2019 (2) TMI 1737 - HC - VAT and Sales Tax

Maintainability of appeal - principles of res-judicata - the dealer once again gone into the question of tax liability in respect of disputed turnover when the same was attained finality by order of first appellate authority and no appeal was filed against it - compounding rate of tax - the respondent/dealer has not exercised his option at the time of commencement of assessment year. Whether the Appellate Tribunal is right in law in entertaining the appeal of the dealer once again gone into the question of tax liability in respect of disputed turnover when the same was attained finality by order of first appellate authority and no appeal was filed against it? - HELD THAT - Originally Assessment Order dated 29.5.2009 was put in challenge before the Commercial Tax Officer (Appeal). He has ordered remanding the matter relating to the assessment on the turnover of 8, 26, 029/- after setting aside the order of the Assessing Officer. In other aspects the appeal was modified and dismissed - After remand the Assessment Order was again passed on 10.10.2002 which was again challenged by way of appeal before the Appellate Assistant Commissioner CT-VI Chennai. By his order dated 18.11.2003 the Appellate Assistant Commissioner dismissed the appeal on the ground that the assesssee has not challenged the order of remand and against which the Appeal was filed before the Tamil Nadu Sales Tax Appellate Tribunal Chennai. The Appellate Tribunal considered the judgment of the Kerala High Court in M SYED ALAVI AND OTHERS VERSUS STATE OF KERALA 1981 (5) TMI 113 - KERALA HIGH COURT held that the docrtine of res judicata normally would not be attracted to statutory proceedings to entertain the appeal and allowed the appeal and held that merely because the option was not exercised by the assessee within a stipulated time same cannot be the ground for denial for concession in the rate of tax conferred in the statue on the assessee. Thus entertaining the appeal on the ground that principles of res judicata normally would not be attracted in the tax matters - the first Substantial Question of Law is answered against the Revenue. Compounding rate of tax - Whether the Tribunal is right in law in accepting the claim of compounding rate of tax under Section 7(c) of the Act when the respondent/dealer has not exercised his option at the time of commencement of assessment year? - HELD THAT - It is to be noted that when the assessee works contractor was engaged at the fag end of the financial year Revenue cannot contend that the tax to be paid as stipulated in the proviso to Section 7-C of the Act. It is not the case of the Revenue that the asssessee has engaged in work contracts much prior to the commencement of the financial year. That being the case it cannot be contended by the Revenue that the option should have been exercised within the time stipulated in the proviso to Section 7-C. Once Return is filed by the assessee and accepted by the Revenue it goes without saying that the assessee in fact opted for availing the benefit under Section 7-C of the Act. Admittedly there is no particular format was prescribed. Therefore once the assessee has filed the Return paid the relevant tax and the same has been accepted by the assessee it is deemed that option has been exercised properly by the assessee. Therefore the order of the Tribunal extending the benefit to the assessee does not require any interference. The order of the Tribunal extending the benefit to the assessee does not require any interference - the Second Substantial Question of law is also answered against the Revenue. Revision dismissed.

Summary

Issues Involved:

1. Whether the Appellate Tribunal was right in entertaining the appeal regarding tax liability on disputed turnover, which had attained finality by the order of the first appellate authority.
2. Whether the Tribunal was correct in accepting the claim of compounding rate of tax under Section 7(c) of the TNGST Act when the dealer did not exercise the option at the commencement of the assessment year.

Detailed Analysis:

Issue 1: Finality of Tax Liability on Disputed Turnover

The first issue revolves around whether the Appellate Tribunal was justified in revisiting the tax liability on the disputed turnover of ?8,26,029/-, which had already attained finality by the first appellate authority's order. Initially, the dealer was assessed for the year 1999-2000, and the assessment was challenged before the Appellate Assistant Commissioner, who remanded the case for reassessment. The reassessment was again challenged, and the Appellate Assistant Commissioner dismissed the appeal. The dealer then approached the Tamil Nadu Sales Tax Appellate Tribunal, which allowed the appeal, leading to the current revision petition by the Revenue.

The Tribunal relied on the Kerala High Court's judgment in M. Syed Alavi and others v. State of Kerala, which held that the doctrine of res judicata does not typically apply to statutory proceedings related to tax liability. The Tribunal also referenced the Karnataka High Court's judgment in Ashok Gramodyoga Sahakara Sangha Ltd. v. Commissioner of Commercial Taxes in Karnataka, which supported the view that higher authorities could examine the correctness of orders made by subordinate appellate authorities in tax matters. Consequently, the Tribunal's decision to entertain the appeal was upheld, and the first substantial question of law was answered against the Revenue.

Issue 2: Compounding Rate of Tax under Section 7(c) of the TNGST Act

The second issue concerns whether the dealer was entitled to the compounding rate of tax under Section 7(c) of the TNGST Act despite not exercising the option at the beginning of the assessment year. The dealer, a works contractor, entered into a contract at the end of the financial year and filed returns, paying tax at the rates specified under Section 7-C(1) of the Act. The Tribunal found that since no specific format was prescribed for exercising the option, the dealer's filing of returns and payment of tax sufficed as an exercise of the option.

The Tribunal's decision was supported by the fact that the dealer was engaged in the contract at the end of the financial year, making it unreasonable to expect the option to be exercised at the start of the year. The Tribunal's observation that the provision of Rule 7-C is procedural and directory, not mandatory, was deemed unwarranted. Nonetheless, the Tribunal's decision to extend the benefit to the dealer was upheld, and the second substantial question of law was also answered against the Revenue.

Conclusion:

The High Court dismissed the Tax Case Revision Petition and confirmed the Tribunal's findings on both issues, ruling that the Tribunal was correct in entertaining the appeal and extending the benefit of the compounding rate of tax to the dealer.