TMI Blog2018 (1) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... iability in respect of works contractors have also been accepted by the Department. This has been in in vogue ever since the introduction of Section 3B of the TNGST Act 1959 and continued to be in course even for the liabilities pertaining to Section 5 of the TNVAT Act 2006 - it could be deduced that while doing so, the tribunal has also verified the audited Profit & Loss statement and Balance Sheet of the assessee / revision petitioner, for the relevant years. Was the Tribunal correct in giving a judgment entirely based on perverse assertions that had no relation to either the established facts or the accounts maintained by the petitioners in the normal course of their business, audited and certified by a Chartered Accountant? - Held that: - Though, learned counsel for the revision petitioner urged that the certificate issued by the Chartered Accountant, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, corroborated the accounts and balance sheet and therefore, the certificates issued by the Auditor, ought to have been give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Nadu Value Added Tax Act, 2006. The assessing officer also assessed sale of assets and reversed certain ineligible ITC. The Assessing Officer also levied penalty under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. 4. Being aggrieved, the assessee / revision petitioner, filed appeals in A.P.Nos.101, 102, 4 and 5 of 2013 to the appellate authority viz., the Appellate Deputy Commissioner (CT)-III, Chennai. The Appellate Deputy Commissioner, sustained the reversal of ITC, but allowed the appeals preferred by the assessee on other aspects. 5. Being aggrieved, appellate Joint Commissioner (CT), preferred STA Nos.109 110 of 2015 and 200 201 of 2014, respectively, before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai. After considering the rival submissions and the material on record, the tribunal vide separate orders in STA Nos.109 110 of 2015 and 200 201 of 2014 dated 25.06.2015, allowed the appeals. 6. Being aggrieved by the orders of the tribunal, instant Tax Case (Revision) Nos.31 to 34 of 2017, have been filed by the assessee, on the following substantial questions of law. (1) Was the Tribunal correct in discarding the actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete accounts disclosing their purchase turnovers, salaries, wages, contract receipts and all other expenses and receipts and not a single purchase or other omission has been pointed out by any of the assessment, inspecting or appellate authorities . According to the learned counsel for the petitioner, adoption of Gross Profit of 10% by the assessing officer and the Tribunal, was merely on surmises and approximation . 11. Per contra, inviting the attention of this Court, to the assessment order, for the abovesaid years, Mr.V.Haribabu, learned Additional Government Pleader (Taxes) submitted that though the dealer, in the objections had stated that 10% Gross Profit as not warranted, perusal of the accounts by the assessing officer revealed that the dealer had not added transport charges, loading and unloading charges, on the purchase of goods incorporated, into works contract. 12. Learned Additional Government Pleader (Taxes) also pointed out that the assessing officer has considered that the dealer had simply computed the total purchases for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 01.04.2009 to 31.03.2010 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, Mr.V.Haribabu, learned Additional Government Pleader (Taxes), submitted that the dealer has not maintained proper accounts, as stipulated under Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007. Dealer has not produced any accounts for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, to arrive at the taxable turn over under Section 5 of the Tamil Nadu Value Added Tax Act, 2006. Learned Additional Government Pleader (Taxes) submitted that on surmises, the dealer has chosen to adopt 5% Gross Profit to arrive at the deemed sales turn over. According to him, certificate of the Chartered Accountant alone is not sufficient. The Assessee ought to have produced related accounts, to support the certificates issued. 17. Mr.V.Haribabu, learned Additional Government Pleader also pointed out that though the tribunal has considered several decisions, wherein, 15% of gross profit has been accepted, as the norm, in the case on hand, taking note of the conventional method of adopting 10% gross profit by the department, and working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 10% notional Gross Profit: The one and only dispute is whether liability on the deemed sales turnover to be fixed by adopting 5% Gross Profit as being done by the respondent dealer or by adopting 10% Gross Profit as being levied by the learned Assessing Officer in the impugned order. The respondent dealer have opted to pay tax under section 5 of the TNVAT Act 2006, which is reproduced as below. 