2019 (11) TMI 374 - HC - VAT and Sales Tax

Entry tax - Adjustment of entry tax not paid with the VAT paid - sale of motor vehicles - Entry tax not paid - C declaration form under the provisions of Section 8(4) of the Central Sales Tax Act, 1956 - whether the petitioner, though not paid the entry tax, is entitled to adjust the same on the VAT paid by them at the rate of 14.5%? - HELD THAT - There is no dispute to the fact that the VAT liability is 14.5% and the entry tax liability is 12.5%. The question as to whether the adjustment can be made even though such entry tax was not paid, has already been considered by this Court in KASI AND SETHU VERSUS DEPUTY COMMERCIAL TAX OFFICER (DG-CTO), KUMBAKONAM AND ANOTHER 2002 (12) TMI 573 - MADRAS HIGH COURT , wherein the learned Single Judge after allowing the writ petition and quashing the impugned proceedings therein, granted liberty to the first respondent therein to set off the general sales tax already paid by the petitioner as against the entry tax payable for the vehicles concerned and to issue appropriate orders. Therefore, this Court is of the view that by applying Kasi and Sethu case, the Assessing Officer has to make adjustment towards the liability of the entry tax at the rate out of the amount already paid by the petitioner towards VAT - When such adjustment has to be made only after making correlation exercise, since the vehicles involved in this case is numbering 141, needless to say that the petitioner has to place all the material documents before the Assessing Officer to redo the exercise based on the materials so placed. The matter is remitted back to the Assessing Officer to redo the assessment after making necessary correlation in the light of the observation made in Kasi and Sethu case - petition allowed by way of remand.

Summary

Issues:
Challenge to assessment order dated 26.09.2018 for assessment year 2016-2017 regarding non-payment of entry tax on vehicles purchased interstate.

Analysis:
The petitioner, a company dealing in motor vehicles, faced a challenge during VAT audit regarding non-payment of entry tax on vehicles purchased interstate. The petitioner explained that they diligently paid entry tax on vehicles imported from other states and claimed set-off in VAT returns. Due to oversight, entry tax was not paid on vehicles purchased from a specific manufacturer, although VAT was paid at the time of sales in Tamil Nadu. The Assessing Officer issued a notice proposing entry tax payment, which the petitioner contested, arguing that only one tax should be paid, either entry tax or VAT, not both. The petitioner's reply was filed before a different officer than the one who passed the assessment order, without a personal hearing.

A VAT audit revealed the interstate purchase of vehicles without entry tax payment, leading to a demand for entry tax payment at 12.5%. The petitioner filed a writ petition challenging this demand without exhausting the appeal remedy.

The petitioner's counsel cited precedent cases where courts allowed adjustments of entry tax against VAT paid. The government pleader argued that correlation exercise was necessary to verify VAT payment for all 141 vehicles involved, as seen in a previous case remitted for correlation assessment. The court noted the precedent cases where adjustments were allowed and directed the Assessing Officer to redo the assessment after necessary correlation exercise, within six weeks, granting the petitioner a personal hearing and opportunity to submit supporting documents for the 141 vehicles. The assessment order was set aside in part, only for entry tax due, and the matter remitted back for reassessment.

In conclusion, the court allowed the writ petition, setting aside the assessment order for entry tax and penalty on interstate purchases, remitting the matter back to the Assessing Officer for reassessment following the principles established in precedent cases.