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Shyam Air Fridge Versus The State of Tamilnadu, rep. by the Deputy Commissioner (CT)

2016 (9) TMI 562 - MADRAS HIGH COURT

Classification - Split Air Conditioner - taxable at 4% or 20%? - works contract - eligibility for composition scheme - Reduction of penalty - Held that: - the revision petitioner is entitled to invoke Section 7-C of the Act, which starts with a notwithstanding clause and gives option to the assessee that instead of paying tax, in accordance with Section 3-B, he may pay, either on the total value of each works contract or on the total value of all works contract, executed by him, in a year, tax c .....

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site works contract and at the concessional rate of 4%, tax has been paid. In such circumstances, it cannot be contended that it is a deliberate and wilful non-disclosure of turnover, in the return and thus, rightly proceeded, under Section 12(3)(b) f the Act, which deals with Submission of incorrect or incomplete return - penalty not imposed - appeal allowed - decided in favor of appellant. - Tax Case (Revision) No. 186 of 2009 - Dated:- 28-7-2016 - S. Manikumar And D. Krishnakumar, JJ. For the .....

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ble turnover of ₹ 56,47,042/- under the TNGST Act. The Deputy Commissioner (CT), Vellore Division, Vellore, while finalizing the assessment had treated the contract receipt of ₹ 3,74,000/- as sale of Split Air Conditioner and subjected the same to tax at 20% instead of 4% in his proceedings in TNGST 4201028/04-05 dated 28.04.2006. The respondent also levied penalty under Section 12(3)(b) of the TNGST Act amounting to ₹ 94,248/-. 3. Aggrieved with the orders of the Respondent, t .....

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deleted the penalty in toto even though the facts and circumstances does not warrant any penalty as per the explanation added to Section 12(3) (b) of the TNGST Act. 4. The petitioner further filed a Second Appeal before the Sales Tax Appellate Tribunal, Chennai disputing the penalty refixed under Section 12(3)(b) of the TNGST Act, on the grounds inter alia that, as per the Explanation Clause added to Section 12(3) of the TNGST Act, the penalty refixed by the Appellate Authority is unwarranted. T .....

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er to the additionally payable by the dealer (in relating to the turnover not covered by declarations) would get excluded in the computation of penalty. In the instant case, the claim of the dealer that their transaction represented composite works contract and it was entitled to be assessed under Section 7-C at the concessional tax rate, was not linked to the filing of any declarations. Therefore, when the Assessing Officer rejected the turnover under Section 7C and assessed it under Section 3- .....

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s one possessing no legal support and thus ordered to dismiss the Tribunal Appeal". 5. Aggrieved over the same, the present Tax Case Revision is filed. Record of proceedings shows that this Court has admitted the revision, on the following substantial question of law, Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in applying Explanation (iii) to Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, to sustain the levy of penalty, despite the fa .....

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nder Section 7(c) of the TNGST Act, and paid the taxes, in such circumstances, explanation (i) and (ii) to Section 12(3)(b) of the Act, would squarely apply to the case on hand. 7. As regards disclosure in the books of accounts, whether would warrant suppression and whether in such circumstances, explanation to Section 12(3)(b) of the Act, would be applicable and whether penalty could be levied, learned counsel for the revision petition relied on a decision in Indira Industries v. State of Tamil .....

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ed that there is no case for applying any of the clauses (i) and (ii) mentioned in the explanation to Section 12(3)(b) of the Act, to the case on hand and hence, there is illegality in the impugned order, warranting intervention. Heard the learned counsel appearing for the parties and perused the materials available on record. 9. Material on record discloses that the revision petitioner was assessed for the year 2004-05, under the Tamil Nadu General Sales Tax Act, on a total and taxable turnover .....

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8/-. 10. Being aggrieved by the same, the petitioner has preferred T.A.No.230 of 2008, before the Tribunal. In the written arguments, dated 07.07.2009, submitted before the Tribunal, the revision petitioner/assessee has specifically contended that explanations (i) and (ii) to Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, would be applicable to the case on hand, as the turnover was not suppressed by the assessee and that the same was treated only as contract receipts, and reported in .....

