2021 (8) TMI 489 - HC - VAT and Sales Tax

Validity of assessment order - whether the cooling equipments imported by the petitioner are exempted from payment of entry tax under the provisions of the Tamil Nadu Tax on Entry of Goods into Local Areas Act, 2001? - HELD THAT - In the present case, admittedly, the petitioner has imported 3 Nos.217 tons refrigerating equipment of compression type with screw compressor, the Compressor has already incorporated in the Amendment Act No.51 of 2002 and water cool and exchanger compressor and Marley SR 175 cooling towers 3 Nos., the word 'Air-Conditioner' is not mentioned in the invoice and that will not dis-entitle the State from imposing entry tax in accordance with the provisions of the said Act. Though the word 'air-conditioner' is not mentioned in the invoice issued by the manufacturers, the equipments and the utilisation of the equipments are only for air conditioning the business premises of the petitioner, who is running a Textile Shop. Therefore, the equipments imported, admittedly, are installed or commissioned and utilised for the purpose of air conditioning the business premises and therefore for all purpose, the equipments imported are the air-conditioners, within the meaning of Scheduled Goods under the Entry Tax Act. The learned counsel for the petitioner states that the entry tax as demanded had been paid. In view of the belated payment of tax, penalty was also imposed. However, the petitioner is at liberty to approach the Competent Authority if they are otherwise eligible for reduction or waiver of penalty under the provisions of the Act. Petition dismissed.

Issues:
1. Challenge to assessment order for assessment year 2004-2005.
2. Exemption claim for turnover due to Textiles being exempt from sales tax.
3. Import of refrigerating equipment and cooling towers from the U.S.A.
4. Dispute over liability for entry tax on imported goods.
5. Interpretation of the term "air-conditioners" under the Tamil Nadu Tax on Entry of Goods into Local Areas Act, 2001.
6. Application of entry tax on large-scale air-conditioning equipment.

Analysis:

1. The petitioner, a registered dealer in Textiles, challenged an assessment order for the year 2004-2005 due to a dispute over the liability for entry tax on imported refrigerating equipment and cooling towers.

2. The petitioner claimed exemption for the entire turnover based on the exemption of Textiles from sales tax, but faced a challenge regarding the imported goods.

3. The petitioner imported refrigerating equipment and cooling towers from the U.S.A., valued at ?73,43,356, and paid Customs Duty of ?31,10,171 for installation in their showroom.

4. The Enforcement Wing Officials alleged that the imported goods were liable for entry tax, leading to a demand notice and subsequent payment by the petitioner under protest.

5. The main issue revolved around whether the imported cooling equipment fell under the exemption from entry tax as per the Tamil Nadu Tax on Entry of Goods into Local Areas Act, 2001.

6. The court analyzed the definition of "air-conditioners" under the Act and concluded that the term should be interpreted broadly to include large-scale air-conditioning equipment used for conditioning air in buildings, not limited to home appliances.

7. The court emphasized that a purposive interpretation was necessary to ensure that all equipment used for air conditioning, regardless of specific naming conventions, fell under the entry tax provisions to prevent evasion.

8. Despite the absence of the term "air-conditioner" in the invoice, the court found that the imported equipment was indeed air-conditioners as they were utilized for conditioning the air in the petitioner's business premises.

9. The court held that the petitioner was liable to pay entry tax for the imported equipment used for air conditioning, even though the tax had been paid belatedly, with a penalty imposed.

10. The petitioner was granted the option to seek reduction or waiver of the penalty through the Competent Authority under the Act, leading to the dismissal of the writ petition with no costs awarded.

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