2019 (3) TMI 441 - HC - VAT and Sales Tax

Principles of natural justice - It is the case of the petitioner that the second respondent while passing the impugned assessment order failed to consider the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016 - Held that - It is not in dispute that G.O.Ms.Nos.78 and 79 referred to supra that are applicable for automobile dealers belonging to sale of used cars. In those G.Os, it has been cleared that only 4% tax payable if the sales were not effected upto 11.07.2011 and 5% were effected for sales from 12.07.2011 onwards. The Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, has clarified both the G.O.Ms.No.78 and 79. They have clarified that only 4% of the tax is payable if the sales were effected upto 11.07.2011 and 5% tax is payable if the sales were effected from 12.07.2011 onwards. Despite categorical clarification given in the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, the respondent has passed the impugned assessment order levying higher rate of tax at 14.5%, based on the entire value of the cars in stead of 5% on the value addition of the cars alone. This Court is of the considered view that the assessment order has been passed without jurisdiction and without applying the mind to G.O.Ms.78 and 79 referred supra as well as the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, by the second respondent - the matter is remitted back to the second respondent for fresh consideration and the second respondent after giving sufficient opportunity to the petitioner - petition allowed by way of remand.

Summary

Issues:
Challenge to assessment order based on incorrect tax rate application.

Analysis:
The petitioner challenged an assessment order dated 27.11.2018, contending that the second respondent failed to consider the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016. The petitioner argued that the tax rate applicable for selling used/reconditioned cars for an automobile dealer was 4% as per Notification No.II(1)/CTR/30(a-5)/2007 and 5% as per Notification No.II(1)/CTR/12(R-20)/2008. Despite notifying the second respondent about the relevant notifications, the impugned assessment order directed the petitioner to pay tax at 14.5% on the entire sale value of used cars, instead of the correct rate of 5% as per the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016. The petitioner argued that the assessment order was passed without jurisdiction and without considering the applicable notifications and rulings.

The petitioner's counsel referred to the relevant notifications and judgments, highlighting that automobile dealers were only liable to pay tax on value addition without input tax credit, not on the entire sale value. The counsel cited the judgment of the Hon'ble Supreme Court in Commissioner of Sales Tax, Uttrapradesh Vs. Indra Industries, emphasizing that the interpretation provided by the taxing authority on the law is binding on that authority. The petitioner contended that the tax rate should have been applied as per the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, and the impugned assessment order was erroneous.

The Additional Government Pleader for the respondents argued that the reply submitted by the petitioner and the relevant notifications were duly considered. However, it was noted that principles of natural justice were not followed, and the petitioner had an appeal remedy available. The court observed that the applicable notifications clarified that only 4% tax was payable for sales before 11.07.2011 and 5% for sales from 12.07.2011 onwards. Despite the clear clarification in the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, the respondent passed the assessment order levying tax at 14.5% on the entire sale value instead of 5% on value addition alone. The court held that the assessment order was passed without jurisdiction and remitted the matter back to the second respondent for fresh consideration, emphasizing the binding nature of the interpretation provided by the taxing authority.

In conclusion, the court quashed the impugned assessment order dated 27.11.2018 and directed the second respondent to reconsider the matter, providing the petitioner with an opportunity to raise objections and granting a right to a personal hearing. The second respondent was instructed to pass final orders within six weeks from the date of receipt of the court's order. The writ petition was disposed of with no costs, and the connected miscellaneous petition was closed.