2015 (6) TMI 304 - HC - VAT and Sales Tax

Input tax credit - petitioner purchases raw rubber/latex from the growers and pays purchase tax on the same - Whether the petitioner is entitled to the benefit of input tax credit by taking benefit of the CST payable in respect of inter-State sales - Held that - Input tax has been defined to mean the tax paid or payable under the Act. Obviously, the word Act has to mean the Tripura Value Added Tax Act, 2004 as per the definition of the word Act contained in section 2(1) of the Act. Therefore, input tax is relatable to the tax paid or payable only under the TVAT Act and not under the Central Sales Tax Act. Reference may also be made to the definition of the word Tax which has been defined in section 2(28) to mean tax payable under the Act, i.e. the TVAT Act. Intention of the State of Tripura was to give benefit of input tax credit only in respect of sales intended or made within the State of Tripura. There is no doubt in our mind that the Act specifically excludes from its ambit, the inter-State sales and the benefit of tax paid on inter-State sales cannot be availed of by the petitioner to claim input tax credit. No document like a project report has been placed on record to show that when the petitioner set up the plant, his intention was to sell the goods within the State of Tripura. Some material like a project report or a feasibility report should have been produced before this Court to show that when the plant was set up, it was the intention of the dealer to sell the goods within the State of Tripura. There may be a case where the dealer sets up a plant to produce some goods which can be used by some other factory within the State. If this is reflected in the feasibility report and evidence is led to show that for reasons beyond the control of the dealer, the other plant where the goods of the dealer were to be consumed has shut down, then the dealer can be heard to argue that he was forced to sell the goods outside the State of Tripura. There is no such material placed on record in this case. Court cannot get inside the mind of the petitioner. The intention of the party has to be determined from the material placed on record. In the present case, almost the entire production for the five assessment years has been sold outside the State of Tripura. The intention of a party has to be judged from its action and as far as the actual action is concerned, it is clear that right from the very inception, the petitioner has been selling almost all its produce outside the State of Tripura. Therefore, we have no hesitation in holding that it was not the intention of the petitioner, while setting up the plant, to sell the produce in Tripura. Movement of the rubber thread commenced from Tripura. Therefore, the authorities in the State of Tripura are entitled to collect the tax. Sub-section (2) makes it amply clear that the authorities empowered to assess, reassess, collect and enforce payment of any tax under the sales tax law of the appropriate State shall on behalf of the Government of India asses, reassess, collect and enforce payment of tax including interest and penalty payable by a dealer under the Central Act. This leaves no manner of doubt that the Commissioner of Taxes, Tripura had the authority to pass the impugned orders. It is well settled law that if an authority has the power and jurisdiction to take certain action, then merely because a wrong provision of law is mentioned or because no provision of law is mentioned, the action cannot be set aside on this ground. After considering the entire record, we are clearly of the view that the intention of the taxing authorities of the State was to collect the CST which had not been deposited by the assessee by claiming input tax credit. We are in agreement with the law laid down by the Allahabad High Court 1970 (9) TMI 93 - ALLAHABAD HIGH COURT and, therefore, we hold that merely because there was no reference to the provisions of the Central Sales Tax will not make the action illegal, if otherwise the authorities of the State had jurisdiction to take the said action. Section 85 empowers the Commissioner to delegate his powers under the Act to any person appointed under sub-section (1) of section 18 to assist him. When both the sections are read together, it is amply clear that the power of the Commissioner to delegate his powers is hedged by only one condition that he can delegate these powers only to a person appointed under sub-section (1) of section 18 to assist him. The words assist him have to be read in the context of section 18(1) and, therefore, the Commissioner can only delegate the powers to a person appointed to assist him under section 18, and not to any other person. In the present case, the Superintendent of Taxes has been appointed under section 18(1) and, therefore, also the Commissioner had the power to delegate his authority to him. Five notices should have been issued for the five assessment years giving at least 15 days time to the assessee to respond. The manner in which the notices have been issued is not proper. The first notice was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of returns for the period 2008-09 to 2013-14 (upto 31-12-2013) is necessary. What are the reasons have not been spelt out. The Superintendent wanted to reopen the entire proceedings from the year 2008 till 2014. This notice is dated 01-02-2014 and it requires the petitioner to appear before the Superintendent of Taxes on 13-02-2014. To say the least, the manner in which this notice has been issued is highly improper. No reasons have been spelt out as to why detailed scrutiny is required and nothing is stated in the notice with regard to the nature of the inquiry. Basic assessments assessing the tax and interest payable for these three years are upheld. With regard to the years 2011-12 and 2012-13, since there is some dispute with regard to the C forms and we are of the opinion that no proper opportunity was given to the petitioner, the assessment orders are set aside and the proceedings shall now commence from the stage of filing of reply by the petitioner. - The petitioner did not hide any facts. It claimed input tax credit by claiming that it was entitled to claim the benefit in terms of the TVAT Act. The taxing authorities of the State of Tripura permitted the petitioner to take benefit of input tax credit on these averments. Suddenly after five years the authorities became wiser and found that the assessee is not entitled to such benefit. We are in agreement with the State that the assessee may not be entitled to such benefit and, therefore, it is liable to pay the amount of Central Sales Tax collected by it along with the statutory interest payable under section 25 of the Act which is 18% per annum. The assessee claimed input tax credit by depicting the true and correct facts. Though we have decided the case against the assessee, we are clearly of the view that in such a situation it cannot be said that the dealer had claimed this input tax credit with a view to evade or avoid payment of tax. It is a plain and simple case of different interpretations of the provisions of law. The assessee interpreted section 10 in a particular manner and this interpretation was accepted by the revenue also. In such an eventuality, it would be highly unfair and unjust to impose the maximum penalty of 150%. This is a fit case where the minimum penalty of 10% alone should have been imposed. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Entitlement to input tax credit for inter-State sales.
2. Jurisdiction of State authorities to collect Central Sales Tax (CST).
3. Adequacy of notice provided to the petitioner.
4. Legality of the penalty imposed.

