2021 (12) TMI 281 - HC - VAT and Sales Tax

Levy of tax - Chewing Tobacco manufactured by the petitioners - Assessment Year 2007-2008 - applicability of limitation period of five years - error apparent on the face of record or not - Section 84 of the TNVAT Act - HELD THAT - The product called 'Chewing Tobacco', admittedly manufactured by these petitioners from 2006-07 was not at all included as one of the item scheduled in TNVAT Act as a taxable item. Realising this omission or lacuna or with the wisdom of the legislature, Act 30 of 2011 was brought in, under which, the TNVAT Act, 2006 underwent amendment, wherein as per Section 3 of the Amending Act, after Serial No.12 to second schedule Serial No.13 was inserted, whereas, one of the item in Serial No.(vii)-'Chewing Tobacco' also has been mentioned. Admittedly, the said amendment has come into the effect only from 12.07.2011, therefore, the product 'Chewing Tobacco' has become a taxable item only from 12.07.2011. It is a definite case of the petitioners that because of the said product, namely, 'Chewing Tobacco', which they manufactured in the year 2007-2008, excess tax had been calculated by the first respondent, as if that, it is a taxable item, however, the fact remains that the product has become a taxable item only from 12.07.2011 and therefore, these apparent mistake available on the face of the record has to be rectified, that is the reason why, they filed the rectification applications, which are admittedly pending before the first respondent. Time Limitation - HELD THAT - The five years limitation period is no doubt starts from the order passed by the authorities, which was passed sometime in 2009, however, from October 2011, there has been a stay, which was in operation for all these years up to 03.10.2019, the date on which, those writ petitions were disposed of. Therefore, the period between 15.09.2011, the date on which originally interim stay was granted till the disposal of the writ petition, that is, dated 03.10.2019 has to be excluded. If that period is excluded, certainly the present rectification petitions, dated 19.07.2021 and 15.07.2021, filed by the petitioners would be within the time of five years limitation period, as contemplated under Section 84 of the TNVAT Act. Therefore, that objection raised by the learned Government Advocate cannot be countenanced. This Court feel that, unless the rectification petitions filed by the petitioners is decided by taking into account the aforesaid factual as well as the legal aspects projected by the petitioners, the first respondent cannot proceed further pursuant to the alleged due for the Assessment Year 2007-2008. In that view of the matter, the impugned orders requiring the bank authorities to recover the amount and to pay it in favour of the first respondent may not be justifiable and accordingly, those orders are liable to be interfered with. The matters are remitted back to the first respondent, where the rectification petitions filed by the petitioners, dated 19.07.2021 and 15.07.2021, shall be considered first and orders shall be passed - Petition allowed by way of remand.

Summary

Issues:
1. Taxability of the product 'Chewing Tobacco' for Assessment Year 2007-2008.
2. Rectification petitions under Section 84 of the TNVAT Act filed by the petitioners.
3. Legality of the communication issued by the Assistant Commissioner to recover alleged arrears without disposing of rectification petitions.

Analysis:
1. The petitioners, manufacturers of Tobacco products, started producing 'Chewing Tobacco' from the Assessment year 2006-2007. The product was not initially included in the taxable items under the TNVAT Act. However, an amendment in 2011 added 'Chewing Tobacco' to the list of taxable items effective from 12.07.2011.
2. The petitioners contended that they should not be taxed for 'Chewing Tobacco' for the Assessment Year 2007-2008 as the product became taxable only in 2011. They filed rectification petitions under Section 84 of the TNVAT Act to rectify the alleged tax demand for that year.
3. The Assistant Commissioner issued a communication to recover alleged arrears without disposing of the rectification petitions. The petitioners challenged this action, arguing that the tax demand for the product was not valid for the earlier year and that the rectification petitions should be considered before any recovery action.

Court's Decision:
- The Court acknowledged that 'Chewing Tobacco' became a taxable item only from 12.07.2011 and excess tax had been calculated for the Assessment Year 2007-2008. The rectification petitions filed by the petitioners were pending, and the five-year limitation period for rectification applications excluded the period of stay from 2011 to 2019.
- The Court held that the rectification petitions should be decided considering the legal and factual aspects presented by the petitioners before any recovery action could be taken. The impugned orders were quashed, and the matters were remitted back to the first respondent for a decision on the rectification petitions.
- The Court directed the first respondent to consider the rectification petitions and pass orders based on the legal and factual positions presented by the petitioners. Further actions, if necessary, were to be taken in accordance with the law after the rectification petition's outcome.

Conclusion:
The Court's decision emphasized the importance of considering the legal and factual aspects presented by the petitioners before taking any recovery action for alleged tax arrears. The rectification petitions were to be decided first, and subsequent actions were to be taken based on the outcome of the rectification process.