2009 (2) TMI 787 - HC - VAT and Sales Tax

Entry tax as per the provisions of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 challenged - Held that - Since there is no provision in the Entry Tax Act for assessing a person who failed to furnish the return under section 7 of the Act, the only course open to the assessing authority was to levy penalty not exceeding twice the amount of tax due as provided under section 15(1) of the Act. However in the present case, the levy of penalty has already been set aside by the learned single judge on the ground that there was no requirement to file a return or to pay entry tax on the motor vehicle into the local area as on the date on which the vehicle was imported by the appellant. No appeal has been preferred by the respondent against the order setting aside the imposition of penalty by the learned single judge and as such, the said order has become final. In such circumstances, we are of the considered view that it is not permissible for the respondent to collect penalty also in the present case. In the result, the writ appeal is allowed and the direction of the learned single judge for payment of entry tax is set aside.

Summary

Issues:
Challenge to order directing payment of entry tax under Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 after a lapse of seven years; Interpretation of provisions of the Act regarding assessment and liability to pay tax; Justification of assessment order by the assessing authority; Legal obligation to file return under the Act; Applicability of Supreme Court judgment clarifying definition of "motor vehicle"; Assessment authority's power to assess importer for failure to furnish return; Statutory limitations for assessment and reassessment; Interpretation of plain and unambiguous taxation statutes; Authority to levy tax on importer who failed to file returns; Consideration of penalty under the Act.

Analysis:

The judgment pertains to an appeal challenging an order directing payment of entry tax under the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 after a considerable period of seven years. The appellant, a firm, imported an Escort JCB excavator in 1995, which was not liable for registration under the Motor Vehicles Act at that time. The assessing authority issued a notice in 2001, followed by an assessment order in 2002, imposing entry tax and penalty. The appellant contested the levy, citing absence of legal obligation to register the vehicle and file returns at the time of import.

The learned single judge opined that the appellant was not required to register the vehicle in 1995, and only after a Supreme Court judgment in 2001 did the necessity for registration arise. However, the appellant was directed to pay tax as per the assessment order, leading to the present appeal. The appellant argued that the Act lacked provisions for assessing an importer for failure to submit a return, emphasizing no liability existed at the time of import due to the vehicle not meeting registration criteria.

The Special Government Pleader defended the assessment order, citing Rule 12 of the Entry Tax Rules permitting information gathering for assessments. The Act aimed to prevent sales tax evasion on vehicles brought into Tamil Nadu. The Act defined "motor vehicle" in alignment with the Motor Vehicles Act, 1988, and mandated tax on vehicles liable for registration in the state. Sections 7, 7A, and 8 outlined filing returns, assessment procedures, and limitations for assessments and reassessments.

The judgment highlighted the significance of the Supreme Court's clarification on the definition of "motor vehicle" in 2001, post which the assessing authority issued the notice and assessment order. The absence of a specific provision in the Act for assessing importers failing to file returns constrained the authority's power to assess post-import based on subsequent clarifications. The judgment stressed interpreting plain taxation statutes without adding provisions not explicitly stated.

Ultimately, the Court held the assessing authority unjustified in demanding entry tax from the appellant, emphasizing the absence of legal provision enabling assessment for failure to file returns. The Court referenced a Supreme Court case on reasonable exercise of jurisdiction in the absence of prescribed limitations for reassessment. As the penalty was set aside by the single judge and not appealed, the Court deemed it impermissible for the respondent to collect penalty, allowing the writ appeal and setting aside the payment directive.