2018 (4) TMI 280 - HC - VAT and Sales Tax

Validity of assessment order - TNVAT Act - whether the percentage of loss of materials (invisible loss) as computed by the respondent is correct? - effect of Section 19(2)(5) of the Act - Held that - Though on the date when the impugned order was passed, the decision in the case of Interfit Techno Products Ltd. Vs.Principal Secretary/Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai and another 2015 (4) TMI 935 - MADRAS HIGH COURT was very much available, the impugned order was set aside and the matter was remanded back to submit objections and the assessment was ordered to be re-done. Effect of Section 19(2)(5) of the Act - Held that - writ appeals have been preferred by the State, against the order in the case of Everest Industries Limited Vs. State of Tamil Nadu And Another, and the appeals are yet to be numbered - mere pendency of such appeals cannot operate as stay of orders in Everest Industries Limited - the assessment requires to be re-done. Petition allowed by way of remand.

Summary

Issues:
1. Calculation of invisible loss percentage by the assessing authority.
2. Interpretation and application of Section 19(2)(5) of the Tamil Nadu Value Added Tax Act, 2006.

Analysis:

1. Invisible Loss Percentage Calculation:
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, challenged the assessment orders for various assessment years. The primary issue was the correctness of the percentage of loss of materials, known as "invisible loss," as computed by the assessing authority. The court referred to a previous case, Interfit Techno Products Ltd. Vs. Principal Secretary/Commissioner of Commercial Taxes, where it was held that dealers must establish that certain circumstances specified in the law were not present in their manufacturing process. The court emphasized that adopting a uniform percentage for invisible loss without factual verification was unjustified. The court directed a fresh assessment with an inspection of the factory and consideration of the dealer's objections to determine the actual loss accurately.

2. Interpretation of Section 19(2)(5) of the Act:
Regarding the effect of Section 19(2)(5) of the Act, the respondent mentioned pending writ appeals challenging a previous decision in Everest Industries Limited Vs. State of Tamil Nadu. However, the court noted that the mere pendency of appeals did not stay the previous decision's orders. Therefore, the court directed a re-assessment in accordance with the existing law, emphasizing that the pendency of appeals did not affect the validity of the previous decision. Consequently, the impugned orders were set aside, and the matters were remitted back to the respondent for fresh consideration, allowing the petitioner to submit additional objections and ensuring a fair assessment process in compliance with the law.

In conclusion, the court allowed the writ petitions, set aside the impugned orders, and directed a re-assessment based on factual verification and compliance with the legal provisions. No costs were awarded, and the connected miscellaneous petitions were closed.