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2020 (5) TMI 494 - HC - VAT and Sales TaxLevy of purchase tax payable - purchase of turmeric - Section 12 (2) of the Tamil Nadu Value Added Tax, 2006 - contention of the petitioner is that that turmeric purchased by the petitioner from dealers, who were exempted from payment of tax in terms of Section 15 read with Item 18, Part B of the 4th Schedule of the Tamil Nadu Value Added Tax Act, 2006 were also exempted in the hands of the petitioner and therefore the petitioner cannot be saddled with tax liability under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006. HELD THAT - While under Section 7A of the TNGST Act,1959, tax was payable at the rate mentioned in Section 3 or 4 as the case may be of the Act. However, under Section 12(1) of the Tamil Nadu Value Added Tax Act,2006, tax is payable at the rate specified in the Schedules to this Act - Both Section 8 of the TNGST Act, 1959 and Section 15 of the Tamil Nadu Value Added Tax Act, 2006 provide for exemption. They exempted a dealer from payment of tax whose turnover in respect of items mentioned does not exceed ₹ 300 crores in a year. Merely because they read identically, the interpretation given by the Courts earlier for levy of purchase tax under Section 7A of the TNGST Act, 1959 and exemption cannot be straight away imported for levy of purchase tax under Section 12 of the Tamil Nadu Value Added Tax Act,2006 in view of few differences in the language in Item 16,III Schedule to the TNGST Act, 1959, and Item 18, Part B IV Schedule to the Tamil Nadu Value Added Tax Act, 2006 - Item 16, III Schedule to the TNGST Act, 1959 was to be read along with Section 8 of the TNGST Act, 1959. Similarly, Item 18, Part B IV Schedule to the Tamil Nadu Value Added Tax Act, 2006 has to be read along with and Section 15 of the said Act, 2006. Though they gave to dealers of the goods enumerated therein exemption from payment of tax upto ₹ 300 Crores, yet the consequence under the respective enactments are different as far as levy of purchase tax are concerned. There are few but very important differences in the Tamil Nadu Value Added Tax Act, 2006 which distinguishes the levy under Section 12 of the Act from levy under Seciton 7A of the TNGST Act,1959. Though the levy under Section 7A of the TNGST Act, 1959 and 12 of the Tamil Nadu Value Added Tax Act, 2006 get attracted under similar circumstances, the rate of tax are different - Under Section 7A of the TNGST Act, 1959 tax is payable at the rate prescribed in Section 3 and 4 of the said Act. Where as, under Section 12 of the Tamil Nadu Value Added Tax Act, 2006 tax is payable at the rate specified in the Schedules to the Act. Therefore, the Petitioner would be liable to pay tax only at the rate specified in the Schedules to the Tamil Nadu Value Added Tax Act, 2006. There was a paradigms shift from TNGST Act, 1959 when Tamil Nadu Value Added Tax Act, 2006 was enacted. The tax regime was altered to levy tax on value addition at every point of sale with a within the State with a corresponding provision for input tax credit for being set off. It not only rationalised the rate of tax but also rendered tax paid at every point of sale within the State to be set off as input tax credit - thus, under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006, petitioner who is also a dealer is liable to pay purchase tax at the rate specified in the Schedules. If the total turnover of the petitioner during the relevant year did not exceed ₹ 300 crores as per Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 the Tax payable by the petitioner would be at the rates specified in the Schedules to this Act which would mean the rate specified in Entry 18, Part B, IV Schedule to the Tamil Nadu Value Added Tax Act, 2006 - If however on the other hand, the turnover of the petitioner had exceeded ₹ 300 crores, the petitioner would be liable to pay tax at the rate prescribed in Item 52, Part B, I Schedule to the Tamil Nadu Value Added Tax Act, 2006 as that would be the rates specified in the Schedules to this Act . This is a factual matter which would require a proper determination by the respondent. Case remitted back to the respondent with the direction to the respondent to pass a speaking order within a period of 3 months from date of receipt of this order in terms of the above observation as far as levy of purchase tax under Section 12 (1) of the Tamil Nadu Value Added Tax Act, 2006 is concerned - petition allowed by way of remand.
Issues Involved:
1. Validity of assessment orders for the years 2010-11 to 2014-15. 2. Entitlement to input tax credit under Section 12(2) of the Tamil Nadu Value Added Tax Act, 2006. 3. Imposition of purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006. 4. Imposition of penalty under Section 27(3)(c) of the Tamil Nadu Value Added Tax Act, 2006. 5. Applicability of exemptions under Section 15 read with Item 18, Part B, IV Schedule of the Tamil Nadu Value Added Tax Act, 2006. 6. Availability of alternate remedy under Section 51 of the Tamil Nadu Value Added Tax Act, 2006. Issue-wise Detailed Analysis: 1. Validity of Assessment Orders: The petitioner challenged the assessment orders dated 29.1.2016 for the assessment years 2010-11 to 2014-15. The court noted that the impugned orders were based on the petitioner’s failure to pay purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006, following an investigation by the Commercial Tax Department. The court highlighted that the orders confirmed the demand for purchase tax and imposed penalties under Section 27(3)(c) of the Act. 2. Entitlement to Input Tax Credit: The petitioner sought a writ of mandamus to direct the respondent to accept revised returns to allow input tax credit on the purchase tax payable under Section 12(2). The court acknowledged the petitioner’s contention that input tax credit should be available under Section 12(2) read with Section 19(3)(c) of the Act. It was argued that since the petitioner was unable to utilize such credit due to the absence of local sales, a refund should be granted, citing revenue neutrality. 3. Imposition of Purchase Tax: The petitioner contended that turmeric purchased from dealers exempted under Section 15 read with Item 18, Part B of the IV Schedule should not attract purchase tax under Section 12(1). The court examined precedents, including the decisions in Hotel Shri Kannan vs. State of Tamil Nadu and Ruchi Soya Industries Ltd vs. Commercial Tax Officer, which dealt with similar issues under the TNGST Act, 1959. The court concluded that under Section 12(1), the petitioner is liable to pay purchase tax at the rates specified in the Schedules if the turnover exceeds ?300 crores. 4. Imposition of Penalty: The petitioner argued that the imposition of penalty was unjustified given the revenue-neutral nature of the issue. The court referred to various decisions, including R.E.M. Ramakutty Nadar vs. The State of Madras and The Deputy Commissioner (C.T.) vs. V.S.R. Ramaswami Chettiar, which emphasized that penalties should not be imposed if the issue is revenue neutral. 5. Applicability of Exemptions: The court analyzed the exemptions under Section 15 read with Item 18, Part B, IV Schedule, noting that if the petitioner’s turnover did not exceed ?300 crores, the levy under Section 12(1) is not attracted. The court also highlighted the need for verification of the petitioner’s turnover to determine the applicable tax rate. 6. Availability of Alternate Remedy: The respondent argued that the petitioner had an alternate remedy under Section 51 of the Act. However, the court decided to dispose of the writ petitions on merits due to the considerable time elapsed since their admission in 2016, and to avoid further delays and rounds of litigation. Conclusion: The court quashed the impugned orders and remitted the case back to the respondent to pass a fresh order within three months, focusing solely on the levy of purchase tax under Section 12(1). The court directed the petitioner to furnish necessary information for a de-novo proceeding, allowing for a hearing via videoconference if necessary due to the Covid-19 pandemic. The demand confirmed on other issues remained undisturbed. The writ petitions were disposed of with no cost.
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