2019 (4) TMI 1634 - HC - VAT and Sales Tax

Jurisdiction - Invocation of revisional power by Joint Commissioner - TNGST Act - HELD THAT - The Joint Commissioner has erred in invoking the revisional power to bring to tax the aforesaid items of receipts, either receipts for the job work or the receipts for designing the moulds for manufacturing of pet bottles for the specified customers, as taxable turnover in the hands of the Assessee. Even though the Assessee was engaged in the business of manufacture and sale of pet bottles (plastic bottles), but it is only the bottles manufactured from its own raw materials and sold in general market could be taxed in the hands of the Assessee as the taxable turnover. The receipts for the job work of converting the raw materials from plastic into pet bottles in a specified size or design for other customers is not a taxable turnover in the hands of the Assessee. Even though the learned counsel for the Revenue submitted before us that at the time of inspection, these moulds were not produced for verification, he was unable to support the said stipulation made in the show cause notice given by the revisional authority with the help of any document or certain report that the further verification of the inspection report by the enforcing authority by producing him in cross-examination of the Assessee during the course of revisional proceedings - nothing as a fact was proved against the Assessee that all the moulds were not available with the Assessee for verification. Thus, the revisional authority has not correctly invoked his revisional jurisdiction in this matter, under Section 34 of the Act, which empowers him to call for and examine an order passed by the Appellate Assistant Commissioner - The discretionary power given under Section 34 of the Act to the revisional authority is wide and therefore, the said discretionary power has to be exercised with a great amount of circumspection, but the reason for invoking such revisional power should be based on the relevant materials and such materials should inspire confidence when the reasons are examined by the appellate forum or Constitutional Courts. Petition allowed.

Issues Involved:
1. Taxability of receipts for designing moulds for manufacturing 'Pet Bottles'.
2. Taxability of job work receipts for converting raw materials into 'Pet Bottles'.
3. Validity of invoking suo motu revisional jurisdiction by the Joint Commissioner.
4. Legality of the penalty imposed by the Assessing Officer.

Issue-Wise Detailed Analysis:

1. Taxability of Receipts for Designing Moulds:
The Assessee received ?8,00,000 from four companies for manufacturing specific moulds and dies for 'Pet Bottles'. The Appellate Assistant Commissioner held that these receipts were not taxable as the moulds were designed according to customer specifications and were retained as assets by the Assessee. The Joint Commissioner, however, reversed this decision, asserting that the moulds should be part of the taxable turnover. The High Court concluded that the designing charges for moulds, treated as assets by the Assessee, were not taxable turnover, as these moulds were not sold to any other party or even to the specified customers.

2. Taxability of Job Work Receipts:
The Assessee's receipts of ?4,78,595 for job work, specifically for converting raw materials supplied by customers into 'Pet Bottles', were also under scrutiny. The Appellate Assistant Commissioner found that these receipts were not taxable turnover as they were merely job work. The Joint Commissioner disagreed, but the High Court upheld the Appellate Assistant Commissioner's view, stating that job work receipts for converting raw materials into specified bottles are not taxable turnover.

3. Validity of Invoking Suo Motu Revisional Jurisdiction:
The Joint Commissioner invoked suo motu revisional jurisdiction under Section 34 of the Tamil Nadu General Sales Tax Act, 1959, to revise the Appellate Assistant Commissioner's order. The High Court found that the Joint Commissioner erred in invoking this power, as the reasons provided did not justify the revision. The discretionary power under Section 34 must be exercised with circumspection and based on relevant, confidence-inspiring materials, which was not the case here.

4. Legality of the Penalty Imposed:
The Joint Commissioner upheld the penalty imposed by the Assessing Officer, despite the Assessee's objections. The High Court, however, found that the penalty was unjustified as the receipts in question were not taxable turnover. The Appellate Assistant Commissioner had given valid reasons for deleting the turnover from the taxable category, and the High Court restored this decision.

Conclusion:
The High Court allowed the revision petition filed by the Assessee, setting aside the Joint Commissioner's order dated 09.09.2002, and restored the Appellate Assistant Commissioner's order dated 02.12.1994. The Court concluded that the receipts for designing moulds and job work were not taxable turnover, and the Joint Commissioner had incorrectly invoked revisional jurisdiction. Consequently, the penalty imposed was also deemed unjustified.

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