2011 (9) TMI 912 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of Notification G.O. Ms. Nos. 1186 and 1187 regarding waiver of tax.
2. Validity of tax collection by the assessee and subsequent refund.
3. Application of the decision in Sree Annapoorna v. State of Tamil Nadu [1986] 63 STC 18 (Mad) by the Tamil Nadu Taxation Special Tribunal.
4. Entitlement of the assessee to refund of tax paid for the assessment year 1977-78.

Issue 1 - Interpretation of Notification G.O. Ms. Nos. 1186 and 1187 regarding waiver of tax:
The case involved the interpretation of Notification G.O. Ms. Nos. 1186 and 1187, which specified conditions for the waiver of tax. The court emphasized that the waiver applied only when the assessee had not collected tax. The court also discussed the constitutional amendment related to the taxation of food and drinks in hotels and restaurants, clarifying that non-liability to pay tax meant no tax could be collected, and any collected tax in such cases was refundable.

Issue 2 - Validity of tax collection by the assessee and subsequent refund:
The assessing authority initially granted a waiver to the assessee, but later initiated proceedings to withdraw the waiver due to tax collection by the assessee. The court held that if the transaction was not taxable, the assessee was entitled to a refund of any tax collected. The court emphasized that the waiver did not apply to transactions where tax liability did not exist.

Issue 3 - Application of the decision in Sree Annapoorna v. State of Tamil Nadu [1986] 63 STC 18 (Mad) by the Tamil Nadu Taxation Special Tribunal:
The Tamil Nadu Taxation Special Tribunal applied the decision in Sree Annapoorna case, ruling in favor of the assessee and ordering a refund of the tax paid. The tribunal held that waiver was available even if the assessee had collected tax, as long as the transactions were not taxable.

Issue 4 - Entitlement of the assessee to refund of tax paid for the assessment year 1977-78:
The court confirmed the tribunal's decision, stating that during the relevant assessment year, there was no liability for sales tax. Therefore, the conditions for granting waiver were unsustainable, and the assessee was entitled to a refund of the tax paid. The court dismissed the writ petition filed by the Revenue and instructed the Revenue to grant the refund promptly within ten weeks.

In conclusion, the judgment clarified the conditions for waiver of tax, emphasized the entitlement to a refund if the transaction was not taxable, and upheld the tribunal's decision in favor of the assessee for the assessment year 1977-78.