2018 (5) TMI 280 - HC - VAT and Sales Tax

Rate of tax on turnover - Section 16(1)(b) of TNGST Act - Held that - the issue is squarely covered by the decision in the case of Madras Electrical Conductors (P) Ltd. Versus State of Tamil Nadu 1995 (10) TMI 216 - MADRAS HIGH COURT - the Assessing Authority is directed to refix the levy of tax at 3% on the disputed turnover - tax case revision dismissed.

Issues Involved:
1. Levy of higher tax rate on the turnover.
2. Levy of penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959.
3. Eligibility for concessional tax rate under Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959.
4. Classification of pulpwood as timber.
5. Validity of the Tribunal's reliance on previous judgments and government orders.

Detailed Analysis:

1. Levy of Higher Tax Rate on the Turnover:
The assessee was initially assessed at a 3% tax rate on a turnover of ?7,17,108/- for the year 1994-95. However, the assessment was revised to levy an 8% tax rate. The Appellate Assistant Commissioner confirmed this higher levy. The Tribunal, however, reduced the tax rate back to 3% based on the precedent set by the Madras High Court in M/s. T.S.R. Company vs. State of Tamil Nadu, and the Supreme Court's ruling in Mukesh Kumar Aggarwal & Co. vs. State of Madhya Pradesh. The Tribunal concluded that pulpwood did not qualify as timber and thus was eligible for the concessional tax rate under Section 3(3).

2. Levy of Penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959:
The initial assessment included a penalty of ?61,850/- under Section 16(2). The Appellate Assistant Commissioner allowed the appeal concerning the penalty, effectively removing it. This decision was not contested further in the Tribunal or the High Court.

3. Eligibility for Concessional Tax Rate under Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959:
The primary contention was whether pulpwood could be taxed at a concessional rate of 3% under Section 3(3). The Tribunal, relying on the Supreme Court's interpretation and the Madras High Court's precedent, concluded that pulpwood did not fall under the definition of timber and hence was eligible for the concessional rate. The Tribunal emphasized that the commodity dealt with by the assessee was only pulpwood, which was not classified as timber.

4. Classification of Pulpwood as Timber:
The Revenue argued that pulpwood should be classified as timber, which would make it ineligible for the concessional rate. However, the Tribunal and the High Court referred to the Supreme Court's definition and found that pulpwood did not meet the criteria for timber. The Tribunal noted that the wood sold was specifically for industrial use as pulp and not for building or carpentry, which are typical uses for timber.

5. Validity of the Tribunal's Reliance on Previous Judgments and Government Orders:
The Tribunal's decision was based on established judicial precedents, including the Supreme Court's ruling in Mukesh Kumar Aggarwal & Co. and the Madras High Court's decision in M/s. T.S.R. Company. Additionally, the High Court noted that the government had issued an order (G.O.Ms.No.92) waiving the differential tax for the period in question, which further supported the Tribunal's decision. The High Court upheld the Tribunal's order, dismissing the Revenue's appeal.

Conclusion:
The High Court sustained the Tribunal's order to levy a 3% tax rate on the disputed turnover and dismissed the Revenue's appeal. The penalty under Section 16(2) was not reinstated. The classification of pulpwood as non-timber was upheld, making it eligible for the concessional tax rate under Section 3(3). The court also acknowledged the government order waiving the differential tax for the relevant period.

← Previous Next →