2016 (7) TMI 991 - HC - VAT and Sales Tax

Power to levy penalty - petitioner refers to Section 67(3)(b)(i) and (ii) of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and submits that the officer is entitled to only call upon the petitioner to pay the tax and there is no power to levy the penalty. Held that - The order has been passed by the detention officer, who detained the goods and he has exercised his power under Section 67(3)(b) of the TNVAT Act and released the goods. This is evident from the impugned order itself that he has exercised his power under the said provision. Therefore, he could have directed the petitioner to pay tax and released the goods and left it open to the petitioner to work out other remedies available under the Act. However, this was not done by the respondents. The amount collected from the petitioner cannot be treated as penalty, but should be treated as tax. Accordingly, the writ petition is disposed of by directing the respondents to treat the remittance made by the petitioner, i.e., ₹ 2,29,680/- as tax and it is left open to the petitioner to work out his remedies available under the Act in the event they claim for adjustment.

Summary

Issues:
Challenge to release order by detention officer - Jurisdiction of detention officer to adjust payment as penalty or tax

Analysis:
The petitioner challenged a release order by the detention officer, arguing that the amount paid was for tax, not penalty. The petitioner referred to Section 67(3)(b)(i) and (ii) of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) to support the contention that the officer can only call for tax payment, not levy a penalty. The provision allows the officer to detain goods if tax evasion is suspected, directing payment of tax or security. The court noted that the officer lacked the power to levy a penalty.

The Additional Government Pleader cited Section 71(3) of the TNVAT Act, stating that penalties apply to those submitting false returns or evading tax willfully. However, the court highlighted that the detention officer, not the assessing officer, issued the order. The detention officer acted under Section 67(3)(b) of the TNVAT Act, detaining and releasing goods without the authority to impose penalties. The petitioner argued they had filed returns and claimed input tax credit, exceeding the VAT due, thus contending they owed no tax.

The court concluded that the amount paid should be considered as tax, not a penalty. The writ petition was disposed of, directing the respondents to treat the payment as tax and allowing the petitioner to pursue further remedies under the Act if needed. No costs were awarded, and the connected miscellaneous petition was closed.