2024 (1) TMI 510 - HC - VAT and Sales Tax

Validity of impugned orders of assessment dated 12.07.2021 under the Tamil Nadu Tax on Entry of Goods into Local Areas Act 2001 - stock transfer - exemption on the sales to CSD under the TNGST Act - revenue neutrality - time limitation - whether time spent in challenging validity of a levy would be excluded under Section 16 (5) of the TNGST Act? - HELD THAT - On applying the construction placed on the expressions assessments and in respect of while interpreting section 16 (5) of the TNGST Act it is clear that any proceeding connected with the assessment would be covered by Section 16(5) of the TNGST Act - there is no doubt in the light of the above discussion that the validity of the levy is certainly connected with the assessment and thus the time spent challenging the validity of the levy ought to be excluded while reckoning the limitation for assessment of escaped turnover or value of Schedule goods or reassessment ought to be excluded in terms of Section 10 of Entry Tax Act read with Section 16(5) of TNGST Act. Whether Section 16 (5) of the TNGST Act would have relevance in determining what would constitute reasonable period for the purposes of making an assessment under Rule 4 of Entry Tax Rules? - HELD THAT - The limitation provided under Section 16 of the Act is indicative of what would constitute reasonable period for the purpose of assessment under Rule 4 of the Entry Tax Rules. If the impugned orders of assessments are treated as original assessment under Rule 4 of Entry Tax Rules which does not prescribe any limitation and thus ought to be made within a reasonable period. If one bears in mind the scheme of the Act there is no doubt that the impugned orders of assessment are made within a reasonable period - thus Section 12C of the TNGST Act may not have any relevance in determining whether the impugned orders of assessment are barred by limitation or otherwise. Legality of the impugned orders - escaped assessment - HELD THAT - Assuming that the impugned proceedings qualify as assessments of escaped value of scheduled good in which event it would be governed by Section 10 of the Entry Tax Act read with Section 16 of the TNGST Act. Then applying the exclusion provided under Section 16 (5) of the TNGST Act the impugned orders of assessment are within period stipulated under Section 10 of the Entry Tax Act readwith Section 16 of the TNGST Act and thus the plea of the impugned orders being barred by limitation is liable to be rejected. The matters are remitted back for reconsideration - Petition disposed off by way of remand.

Summary

Issues Involved:
1. Whether the impugned assessment orders are barred by limitation.
2. Applicability of exemption under the TNGST Act to the Entry Tax Act.
3. Relevance of Revenue Neutrality principle.
4. Legality of the assessment orders under the Entry Tax Act.

Summary:

1. Limitation Issue:
The petitioner contended that the assessment orders for the years 2003-04 to 2006-07 were barred by limitation, as the notices were issued beyond the six-year period stipulated by Section 16 of the TNGST Act, which applies to the Entry Tax Act by virtue of Section 10. The court examined whether the period during which the validity of the Entry Tax Act was challenged before the Supreme Court should be excluded. It was held that the time spent in litigation regarding the validity of the Entry Tax Act must be excluded under Section 16(5) of the TNGST Act, making the assessments within a reasonable period.

2. Exemption Applicability:
The court found that the exemption under the TNGST Act for sales to CSD does not automatically extend to the Entry Tax Act. The impugned orders correctly stated that the exemption under the TNGST Act does not apply to the Entry Tax Act in the absence of a specific exemption.

3. Revenue Neutrality:
The petitioner argued that the entire exercise was revenue neutral, as any Entry Tax paid would be set off against the liability under the TNGST Act. The court acknowledged the principle of Revenue Neutrality and referenced the Supreme Court's judgment in Associated Cement Companies, which held that the entitlement to set-off under the Entry Tax Act depends on the liability under the General Sales Tax Act, not on the actual payment of taxes. The court remitted the matter back to the Assessing Authority to reconsider the assessments in light of the principles of Revenue Neutrality.

4. Legality of Assessment Orders:
The court examined whether the assessments were original assessments or reassessments of escaped turnover. It was concluded that if the impugned orders were treated as original assessments, they must be made within a reasonable period, which, considering the exclusion of the litigation period, was met. If treated as reassessments, they were within the limitation period under Section 16 of the TNGST Act.

Conclusion:
The court remitted the matters back to the Assessing Authority for reconsideration, emphasizing the principles laid down in the Associated Cement Companies case and the relevance of Revenue Neutrality. The writ petitions were disposed of, and the connected miscellaneous petitions were closed.