2015 (12) TMI 466 - HC - VAT and Sales Tax

Revision of assessment under section 16 of the Act - Determination of taxable turnover - Held that - there is absolutely no discussion as to why the product should be classified under residuary entry, viz., entry 40 of Part D of the First Schedule, when the petitioner s case is that it falls under entry 18(iii) of Part B of the First Schedule. Further more, the petitioner has relied on G. O. Ms. No. 30 CT (B1) dated March 27, 2002, stating that they fall within the category of electronic integrated circuits and micro-assemblies. Further, the petitioner stated that the Automatic Power Factor Control System is a brand name, but the commodity is microprocessor. This aspect of the matter was also not considered. In fact in the show-cause notice dated October 24, 2007, the respondent does not dispute the fact that the petitioner s product contained electronic integrated circuits and assemblies, nevertheless he proposed to revise the assessment. If the product contains electronic integrated circuits and assemblies, then it would fall under the sub-item No. 3 of G. O. Ms. No. 30 dated March 27, 2002 and consequently fall under entry 18 of Part B of the First Schedule and in such an event, the rate of tax would be only at four per cent. This aspect of the matter has not been considered by the respondent. Therefore, the impugned order is held to be bad in law. - petitioner does not disclose the turnover, but the proceeding itself was a revision of assessment under section 16 of the Act - Hence, the penalty imposed is absolutely uncalled for and accordingly the same is deleted. - Decided in favour of assessee.

Issues:
1. Challenge of order of revision of assessment under section 16 of the Tamil Nadu General Sales Tax Act, 1959.
2. Classification of the product for taxation at either 4% or 12% under different entries of the First Schedule.
3. Consideration of brand name versus actual product composition in tax assessment.
4. Lack of discussion in the impugned order regarding the classification of the product.
5. Imposition of penalty under section 12(3)(b) of the Act without proper grounds.

Analysis:
1. The petitioner, a registered dealer under the Tamil Nadu General Sales Tax Act, challenged the order of revision of assessment under section 16 of the Act. The initial assessment accepted the petitioner's claim of a 4% duty rate on sales of Automatic Power Factor Control Systems. However, a subsequent assessing officer proposed a revision to tax the product at 12% based on a clarification issued by the Department. The petitioner objected, citing the product's composition and classification under the First Schedule. The High Court found the impugned order lacking in discussion on the classification issue and held it to be legally flawed.

2. The key dispute revolved around the correct tax rate applicable to the Automatic Power Factor Control Systems. The petitioner argued that the product fell under entry 18 of Part B of the First Schedule, warranting a 4% tax rate. The respondent contended that the product should be taxed at 12%, as per a Departmental clarification. The Court noted that the respondent failed to address the specific composition of the product containing electronic integrated circuits and assemblies, which would place it under the 4% tax bracket. The Court emphasized the importance of proper classification based on the product's components.

3. The petitioner highlighted the distinction between the brand name "Automatic Power Factor Control System" and the actual composition of the product as microprocessor-based. The petitioner's argument focused on the technical aspects of the product, emphasizing its classification under the relevant entry of the First Schedule. The Court acknowledged the petitioner's explanation regarding the product's composition and criticized the lack of consideration given to this aspect in the impugned order.

4. The Court criticized the impugned order for its failure to provide a detailed discussion on why the product should be classified under a specific entry of the First Schedule. The Court noted discrepancies in the respondent's approach, particularly the lack of consideration given to the product's composition of electronic integrated circuits and assemblies. The Court highlighted the importance of a thorough analysis in tax assessments to ensure accurate classification and proper taxation.

5. Regarding the imposition of a penalty under section 12(3)(b) of the Act, the Court found it unjustified as the proceeding was a revision of assessment under section 16, not a case of non-disclosure of turnover. The Court deemed the penalty unwarranted and ordered its deletion. The Court allowed the writ petition, setting aside the impugned assessment order, and granted the respondent the option to issue a fresh notice for reclassification if deemed necessary, emphasizing adherence to legal procedures.

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