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osite works contract, under Section 7C of the Tamil Nadu General Sales Tax Act. The appellate authority has accepted that the transaction is a works contract. As per Section 7C of the Act, notwithstanding anything contained in Section 3-B, every dealer, referred to in item (vi) of clause (g) of section 2, may, at his option, instead of paying tax, in accordance with Section 3-B, pay, either on the total value of each Works contract or on the total value of all works contact, executed by him in a .....

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ordance with Section 3-B, he may pay, either on the total value of each works contract or on the total value of all works contract, executed by him, in a year, tax calculated at the rates stated supra. Payment of 4% tax on the turnover of composite works contract, under Section 7C of the Tamil Nadu General Sales Tax Act, has been admitted. According to the assessee, the Tribunal has only considered Clause (iii) of the explanation to Section 12(3)(b) of the Act and failed to consider Clauses (i) .....

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, (3), (4), (7) and (8) of section 3, or section 7-A, but subject to the other provisions of this Act including the provisions of sub-section (1) of section 3, every dealer referred to in item (vi) of clause (g) of section (2) shall pay, for each year, a tax on his taxable turnover of transfer of property in goods involved in the execution of works contract at the rates mentioned in [sub-section (2), (2-A) or (2-C)] of section 3 or, as the case may be, in section 4. Explanation:- Where any works .....

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territory of India, or in the course of import of the goods into the territory of India or in the course of inter-State trade or commerce: (b) all amounts for which any goods, specified in the First Schedule or Second Schedule, are purchased from registered dealers liable to pay tax under this Act and used in the execution of works contract in the same form in which such goods were purchased: (c) all amounts paid to the sub-contractors as consideration for execution of works contract whether who .....

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fer of property in goods, actually incurred in connection with the execution of works contract, or such amounts calculated at the rate specified in column (3) of the Table below, if they are not ascertainable from the books of accounts maintained and produced by a dealer before the assessing authority. THE TABLE Sl.No Type of works contract Labour or other charges as a percentage value of the works contract 1 Electrical contracts 15 2 All structural contracts 15 3 Sanitary contracts 25 4 Watch a .....

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tomer) is so refunded or adjusted, within a period of six months from the due date for filing of the return in which the said amount was included and tax paid. 15. It is the specific case of the assessee in the written arguments, dated 07.07.2009, that tax turnover was not suppressed, the same was treated as contract receipt, reported in the monthly A1 return and as per the explanation clauses, the tax arrived on this turnover should be deducted from the tax assessed on final turnover, and the d .....

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Any turnover on which tax is paid at the concessional rate subject to the condition of furnishing any declaration but where such declaration could not be furnished at the time of assessment. 16. Section 12(3)(b) of the Act deals with, submission of incorrect or incomplete return and for the purpose of levy of penalty, under Clause (b), the tax assessed on the following kinds of turnover shall be deducted from the tax assessed on final assessment, (i) twenty-five per cent of the difference of th .....

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, if the tax paid as per the return falls short of the tax assessed on final assessment by more than fifteen per cent but not more than twenty-five per cent; 17. Perusal of the order of the assessing officer shows that he has totally disallowed the case of the assessee and held that there was no works contrct at all and thus, assessed the turnover, under Section 3-B of the Act. The appellate authority, in his order, has categorically stated that the turnover was culled out from the books of acco .....

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ed that it is a deliberate and wilful non-disclosure of turnover, in the return and thus, rightly proceeded, under Section 12(3)(b) f the Act, which deals with Submission of incorrect or incomplete return. Though penalty is leviable under the provisions of the Act, while exercising discretion, the assessing officer is required to take note of the bona fides of the assessee. Contention of the respondent that levy of penalty under Section 12(3) is automatic, cannot be accepted, in the light of the .....

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the assessment order is drawn from the books of accounts itself, and there being no reference to any specific concealment of the turnover in the accounts, the question of invoking section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 would not arise. The Explanation to section 12(3)(b) of the Act specifies the turnover which merited to be excluded for the purpose of levy of penalty, one such being the turnover representing addition related to book turnover itself. Thus, even while calc .....

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