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2022 (7) TMI 819 - HC - VAT and Sales TaxLevy of Entry Tax - entry of imported motor vehicles into the State of Tamil Nadu for the use or sale therein - existence of assessment order or not - whether demand for recovery of the tax can be made by the Revenue in the absence of assessment order - making an assessment, in view of the limitation under the provisions of the Entry Tax Act - HELD THAT - Under the rule making power, the rule making authority, i.e., the Government of Tamil Nadu, made rules called The Tamil Nadu Tax on Entry of Motor Vehicles Rules, 1990, where rule 3 speaks about Submission of Returns and Payment of tax . The sub-rule 2 of rule 3 says that, an importer, who is a dealer in motor vehicles, liable to pay tax under the General Sales Tax Act shall furnish return for each month and each such return shall be furnished on or before the 20th day of the month immediately succeeding. Sub-rule (3) says that, an importer other than the one specified in sub-rule (2) shall furnish return for only the quarter in which an entry of motor vehicle into a local area is effected by him and such return shall be furnished on or before the last day of the month immediately succeeding the quarter - Therefore under sub-rule 3 of rule (3), a private importer, i.e., other than a dealer, shall furnish the return before the last day of the month immediately succeeding the quarter. These petitioners may not be the dealer but only can be treated as an individual, for their own use since they imported the vehicles concerned, they should have filed the return under rule 3(3). However, admittedly none of the petitioners have filed such return within the time. They stated that, the reason for non-filing of the return was that, before they imported the respective vehicles, the pari materia legislation of the State of Kerala was testified and it was declared so, that the entry tax cannot be levied on the imported vehicle - When that being the legal position when paria materia provisions was available in the Tamil Nadu Act, i.e., Entry Tax Act of Tamil Nadu, the petitioners and similarly placed persons were on the impression throughout the State that, the entry tax cannot be imposed against the imported vehicle. Under Section 7 of the Act r/w rule 3(2) or 3(3), no return had been filed. Therefore invoking the best judgment theory, after collecting the details about the cost of the vehicle imported, duty paid on them, insurance charges, clearance charges etc., all put together which are liable to be calculated for the purpose of assessing the entry tax either at the rate of 12.5% or at the rate of 14.5%, accordingly, those amount were assessed. Therefore, the said action taken on the part of the Revenue in completing the assessment based on the input supplied by the petitioners with regard to the value of the vehicle as well as the amount paid on such import by way of import duty etc., cannot be found fault with. Though in one case, the petitioner submitted that the vehicle purchased by him in 2005 was sold to some other party in 2009, therefore he is not liable to pay any tax is concerned, it is not the liability as on today but it was the liability at the time of importing the vehicle and brought the vehicle into the State of Tamil Nadu, i.e., in the year 2005. Therefore that argument also is liable to be rejected. Since the liability of the importers to pay the entry tax on the imported vehicle has already been held in unequivocal terms by this Court in V. KRISHNAMURTHY VERSUS STATE OF TAMIL NADU AND OTHERS 2019 (1) TMI 1714 - MADRAS HIGH COURT followed by number of decisions, the petitioners are liable to pay the entry tax as demanded by the Revenue - Insofar as the levy of penalty for non-payment of the tax as levied or imposed against the petitioners is concerned, such a penalty can be imposed on the petitioners only after 29.01.2019 but not before that date. The Revenue is hereby directed to verify as to when these petitioners have paid the tax and if the tax in full paid as demanded by the Revenue on or before 29.01.2019, no penalty can be imposed on them - Instead if they paid only after 29.01.2019, penalty can be imposed on them, under Section 15 of the Act only from 29.01.2019 till the date of payment of the full tax - Petition disposed off.
Issues Involved:
1. Liability to pay entry tax on imported vehicles. 2. Requirement of an assessment order before tax recovery. 3. Applicability of the limitation period for assessment. 4. Imposition of penalties for non-payment of entry tax. Detailed Analysis: Liability to Pay Entry Tax on Imported Vehicles: The petitioners, consisting of individuals and a private limited hotel, challenged the demand for entry tax on imported vehicles. The legal position on the liability to pay entry tax was clarified by the Supreme Court in the case of *State of Kerala v. Fr. William Fernandez* (2017 SCC Online SC 1291), which upheld the validity of entry tax on imported vehicles. Following this, the Madras High Court in *V. Krishnamurthy v. State of Tamil Nadu* (2019 SCC Online Mad 8523) confirmed that importers of foreign vehicles into Tamil Nadu are liable to pay entry tax. The court reiterated that the petitioners are liable to pay entry tax as per the settled legal position. Requirement of an Assessment Order Before Tax Recovery: The petitioners argued that an assessment order must precede any demand for tax recovery. Section 8 of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 (Entry Tax Act) outlines the assessment procedure, requiring an assessment order to be issued within three years from the last date prescribed for filing returns. The court found that the petitioners had not filed the required returns, allowing the Revenue to proceed with a best judgment assessment based on available data. The court rejected the argument that an assessment order was necessary before tax recovery, given the petitioners' failure to file returns. Applicability of the Limitation Period for Assessment: The petitioners contended that the limitation period for making an assessment had expired. However, the court noted that the litigation period should be excluded from the limitation period. The court emphasized that due to the long-standing legal uncertainty and interim orders restraining the Revenue from collecting entry tax, the limitation period should be tolled. The court concluded that the Revenue's actions were not barred by limitation, as the period during which the legal position was unclear and litigation was pending should be excluded. Imposition of Penalties for Non-Payment of Entry Tax: The petitioners argued against the imposition of penalties for non-payment of entry tax, citing the legal uncertainty that persisted until the Supreme Court's decision in 2017 and the subsequent Madras High Court decision in 2019. Section 15 of the Entry Tax Act allows for penalties if tax is not paid without reasonable cause. The court acknowledged that the legal ambiguity provided a reasonable cause for the delay in payment. Therefore, penalties could only be imposed from 29.01.2019, the date of the Division Bench judgment in *V. Krishnamurthy's* case, until the date of full payment of the tax. The court directed the Revenue to verify the payment dates and impose penalties accordingly. Conclusion: The court disposed of the writ petitions with the following orders: 1. Petitioners are liable to pay the entry tax as demanded by the Revenue. 2. Penalties for non-payment of tax can only be imposed from 29.01.2019 onwards. 3. The Revenue must verify the payment dates and impose penalties only for delays post-29.01.2019. 4. The Revenue can recover full tax and applicable penalties from 29.01.2019 until complete recovery. The petitions were thus disposed of with no order as to costs, and connected miscellaneous petitions were closed.
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