2015 (10) TMI 48 - HC - VAT and Sales Tax

Determination of taxable turnover - inclusion of the exempted sales value - Held that - Despite the fact that the 1970 Act underwent substantial amendments in 1976, 1980, 1999 and 2002, the Legislature did not introduce a section exclusively providing for definitions of words and expressions. It is true that the Tamil Nadu Additional Sales Tax Act, 1970 did not contain a provision that expressly stipulated that the words and expressions contained therein would have the same meaning as assigned to them in the Tamil Nadu General Sales Tax Act, 1959. It must be remembered that the charging Section 2 as it was originally enacted in 1970, spoke only about total turnover. It was only in 1976 that the expression total turnover was changed to taxable turnover . But, neither of these expressions have been defined in the 1970 Act. Once it is seen that the Tamil Nadu Additional Sales Tax Act, 1970 does not contain a provision for definitions, once it is seen that under Section 2(1)(b) of the Tamil Nadu Additional Sales Tax Act, 1970, the provisions of the 1959 Act are made applicable to the additional sales tax payable under the 1970 Act and once it is seen that even for the purposes of assessment, levy of penalty, appeals and revisions, the assessees as well as the Department may have to take recourse only to the 1959 Act, it follows as a corollary that the Tamil Nadu Additional Sales Tax Act, 1970 does not have independent legs to stand on its own. - in the absence of a definition of the expression taxable turnover in the Tamil Nadu Additional Sales Tax Act, 1970, there is no other alternative except to rely upon the definition of the same expression available in Section 2(p) of the Tamil Nadu General Sales Tax Act, 1959. This is permissible both on account of Section 2(1)(b) of the 1970 Act and also on fundamental principles of statutory interpretation. A comparison between the two notifications would reveal something interesting. While the notification for exemption in respect of tax payable under the Tamil Nadu General Sales Tax Act, 1959 was issued in exercise of the powers conferred by Section 17(1) of the 1959 Act, the notification for exemption in respect of additional sales tax payable under the 1970 Act was also issued in exercise of the powers conferred by Section 17(1) of the 1959 Act read with Section 2(1)(b) of the 1970 Act. This is in view of the fact that the Tamil Nadu Additional Sales Tax Act, 1970 does not contain a separate provision for grant of exemption. Therefore, even the notification for exemption from payment of additional sales tax under the 1970 Act had to be issued only under Section 17(1) of the 1959 Act. The Government was able to invoke Section 17(1) of the 1959 Act, only by virtue of Section 2(1)(b) of the 1970 Act. - Tribunal committed an error of law in treating the exempted sales effected by the petitioners to M/s.Hyundai Motors India Limited, as part of the taxable turnover of the petitioner for the purposes of Tamil Nadu Additional Sales Tax Act, 1970. Consequently, the levy of penalty was wrong and the second question has also to be answered in favour of the petitioner - Decided in favour of assessee.

Summary

Issues Involved:
1. Inclusion of exempted sales in taxable turnover for calculating the threshold limit under the Tamil Nadu Additional Sales Tax Act, 1970.
2. Legality of penalty imposed under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959.

Issue-wise Detailed Analysis:

1. Inclusion of Exempted Sales in Taxable Turnover:

During the assessment year 2004-2005, the petitioner sold rubber/PVC profiles and rubber hoses to Hyundai Motors India Limited and Ford India (P) Limited, with sales to both companies being exempted under specific Government Orders. The Assessing Officer included these exempted sales in the taxable turnover to determine if the petitioner exceeded the threshold limit for the applicability of the Tamil Nadu Additional Sales Tax Act, 1970. This led to the imposition of additional sales tax and a penalty.

The petitioner argued that the taxable turnover for the purposes of the Tamil Nadu General Sales Tax Act, 1959, and the Tamil Nadu Additional Sales Tax Act, 1970, should be the same. The petitioner contended that exempted sales should not be included in the taxable turnover, as it would defeat the purpose of the exemption. The Tribunal, however, upheld the inclusion of exempted sales in the taxable turnover.

The High Court analyzed the historical context and amendments of the Tamil Nadu Additional Sales Tax Act, 1970, and noted that the Act did not contain a provision for definitions and relied on the definitions in the Tamil Nadu General Sales Tax Act, 1959. The Court emphasized that the 1970 Act depended on the 1959 Act for definitions, assessment, levy, collection, and statutory remedies. It concluded that the expression 'taxable turnover' in the 1970 Act should have the same meaning as in the 1959 Act.

The Court held that the Tribunal committed an error of law by including the exempted sales to Hyundai Motors in the taxable turnover for the purposes of the 1970 Act. The Court noted that the First Appellate Authority had correctly excluded the sales to Ford India based on similar exemptions under both Acts.

2. Legality of Penalty Imposed:

The penalty was imposed under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, based on the inclusion of exempted sales in the taxable turnover. Since the Court found that the inclusion of exempted sales was incorrect, the basis for the penalty was also invalid.

The Court concluded that the levy of penalty was wrong and answered the second question of law in favor of the petitioner.

Conclusion:

The High Court ruled in favor of the petitioner, holding that the Tribunal erred in including exempted sales in the taxable turnover for the purposes of the Tamil Nadu Additional Sales Tax Act, 1970. Consequently, the penalty imposed was also deemed incorrect. The revision was allowed, and the Tribunal's order was set aside.