interest or both, but there is no corresponding arrears of tax pending collection. 10% of the penalty and 25% of interest. 24. In the cases on hand, the appellant enjoyed the benefits of an Interest Free Sales Tax Deferral Scheme. Though the scheme was for a period of nine years, commencing from 01.07.1999 to 30.06.2008, with the repayment due to commence from 01.07.2008, the same was subject to a ceiling limit. The appellant crossed the ceiling limit .....

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assessment orders for the period from 2003-2004 to 2006-2007 under the TNGST Act are concerned, the appellant failed to produce the Books of Accounts. Therefore, the Assessing Officer passed orders terming them as best of judgment assessments. But, what the Assessing Officer really did was just to add 25% to the total and taxable turnover for the non-production of records. These best of judgment assessment orders were not really a set of orders where some total and taxable turnover that escaped .....

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ent orders could be presented in a tabular form, as follows. Sl.No. CST Assessment Year Reason 1 1999-2000 Declaration in Form-F and other documents for claiming exemption for Inter-State transactions on consignment basis were not filed. 2 2000-2001 There was a discrepancy between the discount reflected in the 'Ç' Form and the discount entered in the Accounts Statement. 3 2003-2004 C-Form Declarations not obtained and produced for the entire Inter- State Sales Turnover of nearly & .....

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assessment under the TNGST Act. The appellant merely filed applications under Section 16-D of the TNGST Act before the Special Committee. In relation to the Assessment Orders under CST Act, the appellant filed only four applications under Section 16-D. They also filed four applications before the Special Committee under Section 16-D in relation to the Assessments under TNGST Act. The Special Committee allowed all but two applications and remitted the matter back to the Assessing Officer. It was .....

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deration is as to whether the case of the appellant would fall under Section 7(a) or 7(c) of T.N.Act 29/2011. 30. The primary contention of Mrs.R.Hema Latha, learned counsel for the appellant is that when admittedly the liability fastened upon the appellant arose out of best of judgment assessment orders, the case would be covered only by Section 7(a) and not Section 7(c) of T.N.Act 29/2011. 31. We have already extracted Section 7 of T.N.Act 29/2011 in entirety. We have also provided in a tabula .....

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tting a particular amount of total and taxable turnover and admitting his liability to pay tax to the extent of ₹ 100/-. If, for some reason. he fails to pay the admitted tax and proceedings for recovery are initiated, he will be liable, even according to the learned counsel for the appellant, to pay 100% of the admitted tax, in terms of Section 7(c) of T.N.Act 29/2011, in case he wants to avail the benefit under the Scheme. 34. Let us now take for instance a dishonest tax payer, according .....

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onsequence, he will only pay 40% of the said amount of ₹ 120/-, namely ₹ 48/-. 35. This result is not what is contemplated by clause (a) and (c) of Section 7 of T.N.Act 29/2011. The Act does not intend to punish the honest and put a premium for a dishonest conduct. 36. Apart from the above, the contention of the learned counsel for the appellant that both clauses (a) and (c) of Section 7 cannot be invoked simultaneously, cannot be accepted for two more reasons. They are: (i) At least .....

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sment orders. Therefore, on the date on which the appellant filed applications in Form-I under the Samadhan Scheme, the best of judgment assessment orders were not in force. As a consequence, the returns filed by the appellant alone were available. Therefore, Section 7(c) alone got attracted, as there was no best of judgment assessment order, enabling the appellant to fall back upon Section 7(a), even if his first contention is accepted. (ii)The second reason as to why the first contention of th .....

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d counsel for the appellant is rejected. 37. The next contention of the learned counsel for the appellant is that Section 7(c) has to be read with Section 4. Section 4, which speaks about eligibility for settlement, imposes three conditions. they are: (i)that the arrears of tax should pertain to the assessment orders upto 2006-2007; (ii)that the assessments relating to these years should have been made prior to 01.08.2011; and (iii) that no appeal or revision was pending on the date of filing of .....

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But some of these assessment orders were set aside by the Special Committee on applications filed under Section 16-D of the TNGST Act and the matters remanded back for passing fresh assessment orders. No fresh orders of assessment were passed before the cut-off date, namely 01.08.2011. Therefore, the second stipulation contained in Section 4 was not satisfied in some cases. 40. The question whether the pendency of an application under Sectio4016-D of the TNGST Act can be taken as equivalent to t .....

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.2011 by the Special Committee had the effect of setting aside the original orders of assessment passed on best of judgment. Once the best of judgment assessment orders go, what would remain are only be the returns filed by the appellant. If there are no best of judgment assessment orders, due to the quashing of the same by the Special Committee, as on the date of the appellant filing applications under the Samadhan Scheme, their very eligibility to the benefit of the Scheme would be in doubt an .....

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namely, the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002. The focus of Section 7 of the said Act was on any tax in dispute or on payment of penalty in dispute or on any penalty in dispute or on any interest in dispute. 44. But the next Scheme that was introduced under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2008, focused on the settlement of arrears. Section 7 of the 2008 Act also provided for four different situations as in the present case. But it spoke only about arre .....

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of disputes, the respondents can demand payment of the admitted tax and allow waiver of a part of the disputed tax. If the focus of the Scheme is for the settlement of arrears, the distinction between admitted tax and disputed tax would disappear, as everything would fall under the category of arrears of tax. 47. In support of the above contention, Mrs.R.Hema Latha, learned counsel for the appellant, also drew our attention to the distinction between Section 7(b) of the 2008 Act and Section 7(b .....

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to be kept in mind, before interpreting Section 7 of the Act. 48. We have carefully considered above submission. We have no difficulty in accepting that the settlement of dispute could be different from the settlement of arrears. In cases of settlement of disputes, the quantum of demand and the quantum of admitted amount may vary. Therefore, the parties may strike a deal for resolving the dispute and it is this deal that becomes known as settlement. But, in cases of settlement of arrears, the t .....

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sive of each other. We have already given an illustration as to how such mutual exclusivity would put a premium on the dishonest. 51. In any case, the expression 'arrears' need not necessarily be confined to 'admitted arrears'. It could also connote 'disputed arrears' or 'arrears claimed as due'. Therefore, the interpretation sought to be given on the basis of various Samadhan Schemes, cannot also be accepted. 52. The last contention of the learned counsel for the .....

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is contrary to the decision of a Division Bench of this Court in E.D.I.Parry (India) Limited vs. Assistant Commissioner (CT) and others - 126 STC 449 Mad. 53. But, we do not know how reliance is placed upon the decision in EID Parry (India) Limited. That was a case where the assessee filed supplementary returns. The supplementary returns covered freight charges and transport subsidy. Along with the supplementary returns, the assessee remitted an additional tax, but under protest. Thereafter, as .....

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