2017 (9) TMI 1304 - HC - VAT and Sales Tax

Levy of purchase tax - Section 7(A) of the TNGST Act - sale of Turmeric and Turmeric Powder - The case of the petitioners is largely based on the decision of the Hon ble Division Bench in the case of Hotel Shri Kannan Vs. State of Tamil Nadu 2007 (4) TMI 623 - MADRAS HIGH COURT , where it was held that Section 7(A) should be a charging section as well as a remedial one, in as much as it levies a tax on the purchases of goods by a dealer from a registered dealer or from any other person who may be either unregistered dealer or other persons such as agriculturists and other producers who are not liable to pay tax under the TNVAT Act on the sales or purchases. Held that - it would be improper to interdict the proceedings at the very threshold, namely, at the stage of show cause notice. Admittedly, the respondent has jurisdiction to issue the impugned show cause notices and what has now been contested by the petitioners is that they have no power to levy purchase tax. This issue involves adjudication of disputed questions of facts and therefore, the petitioners have to necessarily submit their objections to the impugned notices. The writ petitions are held to be premature and not maintainable - petition dismissed.

Summary

Issues:
Challenge to notice issued under Section 12 of TNVAT Act for levy of purchase tax on Turmeric and Turmeric Powder purchases without tax payment.

Analysis:

1. Issue of Notice under Section 12 of TNVAT Act:
- The petitioners, traders of Turmeric and Turmeric powder, challenged a notice issued by the respondent under Section 12 of the TNVAT Act for the levy of purchase tax on goods purchased without tax payment. The petitioners contended that they were entitled to benefit under past clarifications until withdrawn prospectively.

2. Interpretation of TNVAT Act and Circulars:
- The petitioners argued that the proposed levy of purchase tax was illegal and contrary to the provisions of the Act and circulars issued by the Department. They relied on a Division Bench decision that deemed the levy of purchase tax on Turmeric and Turmeric Powder as illegal.

3. Applicability of Tax Provisions:
- The respondent contended that the purchases made by the petitioners from unregistered dealers and sent outside the state for consignment sale were liable for tax under Section 12(1)(c) of the TNVAT Act. The respondent highlighted that the exemption was conditional and not fully applicable as claimed by the petitioners.

4. Judicial Interpretation and Precedents:
- The respondent cited judicial precedents to support the levy of purchase tax on goods sent outside the state for consignment sale. It was argued that the goods being taxable with conditional exemption, the proposed tax under Section 12 of the TNVAT Act was valid.

5. Court's Decision:
- The Court dismissed the writ petitions as premature, directing the petitioners to submit objections to the notices within 15 days. The Court emphasized that the issue involved disputed facts and required adjudication, urging the petitioners to present all contentions during the objection process. The Court upheld the respondent's jurisdiction to issue the notices and instructed a reasoned order to be passed post objections.

In conclusion, the High Court of Madras dismissed the writ petitions as premature, instructing the petitioners to submit objections to the notices within 15 days. The Court emphasized the need for adjudication of disputed facts and legal contentions, allowing the respondent to pass a reasoned order post objections.