2022 (6) TMI 772 - HC - VAT and Sales Tax

Concessional rate of tax - purchase of tin containers, for packing purposes, against Form XVII declaration - levy of penalty under section 3(3) of the TNGST Act - quantum of penalty at 150% imposed on the petitioner by the assessing officer, which was restricted to 100% by the appellate authority - assessment years 1990-91, 1991-92 and 1992-93 - HELD THAT - Considering the fact that prior to amendment of section 3(3), the packing materials were excluded from the concessional rate of tax against form XVII declaration and there is no material to prove that the tin containers purchased by the petitioner were used in the manufacturing activity, this court finds no good reason to interfere with the well considered findings of the Authorities below, disallowing the concessional rate of tax under section 3(3), against issuance of form XVII declaration, during the material point of time - thus, concessinal rate of tax is not available to the petitioner. Levy of penalty - HELD THAT - As rightly held by the third respondent, when the petitioner is not entitled to claim concessional rate of tax under section 3% of the TNGST Act, they are liable to pay penalty under section 23 of the TNGST Act, for violation of the provision of section 3(3). Accordingly, the assessing officer levied penalty and the same was affirmed by the appellate authorities, which in the opinion of this court, warrants no interference, as the issue relating to claim of concessional rate of tax under section 3(3), is decided against the petitioner. The issue regarding levy of penalty is also answered against the petitioner. Quantum of penalty at 150% determined by the first respondent / assessing officer, which was subsequently, restricted to 100% by the second respondent / appellate authority as affirmed by the third respondent / Tribunal - HELD THAT - In the facts and circumstances of the case, the penalty is slightly on the higher side and hence, the same is reduced to 50%, in the opinion of this court. Accordingly, the issue raised herein is answered in favour of the petitioner. Petition allowed in part.

Summary

Issues Involved:
1. Eligibility for concessional rate of tax at 3% for the purchase of tin containers against Form XVII declaration.
2. Correctness of the penalty imposed for violation of Section 3(3) of the TNGST Act.
3. Justification of the quantum of penalty imposed, initially at 150%, reduced to 100% by the appellate authority, and affirmed by the Tribunal.

Detailed Analysis:

Issue 1: Eligibility for Concessional Rate of Tax at 3%
The petitioner company, engaged in the manufacture of refined oil and vanaspathi, purchased tin containers for packing purposes and claimed a concessional tax rate of 3% under Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) for the assessment years 1990-91, 1991-92, and 1992-93. The Assessing Officer, after scrutiny, concluded that the tin containers were used as packing materials, not as integral components in the manufacturing process, thus denying the concessional rate and imposing tax and penalty. The Appellate Assistant Commissioner set aside the original orders and remanded the matter for fresh consideration. However, the revised assessment confirmed the earlier decision. The petitioner contended that the tin containers were an integral part of the manufacturing process, citing various judicial precedents. The respondents argued that the containers were merely packing materials, not used in the manufacturing process, and thus not eligible for the concessional rate. The court, referring to Section 3(3) and its amendment effective from 12.03.1993, concluded that packing materials were excluded from the concessional rate prior to the amendment. Consequently, the court found no reason to interfere with the authorities' findings, disallowing the concessional rate for the assessment years in question.

Issue 2: Correctness of the Penalty Imposed
The Tribunal upheld the penalty imposed under Section 23 of the TNGST Act for violating Section 3(3). The court noted that since the petitioner was not entitled to the concessional rate, the imposition of penalty was justified. The Tribunal's decision to affirm the penalty was found to be in accordance with the law.

Issue 3: Justification of the Quantum of Penalty
The Assessing Officer initially imposed a penalty at 150% of the tax due, which was reduced to 100% by the Appellate Authority and affirmed by the Tribunal. The court acknowledged the Tribunal's reasoning but found the quantum of penalty slightly on the higher side. Hence, the court reduced the penalty to 50%, considering the facts and circumstances of the case.

Conclusion:
The court modified the Tribunal's order to reduce the penalty to 50% while upholding the denial of the concessional tax rate and the imposition of penalty for the violation. The writ petitions were disposed of accordingly, with no costs.