2021 (2) TMI 511 - HC - VAT and Sales Tax

Raising unpaid tax demands - recovery of short paid tax - levy of penalty in terms of Section 75A of the TVAT Act - assessment period 2010-11, 2011-12 and 2012-13 - HELD THAT - There is a clear misconception on part of the Assessing Officer as to his powers under sub-section (1) of Section 25 of the TVAT Act. Clause (a) of sub-section (1) of Section 25 can be activated when a dealer has not paid the tax at prescribed rate without sufficient cause which tax liability emerges from the return filed by him. If there is any legal dispute about the declaration of the taxable turnover or any other element of any of the claims made by the assessee in the return, the same cannot be a subject matter of a demand by the Assessing Officer under Clause (a) of sub-section (1) of Section 25 of the TVAT Act. Any dispute as to correct taxable turnover, any claim of exemption or deduction or any other disputed item under the return filed by a registered dealer, has to be first adjudicated by the Assessing Officer in the assessment proceedings. Clause (a) of sub-section (1) of Section 25 cannot be termed into an assessment which in the present case the Assessing Officer has done. According to him, the petitioner could not have excluded the discounts passed on to the dealers from his taxable turnover and to that extent the assessee had declared turnover less than the actual turnover. Even if the Assessing Officer is correct in so contending, it is not under Section 25(1)(a) of the Act that he can bring such turnover to tax. Allowing him to do so, would not only be expanding the boundaries of the powers under sub-section (1) of Section 25 of the TNVAT Act but also overriding the limitation provisions contained in the said chapter. The impugned orders of tax demands raised by the Assessing Officer under Section 25 of the TVAT Act are set aside - attachment or attachments on the petitioner s bank accounts are lifted - Petition allowed.

Issues Involved:
1. Jurisdiction of the Superintendent of Taxes under Section 25 of the Tripura Value Added Tax Act, 2004 (TVAT Act).
2. Validity of tax demands and penalty orders issued under Section 25 of the TVAT Act.
3. Limitation period for assessment under the TVAT Act.
4. Inclusion of discounts in taxable turnover.

Detailed Analysis:

1. Jurisdiction of the Superintendent of Taxes under Section 25 of the TVAT Act:
The petitioner challenged the orders passed by the Superintendent of Taxes under Section 25 of the TVAT Act, raising unpaid tax demands and imposing penalties. The petitioner contended that the Superintendent of Taxes exceeded his jurisdiction by undertaking a detailed scrutiny of the returns filed by the petitioner, which should have been done under Sections 31 or 34 of the TVAT Act, both of which have specific time limits. The court observed that Section 25 pertains to return defaults and is not intended for detailed scrutiny or assessment of returns. The court emphasized that any legal dispute regarding the declaration of taxable turnover or other claims in the return must be adjudicated in assessment proceedings, not under Section 25(1)(a).

2. Validity of Tax Demands and Penalty Orders Issued under Section 25 of the TVAT Act:
The court found that the Superintendent of Taxes misused Section 25(1)(a) to raise tax demands and impose penalties. The provision under Section 25(1)(a) can be activated only when a dealer fails to pay the tax due as per the return without sufficient cause. The court concluded that the Superintendent of Taxes wrongly treated the exclusion of discounts from taxable turnover as a return default under Section 25(1)(a). Consequently, the court set aside the impugned orders of tax demands and penalty orders, quashing the demand notices and lifting the attachment on the petitioner’s bank accounts.

3. Limitation Period for Assessment under the TVAT Act:
The court noted that the TVAT Act provides specific limitation periods for different types of assessments. Under Section 33, no assessment under Section 31 (audit assessment) can be made after five years from the end of the tax period. Similarly, under Section 34, the power to assess turnover escaping assessment cannot be exercised after five years from the end of the year in question. The court highlighted that the Superintendent of Taxes attempted to circumvent these limitation provisions by invoking Section 25, which does not prescribe a limitation period. The court ruled that such an action was impermissible and invalidated the orders based on this misuse of authority.

4. Inclusion of Discounts in Taxable Turnover:
The dispute between the petitioner and the department centered on whether the discounts offered by the petitioner to its dealers should be included in the taxable turnover. The petitioner argued that the discounts were correctly excluded from the taxable turnover, while the Superintendent of Taxes believed that such discounts should have been included. The court did not delve into the correctness of this dispute but noted that such issues should be resolved through proper assessment proceedings under the relevant provisions of the TVAT Act. The court reiterated that Section 25 is not the appropriate provision for resolving such disputes.

Conclusion:
The court concluded that the Superintendent of Taxes acted beyond his jurisdiction under Section 25 of the TVAT Act by attempting to conduct a detailed assessment of the returns and by raising tax demands and imposing penalties. The court set aside the impugned orders, quashed the demand notices, and lifted the attachments on the petitioner’s bank accounts. The court emphasized the importance of adhering to the prescribed limitation periods for assessments under the TVAT Act and clarified that Section 25 cannot be used to bypass these limitations.

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