2022 (11) TMI 93 - HC - VAT and Sales Tax

Validity of assessment order - Taxability - fly ash procured from the Tamil Nadu Electricity Board (TNEB) - exemption claimed in respect of supplies to be made to Special Economic Zones (SEZ) - ban imposed by the Central Government in transacting in fly ash, for preservation and protection of the environment by way of Notification dated 14.09.1999 - HELD THAT - The impugned proceedings were triggered by an audit slip wherein there was reference to Section 18 of the Act. The petitioner has specifically disavowed all reference to Section 18 stating that the claim of exemption is not under Section 18 but only under the Government Order as aforesaid. Despite the multiple rounds of prior litigation in this matter, in the present impugned notices as well, the assessing authority merely repeats the same proposals contained in the audit note - The officer proposes, in the impugned notice, to assess the value of the material taking the price at which other suppliers have effected the sale, as a base. While he initially states that the actual turnover must be brought to tax, he goes on to state that the value of fly ash at which other suppliers have supplied the goods to the cement industry will be adopted as the basis of assessment, notwithstanding that the petitioner has set out the actual value at which the fly ash has been procured duly supported by a certificate from the chartered accountant. Supply to developers of SEZ - HELD THAT - The officer again reiterates that the ingredients of Section 18 of the Act have not been satisfied. Despite the settled position that an assessment should proceed on an independent application of mind by the officer, though naturally, he would take note of the objections raised by audit, and inspite of the submissions of the petitioner that no claim has been made in terms of Section 18, the authority repeatedly refers to Section 18. In light of the reiteration of the same errors by the assessing authority to which learned Government Pleader will accede, the impugned notice shall not be pursued. Let a fresh notice be issued and if and when such notices are issued, responses will be filed by the assessee and assessments be completed expeditiously - the respondent is permitted to issue notices within four (4) weeks from today, bearing note of the flaws pointed out above. If no notice is issued within the aforesaid time frame, the returns of the petitioner for the periods in question will be deemed to have been accepted. Petition disposed off.

Summary

Issues:
1. Taxability of fly ash procured from TNEB
2. Exemption claimed for supplies to SEZ

Analysis:

Issue 1: Taxability of Fly Ash
The petitioner, a company engaged in cement manufacturing, challenged notices under the Tamil Nadu Value Added Tax Act for four periods. The primary contention was regarding the taxability of fly ash procured from TNEB. The petitioner argued that the service charge paid for fly ash did not constitute sale consideration and, therefore, was not subject to purchase tax. Additionally, the valuation of fly ash was disputed, with the petitioner asserting that the sale price should be as per the Memorandum of Understanding with TNEB. Previous court orders were referred to in support of this argument, highlighting the need for a re-assessment based on the agreement between the parties.

Issue 2: Exemption Claimed for SEZ Supplies
The second issue pertained to an exemption claimed by the petitioner for supplies to developers of SEZ under a government order. Despite the petitioner's insistence that the exemption claim was not under a specific section of the Act but under the government order, the assessing authority continued to refer to Section 18. The authority proposed assessing the value of materials based on prices from other suppliers, disregarding the actual value provided by the petitioner supported by a chartered accountant's certificate. The repeated reference to Section 18, despite the petitioner's objections, indicated a lack of independent assessment by the authority.

Court Decision
The court noted the errors in the impugned notices, particularly the incorrect application of tax provisions and the failure to consider the petitioner's submissions. The court directed the assessing authority to issue fresh notices, ensuring a proper assessment process based on the actual agreements and supporting documents provided by the petitioner. If no fresh notices were issued within the specified timeframe, the returns of the petitioner for the relevant periods would be deemed accepted. The writ petitions were disposed of with no costs, and connected miscellaneous petitions were closed, emphasizing the need for a fair and accurate assessment process in line with the legal provisions and agreements between the parties.