Back
2018 Supreme(Mad) 559
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S. MANIKUMAR, V. BHAVANI SUBBAROYAN, JJ.
M/s. Ergomaxx (India) Private Limited, Chennai - Petitioner
Versus
The State of Tamil Nadu, Rep by its Joint Commissioner (CT), Chennai - Respondent
Tax Case (R) Nos. 10 to 12 of 2018 & C.M.P. Nos. 2297 to 2299 of 2018
Decided On : 28-02-2018
For the Petitioner:V. Sundareswaran, Advocate.
For the Respondent: V. Haribabu, Additional Government Pleader (Taxes).
The central legal point established in the judgment is that the payment of tax before the initiation of assessment proceedings reduces the quantum of penalty, as supported by precedents such as Chennai Textile Chemicals Private Ltd. Vs. State of Tamil Nadu and Lingam & Sons Vs. State of Tamil Nadu.
Headnote:
Tax Case Revision - Assessment of Escaped Turnover and Wrong Availment of Input Tax Credit - Section 27 of the Tamil Nadu VAT Act, 2006 - Summary of Acts and Sections: Section 27 of the Tamil Nadu VAT Act, 2006 was discussed, which deals with the assessment of escaped turnover and wrong availment of input tax credit. The court analyzed the provisions of Section 27 and its application in the case, highlighting the requirement for the assessing authority to determine the turnover that has escaped assessment and assess the tax payable, as well as the reversal of input tax credit availed and determination of tax due. The court also referred to precedents such as Chennai Textile Chemicals Private Ltd. Vs. State of Tamil Nadu and Lingam & Sons Vs. State of Tamil Nadu to support its decision.
Fact of the Case:
The case involved Ergomaxx (India) Pvt Ltd., a registered dealer in Chennai, which was assessed for the assessment years 2008-2009, 2006-2007, and 2007-2008. The assessing officer issued a notice under Section 27 of the Tamil Nadu VAT Act, 2006, for the assessment of escaped turnover and wrong availment of input tax credit. The dealer objected to the notice, stating that the entire input tax credit amount availed was paid at the time of VAT audit, and there was no wrong availment of input tax credit or any escaped turnover to invoke Section 27. The appellate deputy commissioner deleted the penalty, but the respondent filed appeals before the Tribunal.
Finding of the Court:
The court found that the dealer had paid the tax and rectified the defects noticed even before the finalization of reassessment. It held that there was no redetermination of tax after making an enquiry as contemplated under Section 27(1) of the Tamil Nadu VAT Act, 2006. The court also referred to precedents to support its decision to reverse the penalty imposed under Section 27(4) of the Act.
Issues: The substantial questions of law raised in the Tax Case Revision Petitions included the correctness of the Tribunal's order in allowing the appeal in favor of the respondent, the justification of upholding the order of the assessing officer, the misdirection of the Tribunal in ignoring the payment of input tax credit availed, the Tribunal's disregard of legal submissions, and the automatic imposition of penalty under Section 27(4).
Ratio Decidendi: The court's decision was based on the fact that the dealer had paid the tax and rectified the defects noticed even before the finalization of reassessment, and there was no redetermination of tax after making an enquiry as contemplated under Section 27(1) of the Tamil Nadu VAT Act, 2006. The court also relied on precedents to support its decision to reverse the penalty imposed under Section 27(4) of the Act.
Final Decision: The Tax Case Revision Petitions were allowed, and the connected Miscellaneous Petitions were closed. No costs were imposed.
S. Manikumar, J.
1. Tax Case Revision Petition Nos.10 to 12 of 2018, for the assessment years 2008 2009, 2006 to 2007 and 2007 2008, respectively, are filed against the orders made in S.T.A.Nos.250 to 252 of 2014, dated 20/12/2017, on the file of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai.
2. As common facts and questions of law are involved in the instant Tax Case Revisions, they are heard together and disposed of by a common order.
3. Facts of the cases, as culled out from the supporting materials are that the petitioner Ergomaxx (India) Pvt Ltd., Chennai, is a registered dealer in the Books of the Assistant Commissioner (CT) Nungambakkam, Assessment Circle. He is also a dealer registered under the Central Sales Tax Act, 1956. In the course of business, the assessing officer, issued notice, under Section 27 of the Act, which applies to "assessment of escaped turnover and wrong availment of input tax credit". He also proposed to impose penalty, u/s. 27(4) of the Act. The petitioner has filed objections to the effect that when the entire ITC amount availed was paid, at the time of VAT Audit, on 28/08/2010, the notice for revision of assessment is without jurisdiction and has to be dropped, moreso, with regard to penalty u/s. 27(4), since there being no wrong availment of ITC nor any escaped turnover to invoke sec. 27 of the Act. However, the assessing officer rejected the objections and confirmed the proposal vide order dated 20/01/2012.
4. As against the order dated 20/01/2012 appeal was filed before the Appellate Deputy Commissioner contending the reversal of ITC along with penalty was erroneous. The Appellate Deputy Commissioner deleted the penalty. As against the order of the Appellate Deputy Commissioner, the respondent filed appeals before the Tribunal.
5. On 16/12/17, the appeals were taken up for hearing. The State Representative reiterated the submissions, in the memorandum of grounds of appeal and pleaded that once ITC was wrongly availed, penalty u/s. 27(4) is automatic and prayed to allow the appeals.
6. By way of reply, the respondent therein, made the following submissions:-
(i) The very VAT Audit was without jurisdiction, as there was no authorization, as envisaged under Section 64(4) of the Act.
(ii) when the entire ITC was paid, which amounts to reversal of ITC, on 28/08/2010, there is no escapement of any turnover nor any wrong availment of ITC, to invoke section 27 into service, Reliance was placed on the decision of this Court in 125 STC 505.
(iii) In view of the Amendment Act 5 of 2015, when the very prohibition u/s.19(5)(c) read with Section 19(2)(v), to avail ITC, on the turnover not covered by Form C has been removed, writ petitioner cannot be mulcted with tax liability and penalty. It is also the contention of the respondent therein/writ petitioner that when reversal of ITC itself is illegal, the consequential penalty has to be deleted. Writ Petitioner has further contended that after the orders were reserved on 16/12/17 and when the counsel for the petitioner requested the Tribunal, to enable the petitioner, to file written submissions, it was refused.
7. Upon hearing the learned counsel for the parties, the Tamil Nadu Sales Tax Appellate Tribunal, vide separate orders in S.T.A.Nos.250 to 252 of 2014, for the assessment years, 2008 - 2009, 2006 to 2007 and 2007 - 2008, passed order. As orders are similar, suffice to extract one such order, for the assessment year 2006 - 07.
“8. In this case the respondent / dealer's business place was audited by the enforcement wing officials during the period from 01.01.2007 to 31.03.2007 on 28.08.2010. During the course of audit it was found that the dealers have effected interstate sales without 'C' form and the Input Tax Credit on corresponding purchases were reversed in monthly returns for Rs.15,644/- instead of Rs.80,949/-. At the time of audit it was noticed by the enforcement wing officers, the respondent/dealer had admitted
