2013 (10) TMI 136 - HC - VAT and Sales Tax

Classification of goods - Audit u/s 43 - Held that - Section 43 of the Value Added Tax Act empowers the Commissioner to audit the accounts, registers or documents of a dealer for any year or part thereof not being a period which ended five years previous to the date of selection. Sub-section 3 as already indicated above requires the preparation of the report containing the observation and findings, regarding correctness of the returns, admissibility of various claims of the dealer for which the audit is conducted and the preparation of computation sheet quantifying the tax interest or late fees. Sub-section 5A of the Act says that if the dealer fails to pay the tax interest and late fees stated in the computation sheet within one month of the receipt of such report, it would culminate into an order of assessment and shall be deemed to be notice of demand. There is a distinction between the levy and the assessment, as the levy is wider in its import than the assessment so as to include both the imposition of tax and the assessment - Section 5A of Section 43 of the Act specifically provides that in default of the payment of the tax interest or the late fees stated in the computation sheet, it would partake the character of an order of assessment and shall be deemed to be a notice of demand. Rule 54 (7A) of the West Bengal Value Added Tax Rule, 2005 also makes the determination of tax interest or late fees in the computation sheet be deemed to be an order of assessment in default of its payment within a specified date. Audit made under Section 43 and the computation of tax, penalty and late fees shall be deemed to an order of assessment in default of the payment within one month from the date of the service of the report and the computation sheet is amenable to be challenged before the tribunal under Section 5 & 6 of the Taxation Tribunal Act - Decided against assessee.

Summary

Issues Involved:

1. Maintainability of the writ petition due to Section 5 & 6 of the West Bengal Taxation Tribunal Act, 1987.
2. Classification of mosquito repellent and toilet cleaner under the West Bengal Value Added Tax Act.
3. Jurisdiction of the High Court versus the Taxation Tribunal.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:

The respondents raised a preliminary objection regarding the writ petition's maintainability, citing Section 5 & 6 of the West Bengal Taxation Tribunal Act, 1987. These sections exclude the High Court's jurisdiction in matters of tax adjudication under specified State Acts, directing such disputes to the Taxation Tribunal. The court noted that the West Bengal Value Added Tax Act, 2003 is included in the Schedule of the Taxation Tribunal Act, thus falling under its purview.

2. Classification of Mosquito Repellent and Toilet Cleaner:

The petitioner classified mosquito repellent under the brand name 'motrin' as an insecticide and the toilet cleaner under the brand name 'harpic' as a pesticide, under Entry 22 of Part-1 to Schedule-C of the West Bengal Value Added Tax Act. The petitioner argued that these products should be taxed as insecticides and pesticides, respectively, referencing the Supreme Court judgment in Sonic Electrochem & Another vs. Sales Tax Officer & Others and the Allahabad High Court judgment in M/s Knight Queen Industries (p) Ltd., vs. State of U.P. However, an audit report dated 30.04.2013 contradicted this classification, stating that these products do not fall under Entry 22, leading to a tax demand.

3. Jurisdiction of the High Court vs. Taxation Tribunal:

The court examined the jurisdictional conflict between the High Court and the Taxation Tribunal. The respondents cited the Supreme Court judgment in L. Chandra Kumar vs. Union of India, which held that High Courts retain the power of judicial review under Articles 226/227 of the Constitution but should not be the first instance for such matters. Instead, cases should first go through the tribunal, with the High Court exercising supervisory jurisdiction. The court concluded that the writ petition should have been routed through the Taxation Tribunal, as per the provisions of Section 5 & 6 of the Taxation Tribunal Act.

Conclusion:

The court held that the writ petition is not maintainable as it should have been first addressed by the Taxation Tribunal. The audit and subsequent tax demand fall within the tribunal's jurisdiction, and any challenge should be routed through it. The High Court can only review such matters under its supervisory jurisdiction after tribunal adjudication. Thus, the writ petition was dismissed, with no order as to costs.