2007 (6) TMI 493 - HC - VAT and Sales Tax

Issues Involved:
1. Eligibility for concessional rate of tax under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Jurisdiction of the assessing authority to impose tax and penalty on the seller for contravention of conditions of form XVII.
3. Availability and appropriateness of alternative remedy through statutory appeal.

Issue-wise Detailed Analysis:

1. Eligibility for Concessional Rate of Tax under Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959:

The appellant firm, engaged in the manufacture of control panels, was initially assessed at a concessional tax rate of three percent on a turnover of Rs. 14,86,537. However, a pre-revision notice was later issued, proposing to reassess this turnover at twelve percent. The assessing officer argued that control panels, classified as "plant and machinery," do not qualify for the concessional rate under section 3(3) of the Act. Despite the appellant's objections, the concessional rate was disallowed.

The court referenced the case of Premier Electro-Mechanical Fabricators v. State of Madras, which established that a dealer is entitled to the concessional rate if three requisites are met: the goods must be listed in the First Schedule, the sale must be to another dealer, and the goods sold must be used as component parts in the manufacture of other goods listed in the First Schedule. The court emphasized that once the selling dealer produces a declaration in form XVII, no further obligation exists to verify the purchaser's use of the goods.

2. Jurisdiction of the Assessing Authority to Impose Tax and Penalty on the Seller:

The court cited the Supreme Court's decision in Chunni Lal Parshadi Lal v. Commissioner of Sales Tax, which clarified that the seller is not responsible for the purchaser's use of the goods once a valid declaration is provided. The selling dealer's duty is limited to verifying the purchaser's registration and the goods' specification in the certificate. Any misapplication by the purchaser incurs penalties solely on the purchaser, not the seller.

The court reiterated this principle in Sree Murugan Engineering Products v. Commercial Tax Officer, stating that the seller cannot be penalized for the purchaser's false declaration or misuse of goods. The court found that the assessing officer's order to disallow the concessional rate was without jurisdiction, as penalties for form XVII violations apply only to the purchasing dealer.

3. Availability and Appropriateness of Alternative Remedy through Statutory Appeal:

The single judge initially dismissed the writ petition on the grounds that an alternative statutory appeal was available. However, the Division Bench rejected this plea, referencing Harbanslal Sahnia v. Indian Oil Corporation Ltd., which held that the rule of alternative remedy is discretionary, not compulsory. The court noted exceptions where writ petitions are permissible, such as violations of fundamental rights, principles of natural justice, or jurisdictional overreach by authorities.

The court concluded that the impugned order was without jurisdiction and covered by precedents that exempt the seller from penalties for the purchaser's misuse of goods. Thus, the writ petition was allowed despite the availability of an alternative remedy.

Conclusion:

The writ appeal was allowed, setting aside the single judge's order and reinstating the concessional tax rate for the appellant. The court clarified that the judgment does not preclude the assessing officer from redoing the assessment lawfully. No costs were imposed, and the connected miscellaneous petition was closed.

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