5. Levy of tax on transfer of goods involved in works contract: (1) Notwithstanding anything contained in this Act, but subject to the provisions of this Act, every dealer, shall pay, for each year, a tax on his taxable turnover, relating to his business of transfer of property in goods involved in the execution of works contract, either in the same form or some other form, which may be arrived at in such manner as may be prescribed, at such rates as specified in the First Schedule. Explanation. - Where any works contract involves more than one item of work, the rate of tax shall be determined separately for each such item of work. (2) The dealer, who pays tax under this section, shall be entitled to input tax credit on goods specified in the First Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment of Andhra Pradesh AIR 1977 SC 1481, Dwaraka Das v. State of Madhya Pradesh [1999] 3 SCC 500, Government of Andhra Pradesh v. E.C.Techno Industries [1989] 2 ALT 320, Superintending Engineer v. P.Radhakrishna Murthy [1996] 3 ALT 1137, G.V.Malla Reddy Co., Hyderabad v. A.P.State Trading Corporation Ltd., Hyderabad [2010] 4 ALD 331 and Hudson on Building and Engineering Contracts (Tenth Edition, by I.N.Duncan Wallace), wherein the manner of estimation of profits for different works contracts have been dealt with and, in some of the cases, the percentage of profits estimated at 15 per cent has been accepted as being reasonable. We may not be understood to have held that in all cases 15 per cent should invariably be accepted as the norm. We have merely indicated broadly the factors which the assessing authority should bear in mind while estimating the profit percentage in the facts and circumstances of the case before him. The Hon'ble Supreme Court in the case of Gannon Dunkerley's case [1993] 88 STC 204(SC), has held that the measure for the levy of tax contemplated by articles 366 (29A) (b) is the value of the goods involved in the execution of a works contract, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % is far below that the appreciable percentage. 24. From the material on record, it could be deduced that while doing so, the tribunal has also verified the audited Profit Loss statement and Balance Sheet of the assessee / revision petitioner, for the relevant years. 25. Ultimately, the tribunal held as follows: The Appellate Deputy Commissioner (CT) has erred in relying on the above all India Balance Sheet, and concluded the Gross Profit is less than 5%, whereas actual gross profit should be calculated on the transfer of property in goods in the same form or some other form relating to the transactions in the state of Tamil Nadu only. Moreover the above audited balance sheet relates to the year ended on 31st December, whereas the financial year as per definition section 2(42) of the TNVAT Act 2006, means financial year, i.e From 1st April to 31st March. Thus the Appellate Deputy Commissioner (CT) has compared an apple with an orange to certify the Gross Profit ratio of the respondent dealers @ 5% which is a factual error. 26. Analysing the input / output purchases of the goods, in execution of works contract, the tribunal held that The input and output ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Difference of VAT due Rs.11,97,420.00 4% 47,897.00 Rs.2,04,664.00 12.5% 25,583.00 Rs.14,02,084.00 73,480.00 (ii) for the year 2007-08 is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.2,90,29,320.00 4% 11,61,173.00 Rs.49,73,491.00 12.5% 6,21,686.00 Rs.3,40,02,811.00 17,82,859.00 (iii) for the year 2008-09 is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.5,41,85,444.00 4% 21,67,418.00 Rs.1,05,73,253.00 12.5% 13,21,657.00 Rs.6,47,58,697.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Chartered Accountant, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, corroborated the accounts and balance sheet and therefore, the certificates issued by the Auditor, ought to have been given weightage, for the calculation of gross profit, which according to him, was actually earned by the assessee, and further reiterated the grounds of challenge for reversal of the orders of the tribunal, this Court is not inclined to accept the said contentions, for the reason that the tribunal, after considering the audited Profit Loss statement, balance sheet for the relevant years, revenue receipts and such other materials, and despite the fact that in a series of judicial pronouncements extracted supra, wherein 15% of the gross profit had been adopted, taking note of the fact that the dealer had not maintained proper accounts, as stipulated under Rule 8(5) of the TNVAT Rules, 2007 and failed to produce the related records, to arrive at a taxable turn, over under Section 5 of the TNVAT Act, 2006, and though, gross profit cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet and monthly returns filed. On verification of balance sheet and the monthly returns filed by them it was noticed that there is difference in purchase turnover between the balance sheet and the monthly returns filed. The purchase difference is treated as the purchase omission and the deemed sale value is arrived as follows: Purchase turnover as per balance sheet : Rs.1,18,55,835.00 Purchase turnover as per monthly return : Rs.1,17,30,884.00 Difference : ₹ 1,24,951.00 Add G.P. at 10% : ₹ 12,495.00 31. Perusal of the same shows that the department has adopted the conventional method of adopting 10% gross profit, and accordingly has worked out the liability. 32. Though learned counsel for the revision petitioner submitted that in the absence of furnishing any material in support of the contention that adoption of the conventional method of arriving at 10% gross profit, there is violation of the principles of natural justice, and in that context, relied on a decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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