2020 (5) TMI 496 - HC - VAT and Sales Tax

Demand of tax and compounding/composition fee - Section 72 of TNVAT Act - detention of goods alongwith vehicle - It is the case of the petitioner that the exercise of power under section 72 of the Tamil Nadu Value Added Tax Act, 2006 for alleged violation of section 71 of the said Act was arbitrary and illegal and without jurisdiction - HELD THAT - Mere entry of the goods from another state into Tamil Nadu ipso facto does not attract levy under the provisions of the Tamil Nadu Value Added Tax Act, 2006 unless there was a prior sale within the State of Tamil Nadu and no tax was paid or charged - Therefore 1strespondent as the prescribed authority under section 67 of the Tamil Nadu Value Added Tax Act, 2006 was competent to detain goods and vehicle and verify the records and documents which accompanied the goods. For the same reasons, the 1st respondent was also competent to demand tax at the check post, if the first respondent was of the view that the detained goods was liable to tax but no tax was paid or charged. 1st respondent as the prescribed authority under section 67 of the Tamil Nadu Value Added Tax Act, 2006 was competent to detain goods and vehicle and verify the records and documents which accompanied the goods. For the same reasons, the 1st respondent was also competent to demand tax at the check post, if the first respondent was of the view that the detained goods was liable to tax but no tax was paid or charged. The 1st respondent as an officer in charge of the Check Post is also the prescribed authority for the purpose of section 72 of the Tamil Nadu Value Added Tax Act, 2006. Therefore, 1strespondent was competent to issue impugned draft compounding notices dated 24.7.2013 for compounding of the of the offences specified in Section 71 of the Act. There are however several disputed questions of fact on several counts - while upholding the exercise of power by the 1st respondent, the impugned order is set aside in so far as it seeks to demand compounding/composition fee - case remitted back to the 2nd respondent to pass appropriate order on merits in accordance with law. Appeal allowed by way of remand.

Issues involved:
1. Impugned order demanding tax and compounding fee under Section 72 of the Tamil Nadu Value Added Tax Act, 2006.
2. Detention of goods and vehicles for alleged tax evasion.
3. Competency of the authorities to detain goods and demand tax.
4. Validity of the petitioner's registration and subsequent actions.
5. Jurisdiction of the authorities in dealing with Sections 71 and 72 of the Act.
6. Disputed questions of fact regarding the registration status and tax liabilities.
7. Remedy available to the petitioner against the impugned order.

Analysis:

1. The impugned order demanded tax and compounding fee under Section 72 of the Tamil Nadu Value Added Tax Act, 2006, based on alleged tax evasion by the petitioner. The reasons cited included failure to account for interstate purchases properly and evasion of legitimate taxes due to the government.

2. The detention of goods and vehicles was carried out by the authorities due to suspicions of tax evasion, specifically related to the petitioner's transactions involving Vitrified Tiles from a Gujarat-based dealer. The authorities highlighted discrepancies in tax payments and interstate purchase reporting.

3. The competency of the authorities to detain goods and demand tax was justified under the provisions of the Act, allowing for verification of records and documents accompanying the goods. The authorities were deemed competent to demand tax at the check post if they believed the detained goods were liable for tax but no tax was paid.

4. The validity of the petitioner's registration was questioned, with discrepancies found in the place of business and interstate purchase reporting. The authorities raised concerns about the petitioner's compliance with tax payments on interstate transactions.

5. Jurisdictional issues arose regarding the competence of the authorities in dealing with Sections 71 and 72 of the Act. The petitioner argued that only the 2nd respondent was competent to determine tax evasion, citing rule 15 of the Tamil Nadu Value Added Tax Rules, 2007.

6. Disputed questions of fact surfaced, including the validity of the petitioner's VAT and CST registrations at the time of goods detention. The court acknowledged these disputes and remitted the case back to the 2nd respondent for further review and appropriate orders.

7. The judgment provided the petitioner with a remedy against the impugned order, allowing for the filing of detailed objections within a specified timeframe. The petitioner was granted liberty to approach the prescribed authority for compounding of the offense under Section 72 of the Act, subject to further determinations by the 2nd respondent.

This detailed analysis covers the issues involved in the legal judgment delivered by the Madras High Court, addressing the key aspects of the case and the court's decision regarding the impugned order and related matters.

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