2010 (7) TMI 933 - HC - VAT and Sales Tax

How to apply section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970, which existed prior to Act 31 of 1996, since by Act 31 of 1996, the previous section 2(1)(a) came to be amended and after the amendment, section 2(1)(a) and 2(1)(aa) came to be introduced? Held that - Since the taxable turnover did not cross ₹ 100 crores during the said financial year, in the case of the assessee, the liability of additional sales tax will have to be calculated only for the period up to July 31, 1996 and not beyond and that too, on the taxable turnover that was available up to that date, viz., July 31, 1996. Having regard to the said position, the impugned order of the Tribunal as well as that of the assessing authority are liable to be set aside. While setting aside the order of the assessing authority, we direct the assessing authority to pass fresh orders by keeping the taxable turnover of the assessee up to July 31, 1996 in a sum of ₹ 31,94,415 and calculate the tax at the rate of 1.5 per cent on the sum of ₹ 21,94,415, (i.e.), after deducting the first ten lakhs as provided under the proviso to sub-clause (i) of section 2(1)(a).

Summary

Issues Involved:
1. Application of Section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970, before and after its amendment by Act 31 of 1996.
2. Determination of additional sales tax liability for the assessment year 1996-97.
3. Impact of the judgment in Siemens Ltd. v. State of Tamil Nadu on the amended provisions.
4. Calculation of additional sales tax for the period before and after the amendment in the financial year.

Issue-wise Detailed Analysis:

1. Application of Section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970:
The primary issue revolves around the application of Section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970, which was amended by Act 31 of 1996. Before the amendment, Section 2(1)(a) outlined the additional tax rates for dealers based on their taxable turnover. Post-amendment, Sections 2(1)(a) and 2(1)(aa) were introduced, altering the tax structure and rates. The amendment was challenged, and the Tamil Nadu Taxation Special Tribunal in the Siemens case struck down certain provisions of the amended Section 2(1)(a).

2. Determination of Additional Sales Tax Liability for the Assessment Year 1996-97:
The court had to determine how the additional sales tax liability for the petitioner-assessee should be calculated for the assessment year 1996-97. The unamended provision of Section 2(1)(a) was applicable up to July 31, 1996, and the amended Sections 2(1)(a) and 2(1)(aa) were effective from August 1, 1996. The court examined the respective provisions and the judgment in the Siemens case to ascertain the correct method of calculating the additional sales tax liability.

3. Impact of the Judgment in Siemens Ltd. v. State of Tamil Nadu:
The Siemens judgment had a significant impact on the amended provisions. The Special Tribunal struck down clause (a) of Section 2(1) and deleted certain words in Section 2(1)(aa). Consequently, the court had to interpret the amended provisions in light of the Siemens judgment. The court clarified that the additional sales tax liability up to July 31, 1996, should be calculated based on the unamended Section 2(1)(a), while the amended provisions would apply from August 1, 1996, onwards.

4. Calculation of Additional Sales Tax for the Period Before and After the Amendment:
The court provided a detailed explanation of how the additional sales tax should be calculated for the financial year 1996-97. The taxable turnover up to July 31, 1996, should be assessed based on the unamended Section 2(1)(a), with no additional tax for the first ten lakhs of rupees and varying rates for turnovers exceeding ten lakhs. For the period from August 1, 1996, the amended provisions would apply, but only if the taxable turnover for the entire financial year exceeded one hundred crores of rupees. The court emphasized that the financial year could be bifurcated to apply the respective provisions for the periods before and after the amendment.

Conclusion:
The court concluded that the taxable turnover of the assessee up to July 31, 1996, was Rs. 31,94,415. Since the taxable turnover for the entire financial year did not exceed one hundred crores, there was no need to calculate additional sales tax for the period after July 31, 1996. The assessing authority's calculation of additional sales tax at the rate of two per cent for the entire year was incorrect. The court directed the assessing authority to recalculate the tax liability based on the unamended provision for the period up to July 31, 1996, deducting the first ten lakhs of rupees and applying a rate of 1.5 per cent on the remaining turnover. The revised orders were to be passed before August 10, 2010, considering the prevailing Samadhan Scheme. The tax case was disposed of accordingly, with no costs.