2021 (5) TMI 527 - HC - VAT and Sales Tax

Levy of Sales Tax - sale of articles like food and drinks sold to customers in 3 Star, 4 Star and 5 Star hotels as recognized by(Classified or approved by) the Tourism Department - Relevant documents produced or not - violation of principles of natural justice or not - HELD THAT - The issue as to whether the petitioner had indeed collected tax from the guests visiting the petitioner's hotels or not has to be decided on merits on production of relevant documents including the manner in which the amounts had been shown in the returns filed before the Income Tax Department. Since this exercise has not been carried out by the Special Commissioner and Commissioner of Commercial Taxes/1st respondent herein, the impugned order passed is liable to be interfered on the ground of violation of Principles of Natural Justice. The 1st respondent/Special Commissioner and Commissioner of Commercial Taxes ought to have heard the petitioner before passing the aforesaid order. Therefore without expressing any opinion on the merits of the case as to whether the petitioner was entitled to waiver, the case remitted back to the 1st respondent/Special Commissioner and Commissioner of Commercial Taxes or any officer competent to consider the petitioner's request for waiver after considering the applicability of the above Government Orders - petition allowed by way of remand.

Summary

Issues:
Challenge to rejection of waiver of sales tax under TNGST Act, 1959 for the period 1980-1989.

Analysis:
The petitioner contested the communication rejecting the request for tax waiver under the Tamil Nadu General Sales Tax Act, 1959 for the period 1980-1989. The sales tax was applicable to food and drinks sold to customers in recognized hotels. The issue of sales tax levy was initially decided in favor of hoteliers but was later reversed by the Supreme Court. The 46th amendment of the Constitution and subsequent amendments to the TNGST Act were also noted.

The petitioner sought tax waiver based on government orders from 1967, 1980, and 1996. The government directed an examination of hoteliers' billing practices, balance sheets, and tax returns to determine tax collection and consumer benefit. The Joint Commissioner was tasked to submit findings within three months for the government to make informed decisions in line with the Supreme Court's ruling.

The impugned order denied the petitioner's waiver claim, citing non-compliance with specific government orders and the deduction of tax liability in the balance sheet. The court emphasized the need to assess whether tax was actually collected from hotel guests, highlighting the lack of proper examination by the tax authorities. The court found a violation of natural justice principles due to the failure to hear the petitioner before passing the order.

The court remitted the case back to the tax authorities for a reevaluation of the waiver request, emphasizing the need for a fair consideration of the petitioner's claims within three months. The petitioner was granted the opportunity to submit additional representations if needed. The tax department was instructed to inform the petitioner about the designated officer for handling further submissions and to consider the waiver of penalties as well.

In conclusion, the writ petition was disposed of with the outlined observations, without imposing any costs. The connected miscellaneous petition was closed accordingly.