1998 (8) TMI 571 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of penalty under section 3-A of the Tamil Nadu Additional Sales Tax Act, 1970.
2. Circular dated December 11, 1995, directing refund of additional sales tax reimbursed by the principals.
3. Computation of the total taxable turnover of the principals/tea garden owners.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 3-A:
The petitioners, acting as brokers for tea sales, were penalized under section 3-A of the Additional Tax Act for reimbursement of additional sales tax by the principals, which was deemed a contravention of section 2(2) of the Act. The petitioners argued that the additional sales tax is a tax on the sale of goods and should not be passed on to the purchaser. They cited the Supreme Court decision in *S. Kodar v. State of Kerala* [1974] 34 STC 73, which stated that the tax falls on the dealer and can be added to the price of goods sold. The Government of Tamil Nadu, in a letter dated January 20, 1997, clarified that reimbursement of additional sales tax by the principals to the agents does not violate the Act. The Tribunal concluded that the reimbursement by the principals to the agents is not a contravention of section 2(2) and thus does not warrant a penalty under section 3-A.

2. Circular Dated December 11, 1995:
The Principal Commissioner and Commissioner of Commercial Taxes issued a circular directing the petitioners to refund the additional sales tax reimbursed by the principals or face penalties. The petitioners contended that this circular was issued without statutory authority. The Tribunal held that the Commissioner had no statutory authority to issue such a clarification and that the circular was not binding on the assessing authorities. Since the Tribunal found no contravention warranting a penalty, the circular became infructuous and did not require quashing.

3. Computation of Total Taxable Turnover:
The assessing authorities included the tea sales turnover assessed to tax at the hands of the auctioneers/agents in the total taxable turnover of the principals for applying the rate of additional tax. The petitioners argued that only the principals' own sales should be considered. The Tribunal upheld the method of computation, stating that the aggregate sales turnover of all principals is liable to additional tax, and the inclusion of sales made by agents is in order. The Tribunal found no need to interfere with the computation method used by the assessing authorities.

Conclusion:
(a) The Tribunal quashed the penalties levied on the petitioners for reimbursement of additional sales tax from the principals, as it did not contravene section 2(2) of the Additional Tax Act.
(b) The circular dated December 11, 1995, directing refund of additional sales tax became ineffective, and the petitions challenging it were dismissed.
(c) The method of computing the total taxable turnover by including sales through agents was upheld, and the petitions challenging this method were dismissed.
(d) Any excess amount collected as reimbursement of additional sales tax should be deposited with the department within three months, as agreed by the petitioners.

The petitions were disposed of accordingly.