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2014 (1) TMI 99 - HC - VAT and Sales TaxDemand of tax - Valuation of taxable turnover - Whether the Vend Fee paid by the licencee-TAMIL NADU STATE MARKETING CORPORATION LIMITED was to be included in the taxable turnover of the assessee - Penalty under Section 12(5)(iii) - Held that - Under Section 17-C of the Tamil Nadu Prohibition Act, 1937, the State has the authority to grant to any person or persons on such conditions and for such period as it deemed fit an exclusive or other privilege insofar as manufacture or selling by retail within any local area of Indian Made Foreign Liquor. As far as Section 17-C(1-A) is concerned, the exclusive privilege on wholesale vending is given to TASMAC, a Corporation wholly owned and controlled by the State Government, for the whole of the State of Tamil Nadu and the provision is emphatic that no other person is entitled to any privilege of supplying, by wholesale Indian Made Foreign Spirit for the whole or any part of the State. Vend fee payable under the The Tamil Nadu Indian Made Foreign Spirit (Supply by Wholesale) Rules, 1981 has nothing to do with the manufacturer - it essentially deals with the grant or privilege and licence to sell the Indian Made Foreign Spirit on a whole sale basis. As may be noted from the provisions of the Act and the Rules made, the privilege and the license granted to manufacture and the privilege and the licence to sell as a whole sale dealer is treated differently from the licence/ privilege given to the wholesale dealer, by framing two different rules namely, Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 and The Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules 1981 respectively. As far as the whole sale dealer licensee is concerned, apart from discharging the liability of the manufacturer to pay the excise duty and the vend fee, the whole sale dealer is also obliged to pay vend fee. In accordance with the provisions of sub-rule (1), there is also the levy of vend fee at the rates, which would be collected from the licensee, TASMAC on the stock of Indian Made Foreign Spirits either received from a manufactory inside the State or removed from the manufactory outside the State or removed from the bonded ware house licensed under the Tamil Nadu Indian made Foreign Spirits (Storage in Bond) Rules, 1981. Vend fee paid by the licencee-TASMAC as per rule 15(1) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981 has no relevance to what is paid under Rule 22(2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981, which is for the discharge of the liability on the manufacturer and were liable to be included in the taxable turnover of the assessee. Consequently, the Rules thus being very clear, we have no hesitation in holding that the Sales Tax Appellate Tribunal committed serious error in holding that the contention of the Revenue that the Vend Fee paid by the licensee- TASMAC should be included in the assessees taxable turnover - Therefore, assessment included Vend Fee paid under Rule 15(1) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 by TASMAC, does not form part of the taxable turnover of the assessee. Assessment in all these cases were made under Section 16 of the Tamil Nadu General Sales Tax Act, which deals with assessment of escaped turnover. Sub-Section (1) of Section 16 of the Act, speaks about the jurisdiction of the Officer to assess the turnover escaping assessment and Section 16(1)(b) refers to the turnover, which has been assessed at a rate lower than the rate at which it is assessable. Sub Section (2) of Section 16 of the Act, speaks about the levy of penalty in a case of assessment under clause (a) to Sub Section 1 of Section 16 of the Act. Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act relates to a regular assessment. Section 12(5) of the Act is a provision relating to penalty under three categories. For the purpose of this case, Section 12(5)(iii) is the provision invoked by the Officer, which relates to the submission of incorrect and incomplete return. Thus, while making an assessment, if the Officer is satisfied that the accounts maintained by the assessee are correct and the returns submitted by the assessee is found to be incorrect or incomplete, the Assessing Officer may either by a separate order or in the order of assessment, levy penalty at a sum not less than 50% of the sum and not more than 150% of the difference in the tax payable on the turnover disclosed in the return and thus determined by the Officer. The proviso to said Section says that no penalty under Sub Sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the assessment relates to and unless a dealer affected has had a reasonable opportunity of showing cause against the imposition - Vend Fee collected from the licensee-viz., TASMAC as per Rule 15(2) of the Tamil Nadu Indian made Foreign Spirits (Supply by Wholesale) Rules, 1981 cannot be included in the taxable turnover of the assessee and consequently, the assessment cannot be sustained. On the same line of reasoning, the question of levying of penalty also does not arise in these cases. - Decided in favour of assessee.
Issues Involved:
1. Inclusion of Vend Fee in taxable turnover. 2. Levy of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959. Detailed Analysis: 1. Inclusion of Vend Fee in Taxable Turnover: The primary issue was whether the Vend Fee paid by the Tamil Nadu State Marketing Corporation Limited (TASMAC) under Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, should be included in the taxable turnover of the assessee. The court examined the distinction between Vend Fees under Rule 15 and Rule 22 of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. The Vend Fee under Rule 22 was a liability of the manufacturer and was included in the taxable turnover. However, the Vend Fee under Rule 15 was an independent obligation on the part of the wholesaler (TASMAC) and was not related to the sale by the manufacturer. The court concluded that the Vend Fee paid by TASMAC under Rule 15 should not be included in the taxable turnover of the assessee. 2. Levy of Penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959: The second issue was the legality of the penalty levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959, for the assessment years 1983-84, 1984-85, and 1985-86. The court noted that the assessment was made under Section 16, which deals with escaped turnover. Penalty under Section 16(2) requires proof of wilful non-disclosure by the assessee. The court found that the penalty under Section 12(5)(iii) was inappropriate as it pertains to regular assessments and not to cases of escaped turnover. The court held that the penalty could not be sustained due to the lack of evidence of wilful non-disclosure by the assessee. Conclusion: The court held that the Vend Fee paid by TASMAC under Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, should not be included in the taxable turnover of the assessee. Consequently, the assessments including such Vend Fee were set aside. Additionally, the penalty levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959, was also set aside due to the inappropriate application of the penalty provision. The tax case revisions filed by the assessee were allowed, and the orders of the Sales Tax Appellate Tribunal were set aside.
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