2021 (5) TMI 372 - HC - VAT and Sales Tax

Quantification of arrears of tax - basis of the rejection is that the petitioner was not a 'dealer' as required under the Settlement Act and also that the amount paid did not satisfy the condition that 90% of the settlement amount has to be remitted along with the application - HELD THAT - The learned revenue counsel was directed to serve copies of the assessment orders upon the petitioner in order that one may obtain clarity on the demands raised. This was specifically for the reason that the records of assessment were not available with the petitioner since he is not the original defaulting assessee and just the purchaser of the property in question. The revenue had also not also indicated clearly either in the impugned order or in the communications leading to the passing of the impugned orders the details and breakup of the original tax, interest and penalty. Thus, it was felt that furnishing of the assessment orders would provide clarity as required. On 25.01.2021, learned revenue counsel confirmed that orders of assessment were available only for two years i.e. 1994-95 and 1995-96 and efforts were ongoing to procure the remaining orders. Since the existence of valid orders of assessment passed under the provisions of the Act is a pre-condition for raising of a demand, time was granted to the Department to produce the other orders as well. On 18.03.2021, I have recorded that despite a final opportunity having been granted to the revenue to produce orders of assessment for the periods barring 1994-95 and 1995-96, no orders were produced and only more time had been sought for undertaking an extensive search. Costs were imposed and time as sought for was granted. The petitioner falls within Section 7(b) of the Settlement Act and the 90% payable would have to be computed in line therewith as has been done by the designated authority. The sum total of the demand thus is of a amount of ₹ 13,04,279/-. As against the amount of ₹ 13,04,279/-, the petitioner has admittedly remitted a sum of ₹ 27,46,034/-, which is more than double of the demand payable - petition allowed.

Summary

Issues:
1. Rejection of applications for settlement of arrears under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2019.
2. Determination of demands raised under orders of assessment for the periods 1994-95 and 1995-96.
3. Question of whether the petitioner qualifies as a 'dealer' under the Settlement Act.
4. Compliance with the requirement of remitting 90% of the arrears along with the application.

Analysis:

Issue 1: Rejection of Settlement Applications
The petitioner, a sole proprietary business, purchased a property at an auction conducted by the Tamil Nadu Industrial Investment Corporation Ltd. The petitioner sought to register the sale deed but faced denial due to an encumbrance by the Commercial Taxes Department. Following advice, the petitioner applied for settlement of arrears under the Settlement Act for various tax periods. Despite remitting Rs. 27 lakhs, the applications were rejected on grounds of not meeting the 'dealer' requirement and failing to remit 90% of the settlement amount upfront.

Issue 2: Determination of Demands
The court highlighted the necessity of valid assessment orders for raising demands under revenue statutes. It was established that valid assessment orders were only available for the periods 1994-95 and 1995-96, with no orders for other years. Consequently, the court found that demands for these two years amounted to Rs. 11,85,987/- and Rs. 1,18,292/- respectively. This led to a detailed examination of the petitioner's compliance with the settlement amount requirement.

Issue 3: Qualification as a 'Dealer'
The court clarified that the petitioner need not qualify as a 'dealer' under the Settlement Act since the settlement was sought on behalf of the original assessee to release the property from the Department's encumbrance. This aspect was deemed irrelevant to the case under consideration.

Issue 4: Compliance with Remittance Requirement
The court referred to specific provisions of the Settlement Act, emphasizing the need to remit 90% of the arrears along with the application. The designated authority had correctly calculated the demand under Section 7(b) of the Act, totaling Rs. 13,04,279/-. As the petitioner had remitted Rs. 27,46,034/-, well exceeding the demand, the court ordered the excess amount to be refunded within six weeks, lifting the property attachment promptly.

In conclusion, the court allowed the writ petitions, directing the refund of the surplus amount to the petitioner and lifting the property attachment. The judgment underscored the importance of valid assessment orders for enforcing revenue demands and upheld the petitioner's compliance with the Settlement Act's remittance requirements.