2018 (10) TMI 1 - HC - VAT and Sales Tax

Compounding rate of tax - Section 3(4) of the TNVAT Act - Switch over to Form-I, instead of Form-K - Exceeding turnover of ₹ 50 lakhs - By the Tamil Nadu Ordinance No.1 of 2008, dated 17.06.2008, with effect from 18.06.2008, Section 3(4) of the Act was amended - effect of subsequent amendment in the Act - Held that - As per the amendment, on exceeding the sales turnover of ₹ 50 lakhs, it has to be intimated to the respondent in writing within seven days from the date on which such has so reached and such dealer has to pay tax under Sub-Section (2) on all his sales of rupees fifty lakhs and above. But, this amendment came into effect only from 18.06.2008. Even before the amendment the dealer has filed returns. Therefore, the impugned order cannot be sustained. However, as it is disputed by the respondent that the petitioner has not filed Form-I returns and he paid tax only at 0.5% by filing Form-K returns for the total taxable turnover, this Court is inclined to remit the matter back to the file of the respondent for fresh consideration -

Summary

Issues:
Assessment under Tamil Nadu Value Added Tax Act, 2006 for the year 2007-08; Application of compounding rate under Section 3(4) of TNVAT Act; Intimation requirement for sales turnover exceeding ?50 lakhs; Input Tax Credit eligibility; Compliance with statutory provisions; Validity of assessment order.

Analysis:

1. Assessment under TNVAT Act:
The petitioner opted for the compounding rate under Section 3(4) of the TNVAT Act for the assessment year 2007-08. The respondent issued a notice proposing to assess the sales turnover at 12.5% for the year, leading to a tax liability of ?8,83,654. The petitioner challenged this order, claiming entitlement to the compounding rate of 0.5% for sales turnover up to December 2007 and 4% for subsequent sales. The petitioner argued that the amendment to Section 3(4) cannot be applied retrospectively to the year in question.

2. Intimation Requirement and Input Tax Credit:
The respondent contended that the petitioner failed to inform the assessing authority in writing within 7 days of sales turnover exceeding ?50 lakhs, as required by Section 3(4) of the TNVAT Act. This failure, according to the respondent, resulted in the loss of Input Tax Credit eligibility for purchases preceding the threshold. The respondent sought dismissal of the petition based on this non-compliance.

3. Statutory Provisions and Compliance:
The Court examined the provisions of Section 3(4) of the TNVAT Act before and after the amendment brought into effect on 18.06.2008. The amendment mandated timely intimation to the authority upon reaching the sales turnover threshold for continued eligibility for the compounding rate. However, since the petitioner had filed returns even before the amendment, the Court found that the impugned order assessing tax at 12.5% could not be sustained.

4. Validity of Assessment Order:
Given the disputed facts regarding the petitioner's filing of returns and payment of tax under Form-I or Form-K, the Court decided to remand the matter back to the respondent for fresh consideration. The Court directed the respondent to reevaluate the petitioner's case based on objections, applying the relevant provision of Section 3(4) before the amendment date, and providing an opportunity for a personal hearing.

In conclusion, the Court set aside the impugned order and instructed the respondent to re-examine the petitioner's case within a specified timeframe. The writ petition was disposed of without costs, and the connected miscellaneous petition was closed.