2001 (2) TMI 1010 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Assessment of taxable turnover and best judgment assessment.
2. Levy of tax on inter-State purchases and unregistered dealer purchases.
3. Claim for exemption under section 3-B(2)(a) of the Tamil Nadu General Sales Tax Act, 1959.
4. Imposition of penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:

1. Assessment of Taxable Turnover and Best Judgment Assessment:
The petitioners, building contractors, reported a total and taxable turnover of Rs. 1,60,41,137 and Rs. 6,82,523 respectively for the assessment year 1995-96. The assessing authority, after inspection and considering the objections, fixed the total turnover at Rs. 1,77,03,122 and the taxable turnover at Rs. 29,92,756. The assessment was based on the best judgment as the returns were found to be incomplete or incorrect. The Appellate Tribunal confirmed the best judgment assessment, noting that the assessment was not based on returns but on estimation after rejecting the returns as incorrect and incomplete.

2. Levy of Tax on Inter-State Purchases and Unregistered Dealer Purchases:
The assessing authority levied tax on materials purchased from unregistered dealers and from other States, used in the construction work. The Appellate Tribunal upheld the levy of tax on the turnover pertaining to purchases from unregistered dealers, stating that under section 3-B of the Act, deduction is given only in respect of tax suffered goods. The Tribunal also confirmed the tax on inter-State purchases, noting that the contract was executed in Tamil Nadu and was not in the course of export, import, or inter-State trade.

3. Claim for Exemption under Section 3-B(2)(a):
The petitioners claimed exemption under section 3-B(2)(a) for goods purchased from inter-State and used in the execution of works contract. The Tribunal rejected this claim, stating that the taxable event took place when the goods were incorporated in the works contract in Tamil Nadu. The relevant observation from the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan was cited, which states that the value of goods for tax purposes is at the time of incorporation in the works, not the cost of acquisition.

4. Imposition of Penalty under Section 12(3)(b):
The assessing authority levied a penalty of Rs. 4,21,700 under section 12(3)(b)(v) for the difference between the tax assessed and tax paid. The Appellate Tribunal upheld the penalty, categorically stating that the assessment was a best judgment assessment, and penalty is warranted for the turnover sustained with reference to inter-State purchases and from unregistered dealers. The Tribunal noted that no mens rea is needed for the levy of penalty under section 12(3)(b), referencing the decision in Chennai Textile Chemicals Private Ltd. v. State of Tamil Nadu.

Conclusion:
The Appellate Tribunal found no error in the assessment and penalty imposed by the assessing authority. The Tribunal dismissed the tax revision case, confirming that the assessment and penalty were in accordance with the law. The judgment emphasizes that the taxable event in a works contract occurs at the time of incorporation of goods and that best judgment assessment is valid when returns are incomplete or incorrect. The claim for exemption under section 3-B(2)(a) was rightly rejected, and the imposition of penalty was upheld as per the provisions of the Tamil Nadu General Sales Tax Act, 1959.