Detailed Analysis:

Entitlement to Input Tax Credit for Inter-State Sales:
The petitioner argued that input tax credit should be available for inter-State sales under section 10 of the Tripura Value Added Tax (TVAT) Act. The court examined sections 2(13), 2(28), and 10 of the TVAT Act, noting that input tax credit is only applicable for sales within Tripura or exports outside India. Sub-section 10(6) explicitly excludes input tax credit for inter-State sales. The court concluded that input tax credit is not available for CST under the TVAT Act, reaffirming that the benefit is restricted to intra-State transactions and exports.

Jurisdiction of State Authorities to Collect CST:
The petitioner contended that the State authorities lacked jurisdiction to collect CST, which should be collected by the Central Government. The court referred to section 9(2) of the CST Act, which empowers State authorities to assess, collect, and enforce CST as if it were a State tax. The court upheld the jurisdiction of the State authorities to collect CST, as the movement of goods commenced from Tripura.

Adequacy of Notice Provided to the Petitioner:
The petitioner argued that the notices issued were inadequate and did not provide sufficient time to respond. The court agreed, noting that the notices did not adhere to the 15-day minimum period required by rule 21(4) of the TVAT Rules. The court found the notices issued for the assessment years 2011-12 and 2012-13 particularly inadequate, as they did not allow sufficient time for the petitioner to prepare a response. Consequently, the court set aside the assessment orders for these years and remitted the matters back to the Assessing Officer for reconsideration with adequate notice.

Legality of the Penalty Imposed:
The petitioner challenged the imposition of a 150% penalty, arguing it was excessive and without proper justification. The court reviewed the assessment orders and found no reason provided for imposing the maximum penalty. The court observed that the petitioner had not concealed any facts and had claimed input tax credit based on its interpretation of the law, which was initially accepted by the tax authorities. The court concluded that the maximum penalty was unjustified and reduced it to the minimum penalty of 10% for all five assessment years.

Directions:
The court upheld the assessment of tax and interest for the years 2008-09, 2009-10, and 2010-11. For the years 2011-12 and 2012-13, the court set aside the assessment orders and remitted the matters to the Assessing Officer to allow the petitioner to produce additional documents, including 'C' forms. The court also quashed the 150% penalty and directed that only a 10% penalty should be imposed.