2007 (9) TMI 560 - HC - VAT and Sales Tax

Concessional rate of tax at three per cent on the turnover covered by form XVII declarations - disallowance of labour charges collection - Held that - The impugned revised order passed by the assessing authority is clearly against the provisions of the Act and without jurisdiction. Therefore, on consideration of the pleadings of the materials on record, the matter has to be remitted to the assessing authority on the limited aspect, to determine the turnover covered by valid form XVII, for the reason that total sales have been shown as ₹ 19,57,784, in the impugned order, it is stated that form XVII has been filed only for the turnover of ₹ 18,56,488 and at the same time, it is mentioned as if that the dealer had submitted declaration forms for the entire sales turnover of ₹ 19,57,784. To make it clear, the turnover against form XVII produced for ₹ 18,56,488 is excluded. On the second issue raised by the petitioner on the disallowance of labour charges collection, since no opportunity was given to the petitioner as per the clarification of the Commissioner of Commercial Taxes, in acts cell-VI/13234/2001 dated April 20, 2001, without going into the merits of the case, liberty is given to the petitioner to file an appeal before the appellate authority, within three weeks from the date of receipt of a copy of this order. On receipt of the appeal, the appellate authority shall entertain the appeal without insisting upon the period of limitation.

Summary

Issues Involved:
1. Concessional rate of tax on sales against Form XVII.
2. Disallowance of labor charges collection.

Detailed Analysis:

Concessional Rate of Tax on Sales Against Form XVII:
The petitioner sought a writ to quash the respondent's assessment order and to direct the respondent to grant a concessional rate of tax at three percent on the turnover of Rs. 19,57,784, covered by Form XVII declarations. The petitioner cited settled principles of law from previous judgments of the Madras High Court, specifically "Sree Murugan Engineering Products v. Commercial Tax Officer" and "Maruthi Handling Equipments v. Deputy Commercial Tax Officer."

The assessing authority had disallowed the concessional rate, arguing that air-handling units, which are finished products, were not enumerated in the Eighth Schedule and hence could not be purchased against Form XVII as capital goods. The petitioner contended that the air-handling units were integral parts of pharmaceutical machinery and should qualify for the concessional rate.

The court referred to the precedent set in "Premier Electro-Mechanical Fabricators v. State of Madras," which established that a dealer is entitled to a concessional rate if the goods sold are for use by the purchaser as component parts of other goods mentioned in the First Schedule. The court emphasized that the seller's obligation is limited to ensuring the declaration in Form XVII is duly filled and signed by the purchaser. It is not the seller's duty to verify the purchaser's use of the goods.

The court found the assessing authority's revised order to be against the provisions of the Act and without jurisdiction. The matter was remitted to the assessing authority to determine the turnover covered by valid Form XVII declarations, noting discrepancies in the reported turnover amounts.

Disallowance of Labor Charges Collection:
The assessing authority disallowed the labor charges of Rs. 7,84,600 because the petitioner failed to produce adequate documentation, such as work orders, labor bills, and delivery receipts. The petitioner argued that the labor charges were for pure labor work without any transfer of materials, and requested adequate opportunity to present their case.

The court noted that the petitioner was not given an opportunity as per the clarification issued by the Commissioner of Commercial Taxes. Therefore, without delving into the merits, the court granted the petitioner liberty to file an appeal before the appellate authority within three weeks. The appellate authority was directed to entertain the appeal without insisting on the period of limitation.

Conclusion:
The writ petition was allowed to the extent of granting a concessional rate of three percent on the turnover covered by Form XVII declarations. The court clarified that this order does not preclude the assessing officer from proceeding against the purchaser within the provisions of the law. The petitioner was given liberty to appeal the disallowance of labor charges, and the appellate authority was instructed to consider the appeal without regard to the limitation period. No costs were imposed, and the connected miscellaneous petition was also closed.