2015 (4) TMI 1001 - HC - VAT and Sales Tax

Disallowance of the benefit of payment of tax at compounded rates under Section 6(1) of the Tamil Nadu Value Added Tax, 2006 - petitioner had effected inter-state purchases - Held that - When respondent has accepted the contention of the petitioner that all the purchases were effected locally, still proceeded to levy tax on a new reasoning that the petitioner has not filed any documentary evidence for having exercised the option to pay tax at compounded rates, which was not there in the show cause notice, cannot be said to be correct in law and hence the impugned order has got to be interfered with. - Decided in favour of assessee.

Summary

Issues:
Challenge to order dated 10.03.2015 regarding disallowance of tax benefit under TNVAT Act for inter-state purchases during assessment year 2009-2010.

Analysis:
1. The petitioner contested the pre-assessment notice disallowing tax benefit under Section 6(1) of the TNVAT Act due to inter-state purchases in 2009-2010.
2. Section 6(1) allows works contractors to pay tax at compounded rates instead of Section 5 tax, with specific rates for different contract types.
3. Petitioner objected to the disallowance, stating all purchases were local, but a subsequent notice cited customs duty payment as grounds for denial.
4. Petitioner argued the levy on nearly Rs. 2 crores was unlawful, emphasizing the option under Section 6(1) for compounded tax payment.
5. Despite objections, respondent confirmed the denial, questioning lack of evidence for opting for compounded rates and levying tax without prior notice.
6. Petitioner contended respondent's rejection of purchase details for lack of proper authorization and changing reasoning violated natural justice principles.
7. The respondent did not counter the petitioner's arguments.
8. The judge agreed with the petitioner, finding fault in the respondent's new reasoning for tax levy without prior notice, leading to setting aside the order.
9. The writ petition was allowed, the order dated 10.03.2015 was annulled, and the respondent was permitted to reevaluate the issue following due process. No costs were awarded.