2018 (2) TMI 1223 - HC - VAT and Sales Tax

Concessional rate of tax - purchase of spares for machinery, against Form XVII - case of Revenue is that spares and machineries, intended for repair and reconditioning, are not eligible to be purchased, against Form XVII, under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959, as per the clarification issued by the Commissioner of Commercial Taxes, Chennai K.Dis.Acts Cell-I/13063/2004, dated 14.09.2004 - Whether the disputed turnover is not eligible for concessional rate of tax as provided under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959? - Whether the penalty under Section 23 of the Tamilnadu General Sales Tax Act, 1959 is warranted in this case? Held that - In the present case, the goods sold fall within the items mentioned in Entry 3 of the Eighth schedule. Therefore, the assessee has satisfied the first condition. In respect of the second condition, ie., use in the factory site within the State, there is no dispute that the same were used in the factory site, within the State. Hence, the second condition is also satisfied. The third condition is that the goods should be used in manufacture. Use may be direct or indirect, in the process of manufacture. Plant and machinery are used for the purpose of manufacturing vanaspathi and bakery shortening. Since the goods are installed and used in the factory site, the respondent-dealer is entitled to the concessional rate of tax at 3%. Therefore, the Tribunal has rightly held that the disputed turnovers are eligible for concessional rate of tax, provided under Section 3(5) of the Tamilnadu General Sales Tax Act, 1959. The assessee has satisfied all the conditions enumerated and Section 3(5) of the Act and hence, they are entitled to the concessional rate of tax under Section 3(5) of the Act - Section 3(5) of the Act is a beneficial provision. It provides for concession in tax to encourage industrial activity. It is well settled principle that a taxing provision, granting concessional and incentives for promoting growth and development, should be construed liberally. Revision dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility for concessional rate of tax under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959.
2. Imposition of penalty under Section 23 of the Tamil Nadu General Sales Tax Act, 1959.

Eligibility for Concessional Rate of Tax:
The case involved a dispute regarding the eligibility of the assessee for a concessional rate of tax under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959. The assessing authority revised the assessment due to the claim of a concessional rate of tax on the purchase of spares for machinery against Form XVII. The Appellate Assistant Commissioner allowed the appeals, stating that the purchases were eligible for the concessional rate of tax. The Tribunal examined the case and held that the disputed turnovers were indeed eligible for the concessional rate of tax under Section 3(5) of the Act. The Tribunal found that the circular relied upon by the revenue did not apply to the facts of the case, as the dealer was a manufacturer using the spares in machinery for manufacturing goods. Therefore, the Tribunal dismissed the appeals against the assessing officer's decision.

Imposition of Penalty:
Regarding the imposition of a penalty under Section 23 of the Act, the assessing officer had imposed a penalty for the alleged misuse of Form XVII. However, since the Tribunal had already determined that the assessee was eligible for the concessional rate of tax, it concluded that there was no misuse of the Form XVII declarations. Consequently, the Tribunal held that there was no basis for the imposition of a penalty under Section 23. The Tribunal's decision was based on the finding that the disputed turnovers were eligible for the concessional rate of tax, and therefore, there was no misuse of the Form XVII declarations. The Tribunal's decision was upheld, and the Tax Case Revisions were dismissed by the Court, ruling in favor of the respondent/assessee and against the Revenue.

This detailed analysis of the judgment highlights the key issues of eligibility for a concessional rate of tax and the imposition of a penalty under the Tamil Nadu General Sales Tax Act, 1959. The judgment provides a comprehensive examination of the facts, legal provisions, and reasoning behind the decisions made by the Tribunal and the Court.