2019 (5) TMI 1627 - HC - VAT and Sales Tax

Recovery of excess tax paid which was not liable to be paid - cheques issued under coercion - higher rate of tax demanded on capital goods - Vertical Band saw machines, Horizontal Sawing (Trolly) Machines, Log Saw Mill and all kinds of wood working Machines - HELD THAT - Even though, the petitioner has issued four cheques valued at ₹ 9,28,317/- to the Enforcement Wing Officers towards alleged tax amount payable by the petitioner, the said tax according the petitioner is not payable by them. According to the petitioner, the aforesaid four cheques were obtained by the Enforcement Wing Officers from the petitioner, only under the threat of coercion and undue influence. After issuing the cheques, the petitioner has also issued stop payment instructions to their Bankers for the cheques handed over to the Enforcement Wing Officers. In the instant case, even without affording an opportunity to the petitioner, the respondent has issued the impugned notice under Section 45 of the Tamil Nadu Value Added Tax Act 2006 on the presumption that the petitioner has admitted his liability whereas as seen from the available records excepting for the issuance of cheques, there is no conclusive evidence to prove that the petitioner had admitted his liability. The impugned notice dated 27.01.2016 is hereby quashed and the matter is remanded back to the respondent for fresh consideration and the respondent is granted liberty to initiate fresh legal action after affording sufficient opportunity to the petitioner to raise all objections available to them under law - petition allowed by way of remand.

Summary

Issues:
Challenge to impugned notice dated 27.01.2016 under TIN No.33065700409 regarding tax payment for capital goods at 5% instead of 14.5% for sales to unregistered dealers.

Analysis:
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act 2006, manufactures capital goods as defined under Section 2(11) of the Act. They paid tax at 5% for these goods. However, during an inspection, Enforcement Wing Officers collected cheques for a higher amount, alleging underpayment of tax at 14.5% for sales to unregistered dealers. The petitioner claimed coercion and stopped payment on the cheques, challenging the demand. The respondent issued a notice under Section 45 of the Act to the petitioner's Bankers demanding payment. The petitioner filed a Writ Petition challenging this notice.

The petitioner argued that the cheques were obtained under coercion, and they were only liable to pay tax at 5% for capital goods. They contended that the respondent's actions were arbitrary and lacked proper assessment. The respondent, represented by the Additional Government Pleader, justified the notice based on the petitioner's admission of underpayment and sales to unregistered dealers.

The Court examined Section 2(11) of the Act defining capital goods and a clarification under Section 48-A stating its applicability to sales to unregistered dealers. It noted the petitioner's consistent stand on tax liability at 5% for capital goods. The Court found no conclusive evidence of admission of liability by the petitioner except for issuing cheques. It criticized the respondent for presuming admission without proper opportunity for objections.

The Court quashed the impugned notice and remanded the matter to the respondent for fresh consideration. It directed the respondent to afford the petitioner sufficient opportunity to raise objections and pass final orders in line with the Commissioner's clarification. The respondent was given eight weeks to take necessary action.

In conclusion, the Writ Petition was disposed of without costs, with the direction to the respondent for a fresh review of the matter in accordance with the Court's observations.