2007 (8) TMI 683 - HC - VAT and Sales Tax

Vires of section 6(4) of 2002 Act challenged - Held that - While considering the Voluntary Disclosure of Income Scheme, 1988, when it was attacked that the provisions of section 67(2) provided that if the declarant failed to pay tax within a period of three months as specified, the declarant file shall be deemed never to have been made under the Scheme, the Supreme Court rejected the contention by observing that the Scheme has conferred the benefit on those, who had not disclosed their income earlier by affording protection against the possible legal consequences of such non-disclosure under the Income-tax Act. Where the assessees seek to claim the benefit under the statutory scheme, they are bound to comply strictly with the condition under which the benefit was granted. There was no scope for the application of any equitable consideration when the statutory provisions of the Scheme were stated in the plain language. The Supreme Court has further held that the court has no power to act beyond the power of the statutory scheme under which the benefits have been granted to the assessee. In view of the foregoing reasons the order of the Tribunal declaring section 6(4) of 2002 Act as unconstitutional is not correct. The said order of the Tribunal is liable to be set aside and the same is set aside. The writ petition is allowed as prayed for

Summary

Issues:
Challenge to the constitutionality of sub-section (4) of section 6 of the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002.

Detailed Analysis:

1. Constitutionality of Section 6(4) of the 2002 Act:
The first respondent-dealer challenged the constitutionality of sub-section (4) of section 6 of the 2002 Act, alleging it violated Article 14 of the Constitution of India. The Special Tribunal allowed the original petition, holding that the provision was indeed violative of Article 14. The Government Pleader argued that the excess amount paid by the assessee, as per section 6(4), was not refundable. The Court analyzed the purpose of the 2002 Act, emphasizing its aim to expedite dispute settlement and provide concessions for tax, penalty, and interest payments. The Court held that the simplified dispute resolution method under the Act was optional for assessees with pending appeals, and once an assessee opted for it, they could not challenge the validity of the provision prohibiting excess amount refunds. The Court also cited Supreme Court decisions supporting legislative latitude in economic matters and the need for pragmatic approaches in taxation legislation.

2. Comparison with Kerala General Sales Tax Act and Voluntary Disclosure Scheme:
The Court drew parallels with the Kerala General Sales Tax Act provisions on compounding rates of tax and a Supreme Court decision related to the Voluntary Disclosure of Income Scheme, 1988. It highlighted that opting for alternate tax payment methods was voluntary, and assessees were bound to comply strictly with the conditions of such schemes. The Court rejected contentions that equitable considerations could override statutory provisions and emphasized the need to adhere to the terms of statutory schemes to avail benefits.

3. Decision and Conclusion:
Based on the analysis and precedents cited, the Court concluded that the Tribunal's declaration of section 6(4) of the 2002 Act as unconstitutional was incorrect. Therefore, the Court set aside the Tribunal's order and allowed the writ petition filed by the Revenue without any costs. The judgment underscored the legislative intent behind the 2002 Act, the optional nature of the dispute resolution method it offered, and the necessity for assessees to abide by the conditions of statutory schemes to benefit from them.