2015 (7) TMI 503 - HC - VAT and Sales Tax

Rate of value added tax - 5% or 14.5% on Liquid Petroleum Gas (LPG) and Lubricants (Lubes) - Industrial Inputs or not - Held that - It has been consistently contended by the petitioner that they have inadvertently entered the commodity code and that they have actually collected only @ 5% from their customers and there was no time limit prescribed under Rule 6(3)(b) of TNVAT Rules for filing the certificates and it should be every month. Since there is no time limit prescribed in the Rule, it can be held that the petitioner can file the certificates by the end of the assessment year. I find a considerable force in the contention of the petitioner. Hence, in order to give a fair opportunity, I am of the view that the petitioner can be permitted to file the documents afresh by quoting correct code of commodity as well as by furnishing all the certificates required under Rule 6(3)(b) of the TNVAT Rules, 2007, subject to certain condition. Accordingly, the petitioner is directed to file the documents afresh by quoting correct code of commodity by furnishing all the certificates required under Rule 6(3)(b) of the TNVAT Rules, 2007, subject to the condition that the petitioner shall deposit 10% of the admitted tax liability, within a period of four weeks from the date of receipt of a copy of this order - Decided partly in favor of assessee.

Issues:
1. Dispute over the levy of tax rate on sales turnover.
2. Requirement of certificate under Rule 6(3)(b) of TNVAT Rules, 2007.
3. Consideration of objections raised by the petitioner.
4. Interpretation of commodity codes and their impact on tax rates.
5. Applicability of Circular clarifications issued by the Commercial Tax Department.

Issue 1: Dispute over the levy of tax rate on sales turnover:
The petitioner, engaged in importing and selling LPG and Lubricants, contested the proposed levy of tax at 14.50% instead of 5% on the total turnover. The respondent based their decision on the absence of a required certificate and the use of incorrect commodity codes in the returns. Despite objections, the respondent confirmed the higher tax rate, leading to the petitioner filing a writ petition challenging the order.

Issue 2: Requirement of certificate under Rule 6(3)(b) of TNVAT Rules, 2007:
The petitioner failed to produce certificates from customers, as mandated by Rule 6(3)(b) of TNVAT Rules, to claim the concessional rate of tax at 4% for industrial inputs. The court emphasized the mandatory nature of these certificates for availing the lower tax rate and noted the petitioner's non-compliance in this regard.

Issue 3: Consideration of objections raised by the petitioner:
The court examined the objections raised by the petitioner regarding typographical errors in entering commodity codes and the absence of a prescribed time limit for submitting certificates. It criticized the respondent's rejection of objections, emphasizing the petitioner's claim of collecting taxes at 5% and the lack of a specified time frame for certificate submission under Rule 6(3)(b).

Issue 4: Interpretation of commodity codes and their impact on tax rates:
The court acknowledged the petitioner's inadvertent selection of commodity codes, leading to the incorrect tax rate application. It highlighted the petitioner's actual tax collection at 5% and the absence of a clear time limit for certificate submission, supporting the petitioner's argument against the imposition of a higher tax rate.

Issue 5: Applicability of Circular clarifications issued by the Commercial Tax Department:
The court referenced a Circular clarifying tax rates on LPG under TNVAT Act, emphasizing the necessity of customer certificates for claiming the concessional 4% tax rate on industrial inputs. It upheld the importance of adhering to the Circular's guidelines for determining tax liabilities accurately.

In the final judgment, the court allowed the writ petition, directing the petitioner to submit the required documents correctly and deposit 10% of the admitted tax liability within a specified period. The respondent was instructed to reconsider the case based on the fresh submissions, ensuring a fair opportunity for the petitioner to rectify the errors. Failure to comply would result in the respondent proceeding as per the law, with no costs imposed on either party.

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