2021 (6) TMI 110 - HC - VAT and Sales Tax

Quantum of amount to be deposited for release of detained good - Requirement of furnishing of Bank Guarantee for a sum being twice the amount of tax payable - Section 71(a) of the TNVAT Act, 2006 read with Section 72 of the TNVAT Act, 2006 - HELD THAT - Admittedly, the petitioner is not registered under the provisions of the Central Sales Tax Act, 1956 for the sales effected by the petitioner from Tamil Nadu to a buyer in the erstwhile composite State of Andhra Pradesh in Hyderabad - Since the petitioner is not an assessee within the jurisdiction of the respondent, the respondent was justified detaining the goods by giving an option to the petitioner to pay amounts under Section 72(1-a) of the TNVAT Act, 2006. By effecting a direct sale from Tamil Nadu without obtaining registration, the petitioner at best can be said to have violated the provision relating to the procedure. By the effecting sale from State of Tamil Nadu, the petitioner avoided criss-cross movement of the goods - Therefore, the petitioner cannot be subjected to higher tax as the officers acting as assessing officer under the Central Sales Tax Act, 1956 act as counterparts of each other. No useful purpose would be served by asking the petitioner to furnish bank guarantee four times the tax after the detained goods were allowed to be released by the respondents - this Court is inclined to dispose this writ petition by directing the respondent to pass appropriate orders on merits based on the submission of the petitioner within a period of sixty days from the date of receipt of this order - Petition disposed off.

Summary

Issues involved:
Challenge to sales tax notice and demand for Bank Guarantee under TNVAT Rules, 2007.

Analysis:
1. The petitioner contested a notice demanding sales tax payment and a Bank Guarantee under TNVAT Rules, 2007. The petitioner, a Mumbai dealer, imported iron and steel items from Chennai to sell in Hyderabad. The goods were detained during transit, leading to a legal battle initiated by the petitioner through a writ petition.

2. The Court previously ordered the release of goods upon payment of appropriate tax. The petitioner complied by paying 2% CST along with Form-C. However, a subsequent notice demanded additional tax and a Bank Guarantee, sparking the current challenge by the petitioner.

3. The petitioner argued for a reduced tax rate under the CST Act, 1956, citing a precedent from the Allahabad High Court. The respondent, represented by the Additional Government Pleader, defended the notice, claiming the petitioner partially agreed to the proceedings and referred to a judgment involving animal fees for support.

4. The petitioner maintained that all taxes were paid, including the enhanced tax under the CST Act, 1956. Both parties agreed that the goods were cleared, indicating compliance with previous orders. The remaining issue centered on the necessity of furnishing a Bank Guarantee.

5. The Court considered the petitioner's unregistered status under the CST Act, 1956 but emphasized that appropriate tax payment was crucial. It highlighted the delegation of tax collection powers to local authorities and the need for compliance with tax regulations.

6. Despite the petitioner's procedural violations, the Court concluded that subjecting them to higher tax rates was unwarranted, especially after the goods' release. It deemed requesting a Bank Guarantee four times the tax amount unnecessary post-release.

7. Consequently, the Court directed the respondent to decide on the matter within sixty days based on the petitioner's submissions. The petitioner was given the option to provide additional replies within thirty days. The writ petition was disposed of without costs, and the connected miscellaneous petition was closed.