2020 (10) TMI 727 - HC - VAT and Sales Tax

Payment of tax at compounding rate - alleged suppressed sale - Section 3(4) of the TNVAT Act - HELD THAT - Section 3(4)(b) of the Tamil Nadu Value Added Tax, (Fourth Amendment) Act 2011, enables the dealer to pay tax for a year on his turnover relating to taxable goods upto ₹ 50 lakhs at 1% and for the sales turnover over and above ₹ 50 lakhs, he is liable to pay tax under Section 3(2). The aforesaid amendment came into effect from 01.04.2012 and a bare reading of the provision explicitly permits the dealer to pay tax at the compounded rate of 1% under Section 3(4) for the sales turnover below ₹ 50 lakhs and for the turnover that exceeds ₹ 50 lakhs, they are liable to pay tax under Section 3(2) of the TNVAT Act. In view of the amendment, the respondent may not be justified in bringing the dealer out of the purview of Section 3(4) of the Act, as and when it is found that the sales turnover of the dealer exceeds ₹ 50 lakhs and thereby, subject them to the rate of tax under Section 3(2) for the entire sales turnover . The matter is remanded back to the respondent herein for reconsideration - Petition allowed by way of remand.

Summary

Issues:
Assessment under Section 22(2) of TNVAT Act for the year 2011-2012, Sales suppression allegation leading to total turnover exceeding &8377; 50 lakhs, Eligibility for compounding rate under Section 3(4) of TNVAT Act, Interpretation of Section 3(4)(b) of TNVAT Act, Justification of levying tax on entire sales turnover, Compliance with Section 3(4) of TNVAT Act, Reassessment and remand of the matter.

Analysis:
The petitioner was initially assessed under self-assessment basis for the year 2011-2012 with a turnover below &8377; 50 lakhs. However, upon inspection, sales suppression allegations surfaced, leading to a total turnover exceeding the threshold. Consequently, the respondent issued a notice proposing to levy tax on the total turnover, including the suppressed sales, at the rate of 12.5%. The petitioner argued that the respondent should only levy tax at 12.5% on the amount exceeding &8377; 50 lakhs as per Section 3(4) of the TNVAT Act. On the contrary, the respondent contended that the dealer loses eligibility for the compounding system under Section 3(4) once the turnover surpasses &8377; 50 lakhs, necessitating the payment of regular tax under Section 3(2) for the entire turnover.

The court examined Section 3(4)(b) of the TNVAT Act, introduced through an amendment in 2011, which allows dealers to pay tax at a compounded rate of 1% for turnover below &8377; 50 lakhs and regular tax under Section 3(2) for turnover exceeding the threshold. The court emphasized that the amendment explicitly permits dealers to avail the compounding rate for sales below &8377; 50 lakhs and pay regular tax for sales above that amount. Referring to a previous decision, the court reiterated that levying tax on the entire sales turnover when the threshold is breached is not in accordance with Section 3(4) of the Act.

Consequently, the court set aside the impugned proceedings and remanded the matter back to the respondent for reconsideration. The Assessing Authority was directed to reassess the petitioner's sales turnover, provide a personal hearing, consider any objections raised during the assessment, and expedite the assessment proceedings. The writ petition was allowed, and no costs were imposed, leading to the closure of the connected Miscellaneous Petition.