2019 (8) TMI 754 - HC - VAT and Sales Tax

Liability of tax - payment of tax by job-worker - TNVAT Act - HELD THAT - There is no disputation that the principle of law or the proposition is that, in cases of TDS, when the deductee has paid the entire tax liability on the monies received, the entity/person, who has the obligation to deduct at source cannot be mulcted with liability. However, the rider is that the entity which has the obligation of deduction and has not complied with the same is liable to pay interest for the delayed period, besides penalty under Section 13(5) and 13(8) (respectively) of TNVAT Act. It is made clear that respondent shall redo the assessment after issuing show cause notices afresh to writ petitioner - petition disposed off.

Summary

Issues Involved:
- Interpretation of Tamil Nadu Value Added Tax Act, 2006 regarding Tax Deducted at Source (TDS) obligations
- Validity of assessment orders issued for three Assessment Years
- Application of legal principles from judgments of Hon'ble Supreme Court and Division Bench of the High Court

Interpretation of TNVAT Act regarding TDS Obligations:
The writ petitioner, a dealer under the TNVAT Act, was required to deduct Tax at Source (TDS) at 5% on payments made to job workers for dying cotton. The petitioner contended that the job workers had already paid the tax, absolving them from the TDS obligation. However, the respondent passed assessment orders against the petitioner for non-compliance with TDS requirements under Section 13 of the TNVAT Act.

Validity of Assessment Orders:
Challenging the assessment orders, the writ petitions were filed, arguing that the petitioner should not be held liable for TDS if the job workers had already paid the tax. The petitioner relied on legal precedents, including a judgment of the Hon'ble Supreme Court and a Division Bench judgment of the High Court, to support their case.

Application of Legal Principles from Judgments:
The judgments cited by the petitioner emphasized that if the recipient of income has paid the tax, the entity responsible for TDS cannot be held liable for the same tax amount again. However, the entity failing to deduct TDS remains liable for interest and penalties under the TNVAT Act. Based on these legal principles, the Court directed the respondent to reassess the petitioner's case in line with the decisions in the cited judgments, setting aside the original assessment orders. The respondent was instructed to issue fresh show cause notices and redo the assessment, considering the principles laid down in the referenced judgments, within a specified timeframe.

This comprehensive analysis of the judgment highlights the key issues addressed by the Madras High Court regarding the interpretation of the TNVAT Act, the validity of assessment orders, and the application of legal principles from relevant judgments to determine the petitioner's liability for TDS obligations.