2008 (3) TMI 637 - HC - VAT and Sales Tax

Continuance of the waiver scheme of the deed of the agreement, dated July 12, 2006 entered into between the Government of Tamil Nadu and the petitioner and for further orders Held that - If the petitioner had already exercised their option to continue under the waiver scheme, but simultaneously resorted to collection of tax contrary to rule 16(4) of the TNVAT Rules, 2007, and the terms of the agreement, etc., then, this court cannot approve such action of the dealer, for the reason that court cannot read anything into a statutory provision, substitute or rewrite the provision, which would snap the VAT chain from January 1, 2007 onwards. Neither the terms of the agreement nor the statutory provisions under section 33(1) of the TNVAT Act read with rule 16(4) of the VAT Rules, contemplate operation of waiver/deferral schemes in different spells, while implementing the provisions of the VAT Act and the Rules framed thereunder and such a situation would certainly create anomaly. As stated supra, liability to pay is statutory, failure to remit in time entails penal action under the taxing statutes. Retention of Government money collected towards tax attracts penal action and therefore, there is no need to issue any show-cause notice and provide an opportunity of hearing before taking recourse to realise the dues. Having availed the waiver scheme, the petitioner ought not to have collected tax from the dealers and therefore, they are liable to remit the same to the Government. In view of the above,do not find that there is any abuse of the statutory provisions by the respondents to extract money from the assessee. In the result, the writ petition is dismissed.

Issues Involved:
1. Validity of the impugned order by the Deputy Commercial Tax Officer.
2. Compliance with waiver scheme conditions.
3. Impact of the introduction of the Tamil Nadu Value Added Tax Act, 2006.
4. Alleged violation of principles of natural justice.
5. Petitioner's entitlement to relief.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order by the Deputy Commercial Tax Officer:
The petitioner sought to quash the order of the Deputy Commercial Tax Officer, Arokanam Village, Vellore District, which directed the petitioner to remit the collected tax within three days, failing which penal action would be initiated. The court found that the petitioner had violated the conditions of the eligibility certificate and waiver agreement by collecting tax during the waiver period. The impugned communication, though termed as a notice, was deemed a final order. The court upheld the validity of the order, stating that the petitioner's collection of tax was contrary to the terms of the waiver scheme and the statutory provisions under section 33(1) of the TNVAT Act and rule 16(4) of the TNVAT Rules.

2. Compliance with Waiver Scheme Conditions:
The petitioner was granted an eligibility certificate under the IFST Waiver Scheme, which stipulated that the petitioner should not collect sales tax on local sales of cement for six years. The petitioner entered into a deed of agreement with the Government, agreeing to these conditions. However, the petitioner collected tax from January 1, 2007, onwards, which was a violation of the waiver agreement. The court held that the petitioner's action of collecting tax during the waiver period was in breach of the agreement and the eligibility certificate, and thus, the petitioner was not in compliance with the waiver scheme conditions.

3. Impact of the Introduction of the Tamil Nadu Value Added Tax Act, 2006:
The introduction of the TNVAT Act, 2006, brought a deeming provision under section 33, which stated that all remission of tax under the TNGST Act would be deemed to be deferred payment of tax under the TNVAT Act. The petitioner argued that this provision automatically modified the waiver scheme to a deferral scheme. However, the court found that the petitioner had not applied to switch from the waiver to the deferral scheme as required. The court emphasized that the VAT chain must remain unbroken, and the petitioner's collection of tax during the waiver period disrupted this chain. Therefore, the court held that the petitioner's collection of tax was not justified under the TNVAT Act.

4. Alleged Violation of Principles of Natural Justice:
The petitioner contended that the impugned order was issued without giving them an opportunity to be heard, thus violating the principles of natural justice. The court, however, found that the petitioner had been aware of the conditions of the waiver scheme and had entered into an agreement with the Government. The petitioner's collection of tax was a clear violation of these conditions, and the court held that there was no need for a show-cause notice or an opportunity of hearing before the respondents took action to recover the dues. Therefore, the court rejected the petitioner's claim of violation of natural justice.

5. Petitioner's Entitlement to Relief:
The petitioner sought a writ of certiorarified mandamus to quash the impugned order and direct the respondents to consider their representations. The court, after considering the facts and the statutory provisions, found that the petitioner had violated the terms of the waiver scheme by collecting tax during the waiver period. The court held that the petitioner was not entitled to the relief sought, as their actions were contrary to the statutory provisions and the terms of the agreement. Consequently, the writ petition was dismissed.

Conclusion:
The court dismissed the writ petition, upholding the validity of the impugned order and finding that the petitioner had violated the conditions of the waiver scheme. The court emphasized the importance of maintaining the VAT chain and held that the petitioner's collection of tax during the waiver period was unjustified. The court also rejected the petitioner's claim of violation of natural justice, stating that the petitioner was aware of the conditions and had breached them.

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