2018 (12) TMI 1468 - HC - VAT and Sales Tax

Maintainability of petition - availability of statutory appellate remedy - validity of assessment orders passed in respect of the assessment years 2014-15 and 2015-16 - interpretation of statute - Entry No.108 of Part B of Schedule I and Section 15 of TNVAT Act, 2006 read with Schedule IV, Part B, Entry 54 of the said Act - slaughtering, cleaning and cutting the poultry/live chicken - whether fall within the meaning of 'processing' - classified under Entry 108 of Part-B of Schedule-I or not. Held that - Entry 108 deals with the poultry, which has undergone the process such as slaughtering, defeathering, cleaning and cutting so as to enable the consumer of the same to carry it to the next stage of cooking. Certainly, the petitioner is not entitled to take shelter under the word meat referred to under Entry 54 especially, when the word poultry is specifically referred to therein, apart from the word 'meat', while describing the goods under such Entry. Even otherwise, 'meat' referred to under Entry 54 is a meat other than branded, processed and packed. Thus, it is evident that if an act of process takes place in respect of the poultry, such poultry will not fall under Entry 54, since, the term 'poultry' referred to therein would certainly indicate poultry as such or live poultry and not the processed one. Therefore, if the poultry is processed, the same would certainly fall under Entry 108 of Part B of I Schedule only and not under Entry 54 of Part B of IV Schedule. Whether the admitted activities carried on by the petitioner viz., slaughtering, defeathering, cleaning and cutting the poultry would be construed as an act of processing? - Held that - The above said activities carried on by the petitioner on the poultry, that too, with the aid of the sophisticated machineries, would certainly fall under the purview of 'processing' and consequently, supply of such chicken which undergone such process, would certainly fall under Entry 108 in Part B of I Schedule and not under Entry 54 in Part B of IV Schedule. Thus, the activities carried on by the petitioner viz., defeathering, cleaning and cutting the chicken would certainly fall under the purview of processing and consequently, such sale would fall under Entry 108 of Part B of Schedule I and not Entry 54 of Part B of Schedule IV, as claimed by the petitioner - the Assessing Authority has rightly brought the turnover to tax by bringing such sale under Entry 108. Petition dismissed - decided against petitioner.

Issues Involved:
1. Validity of the assessment orders and demand notice.
2. Interpretation of "processed" under the TNVAT Act.
3. Applicability of tax exemption under Entry 54 of Part B of Schedule IV.
4. Applicability of tax under Entry 108 of Part B of Schedule I.
5. Alleged discrimination against the petitioner.
6. Maintainability of the writ petition versus statutory appellate remedy.
7. Imposition of penalty under Section 27(3)(c) of the TNVAT Act.

Detailed Analysis:

1. Validity of the Assessment Orders and Demand Notice:
The petitioner challenged the assessment orders dated 14.07.2017 and 01.08.2017 for the assessment years 2014-15 and 2015-16, and the demand notice dated 27.10.2017. The petitioner argued that the respondent did not properly consider their objections and imposed a penalty of 150% without due process.

2. Interpretation of "Processed" under the TNVAT Act:
The central issue was the interpretation of the term "processed" as used in the TNVAT Act. The petitioner claimed that their activities of slaughtering, cleaning, and cutting chicken did not constitute "processing." The court, however, found that these activities, especially when performed with sophisticated machinery, fell within the meaning of "processing."

3. Applicability of Tax Exemption under Entry 54 of Part B of Schedule IV:
The petitioner argued that their sales to restaurants and hotels should be exempt under Entry 54 of Part B of Schedule IV, which exempts "meat, fish including dry fish, prawn and other aquatic products (other than branded, processed and packed items), eggs, poultry and livestock (other than race horses)." The court concluded that the term "poultry" in Entry 54 referred to live poultry, and once the poultry was processed, it no longer fell under this exemption.

4. Applicability of Tax under Entry 108 of Part B of Schedule I:
The respondent contended that the petitioner's activities fell under Entry 108 of Part B of Schedule I, which covers "processed meat, poultry and fish" and is taxable at 5%. The court agreed, stating that the petitioner's activities constituted processing, and therefore, the sales were taxable under Entry 108.

5. Alleged Discrimination Against the Petitioner:
The petitioner claimed that other companies engaged in similar activities were not taxed, alleging discrimination. The court dismissed this argument, stating that the petitioner could not claim exemption based on the alleged failure of the authorities to tax other entities. The court emphasized that the petitioner must comply with the statutory provisions regardless of others' compliance.

6. Maintainability of the Writ Petition versus Statutory Appellate Remedy:
The respondent argued that the petitioner should have pursued the statutory appellate remedy instead of filing a writ petition. The court acknowledged that while a statutory remedy was available, the issue at hand involved the interpretation of statutory provisions, which justified the maintainability of the writ petition.

7. Imposition of Penalty under Section 27(3)(c) of the TNVAT Act:
The court upheld the imposition of a 150% penalty, finding that the petitioner had not satisfactorily explained the discrepancies in turnover between the books of accounts and the returns. The court found that the audited financial statements did not support the petitioner's claim for exemption.

Conclusion:
The court dismissed the writ petition, upholding the assessment orders and the imposition of the penalty. The court found that the activities of slaughtering, cleaning, and cutting poultry constituted processing, making the sales taxable under Entry 108 of Part B of Schedule I, and not exempt under Entry 54 of Part B of Schedule IV. The court also dismissed the allegations of discrimination and maintained that the writ petition was justifiably maintainable for interpreting statutory provisions.

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