2017 (7) TMI 456 - HC - VAT and Sales Tax

Jurisdiction of Assessment Order passed - inclusion of discount in the taxable turnover of the appellant - The appellant says that since, he had not availed of any Input Tax Credit (ITC), no reversal of the same could have been brought about, as is required under the provisions of Section 19(20) of the 2006 Act, in case, the said provisions is triggered, as was erroneously sought to be done by the respondent - Held that - A bare reading of the Explanation II(ii) would show that the discount cannot be included in the taxable turnover of an assessee. The Assessing Officer, it appears, has included the taxable turnover by relying upon the circular dated 30.11.2016. Further, the Assessing Officer, in coming to the conclusion that the appellant had sold goods at a price lesser than the price at which the goods were purchased by him, has adverted to the following workings which have been gleaned Form W.W, filed by the appellant for the year 2014-2015. The very basis of the calculation is flawed. The Assessing Officer was required to compare the unit sale price of the goods in issue with the unit purchase price. The inclusion of the opening stock, to our minds, has led to an erroneous conclusion that the appellant has sold the goods at a price lesser than the price at which they had been purchased by him. Before concluding a best judgment assessment, the Assessing Officer is required to reach a satisfaction in this behalf. Clearly, such an exercise has not been carried out by the Assessing Officer. Furthermore, a perusal of the provisions of Section 19(20) would also show that, only if, the Assessing Officer comes to the conclusion that the price of the goods sold is lesser than the price at which they were brought, can he, obtain jurisdiction to adjust the ITC, to the extent the amount of ITC exceeds the output tax on the goods. As indicated herein above, the appellant has not availed of ITC in respect of the subject goods i.e., cement. Therefore, there was no occasion for the Assessing Officer, in any event, to invoke the provisions of Section 19(20) of the 2006 Act. The Assessing Officer is, therefore, directed to redo the assessment - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Jurisdiction of the Assessing Officer under Section 19(20) of the Tamil Nadu Value Added Tax Act, 2006.
2. Inclusion of discounts in the taxable turnover.
3. Availability and impact of alternative remedy.
4. Proper assessment procedure under Section 24 of the Tamil Nadu Value Added Tax Act, 2006.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer under Section 19(20) of the Tamil Nadu Value Added Tax Act, 2006:
The appellant argued that the Assessment Order was without jurisdiction as it erroneously invoked Section 19(20) of the Tamil Nadu Value Added Tax Act, 2006 (the 2006 Act). The appellant contended that since no Input Tax Credit (ITC) was availed, the provisions of Section 19(20) could not be applied. The court agreed with the appellant, noting that Section 19(20) could only be invoked if the appellant had sold goods at a price lesser than the purchase price and had claimed ITC, which was not the case here.

2. Inclusion of Discounts in the Taxable Turnover:
The core issue was whether the Assessing Officer could include discounts in the taxable turnover. The appellant argued that the inclusion of discounts was contrary to Section 2(41) of the 2006 Act, which explicitly excludes discounts from the definition of turnover. The court examined the definition and concluded that the discount could not be included in the taxable turnover. The Assessing Officer's reliance on a circular dated 30.11.2009 was found to be misplaced as it did not override the statutory provisions.

3. Availability and Impact of Alternative Remedy:
The learned single Judge had dismissed the writ petition on the ground that an alternative remedy was available. The appellant argued that the presence of an alternative remedy should not bar the court from exercising its jurisdiction, especially when the illegality in the Assessment Order was palpable. The court concurred, stating that the availability of an alternative remedy does not preclude judicial intervention if the order is evidently flawed.

4. Proper Assessment Procedure under Section 24 of the Tamil Nadu Value Added Tax Act, 2006:
The court found that the Assessing Officer failed to conduct the necessary inquiry under Section 24 of the 2006 Act, which requires determining whether the sales were shown at abnormally low prices compared to the market price. The Assessing Officer's calculation method, which included the opening stock to conclude that the sale price was lower than the purchase price, was flawed. The court emphasized that a proper assessment should compare the unit sale price with the unit purchase price, not aggregate figures.

Conclusion:
The court set aside the Assessment Order to the extent that it included the discount in the taxable turnover. The Assessing Officer was directed to redo the assessment in compliance with the statutory provisions and the court's observations. The appeal was allowed, and the impugned judgment was set aside, closing the connected miscellaneous petition.

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