1977 (12) TMI 124 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 7 of the Tamil Nadu General Sales Tax Act, 1959 regarding payment of tax at compounded rates.
2. Validity of the assessee's option to pay tax under section 7 of the Act.
3. Impact of the deletion of rule 15(4-B) on the assessee's entitlement to the benefit under section 7(1) of the Act.

The High Court of Madras heard a tax revision case where the revenue sought to challenge the Sales Tax Appellate Tribunal's decision allowing the assessee to pay tax under section 7 of the Tamil Nadu General Sales Tax Act, 1959, at compounded rates. The assessee, operating a sweetmeat stall, initially returned a turnover of Rs. 94,139.45 and opted for tax payment under section 7. The assessing officer, after finding defects in the accounts, used the best judgment method to assess the tax at Rs. 3,624.37. The Appellate Assistant Commissioner and the Tribunal upheld the assessment, with the Tribunal reducing the turnover addition from ten to five percent. The revenue contended that the assessee did not exercise the option to be assessed under section 7 at the beginning of the year and thus could not do so at the final assessment stage due to the deletion of rule 15(4-B) under G.O. Ms. No. 2845 (Revenue) dated 27th September, 1971.

The core issue revolved around the interpretation of section 7 of the Act, specifically focusing on the assessee's entitlement to pay tax at compounded rates. Section 7(1) provides for a fixed rate of tax when the turnover falls within a specified range. The Tribunal determined the turnover at Rs. 98,846.42 and assessed it under section 7. However, section 7(2) necessitates that a dealer must seek permission from the assessing authority to pay tax under this section and comply with the prescribed procedures. The revenue argued that the assessee failed to exercise this option at the beginning of the year, rendering them ineligible for the benefits under section 7(1).

The deletion of rule 15(4-B) played a crucial role in determining the validity of the assessee's claim to pay tax under section 7. The Court agreed with the revenue's stance that the assessee should have obtained prior permission from the assessing officer at the commencement of the year to avail the benefits under section 7(1). Since the assessee did not fulfill this requirement, the Court held that they were not entitled to pay tax at the compounded rate as per section 7 of the Act. Consequently, the tax revision case was allowed in favor of the revenue, emphasizing the significance of adhering to procedural requirements for availing tax benefits under the Act.