2014 (8) TMI 897 - HC - VAT and Sales Tax

Benefit of compounding system of assessment - Assessee made inter state purchases in earlier years - Tamil Nadu Value Added Tax Act, 2006 - Held that - dealer effecting second and subsequent sale within the State having a business relating to taxable goods less than ₹ 50 lakhs may pay tax at his option, for each year on his turnover relating to taxable goods at the rate not more than 0.5 per cent. The option to pay at the compounded rate has to be exercised (a) within 30 days from the date of commencement of business, (b) in cases of assessee whose turnover during the previous year is less than ₹ 50 lakhs he has to exercise the option on or before 30th of April of the year for which he exercises the option for the year 2008-09 within 30 days from the date of commencement of the Tamil Nadu Value Added Tax Ordinance, 2008. The proviso to sub-section (b) states that if a dealer s turnover reached ₹ 50 lakhs during the previous year, he shall not be entitled to exercise the option for, subsequent year. Section 3(4) of the Act refers to the entitlement of assessee to have the benefit of compounded rate at 0.5 per cent subject to his turnover relatable to taxable goods being less than ₹ 50 lakhs. The definition of turnover given under section 2(41) refers to aggregate amount for which goods are bought or sold, or delivered or supplied. Given the fact that the turnover assessed relates to taxable goods, the same has relevance to taxable turnover. As per section 2(38) of the Act, taxable turnover means the turnover on which the dealer has to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. Thus as far as section 3(4) is concerned, when the taxable turnover is less than ₹ 50 lakhs, he is entitled to have the benefit of compounded rate under section 3(4)(a) of the Act. There being no provision to deny the benefit of section 3(4) of the Act, on the mere ground of the petitioner s inter-State purchase in the previous years, I do not find any legal support in the order of the second respondent denying the benefit of section 3(4) of the Act for the assessment year 2009-10. The second respondent is hereby directed to apply provisions contained under section 3(4) of the Act subject to the petitioner satisfying all the other requirements of the Act. Decided in favour of assessee.

Summary

Issues:
1. Quashing of proceedings related to assessment year 2009-10 under Tamil Nadu Value Added Tax Act, 2006.
2. Eligibility for assessment under section 3(4) of the Act based on turnover and inter-State purchases.
3. Interpretation of provisions under section 3(4) of the Act for compounded scheme of taxation.
4. Disqualification for concessional levy under section 3(4) due to inter-State purchases in previous years.
5. Legal support for denying the benefit of compounded rate of tax under section 3(4) based on previous year turnovers.

Analysis:
1. The petitioner, a dealer in readymade garments, sought to quash proceedings related to the assessment year 2009-10 under the Tamil Nadu Value Added Tax Act, 2006. The petitioner opted for a tax rate not exceeding one percent under section 3(4) of the Act based on turnover criteria and local transactions. However, the respondent disputed the eligibility for this assessment due to alleged inter-State purchases in previous years.

2. The key issue revolved around the petitioner's eligibility for assessment under section 3(4) of the Act. The petitioner claimed that for the assessment year 2009-10, there were no inter-State purchases made. The respondent contended that inter-State purchases in previous years disqualified the petitioner from the concessional levy under section 3(4). The court analyzed the provisions and found no legal basis to disentitle the petitioner solely based on previous inter-State purchases.

3. The court delved into the interpretation of section 3(4) of the Act concerning the compounded scheme of taxation. It highlighted the conditions for exercising the option of paying tax at a reduced rate not exceeding one percent based on turnover thresholds. The judgment emphasized that as long as the taxable turnover remained below a certain limit, the dealer was entitled to the benefit of the compounded rate.

4. The judgment addressed the disqualification for the concessional levy under section 3(4) due to alleged inter-State purchases in previous years. It clarified that the Act did not contain provisions disentitling an assessee from claiming the compounded rate solely based on previous inter-State transactions. The court directed the respondent to apply the provisions of section 3(4) subject to the petitioner meeting all other statutory requirements.

5. The court examined the legal support for denying the benefit of the compounded rate of tax under section 3(4) based on previous year turnovers. It emphasized that unless the taxable turnover exceeded the specified limit, the petitioner should be allowed to avail of the concessional levy. The judgment concluded by allowing the writ petition and directing the respondent to adhere to the provisions of section 3(4) of the Act for the assessment year 2009-10.