2009 (7) TMI 1200 - HC - VAT and Sales Tax

Levy of tax and penalty - Held that - There is no dispute that the petitioner initially availed of the concessional rate of tax based on form 17 and then subsequently there was a sale covered by section 3(4) of the Act and consequently the levy of two per cent of tax under section 3(4) cannot be availed of and therefore, the challenge made in respect of the said levy cannot also be interfered with. As far as the levy of penalty is concerned only between the period from December 3, 1979 to May 27, 1993, the levy of penalty even in cases of assessment under section 12(1) of the Act can be made. Therefore, since in the present case, the assessment relates to the period 1994-95 and inasmuch as the period was subsequent to May 27, 1993, there is no scope to invoke section 12(3)(b) of the Act as it is not a case of best judgment assessment. Thus levy of penalty imposed in the assessment order dated May 31, 1996, as confirmed by the appellate authorities, deserves to be set aside. Appeal partly allowed.

Issues:
1. Exemption from sales tax on sales to District Leprosy Officer.
2. Consequential distribution of goods to specific institutions.
3. Concessional tax rate under section 3(3) of Tamil Nadu General Sales Tax Act.
4. Levy of penalty under section 12(3)(b) of the Act.

Exemption from Sales Tax on Sales to District Leprosy Officer:
The petitioner contested the sales tax levied on sales to the District Leprosy Officer, claiming exemption under G. O. P. No. 2280 dated April 30, 1973, for sales to voluntary leprosy institutions. However, the Tribunal found that the exemption was specific to named institutions and not applicable to all sales to the District Leprosy Officer. The central purchase system established by the State Government did not indicate distribution to exempted institutions. As such, without evidence of distribution to specified centers, the Tribunal's decision to treat the sales as to the Department of the Government was upheld.

Consequential Distribution of Goods to Specific Institutions:
The contention that goods sold to the District Leprosy Officer would be distributed to exempted institutions was dismissed. The central purchase system outlined in G.O.M.S. No. 634 did not establish a link between the Officer and the named institutions in G. O. P. No. 2280. Without specific directives from the State Government confirming distribution to exempted centers, the lower authorities' conclusion that the sales were to the Government Department was deemed valid and unchallenged.

Concessional Tax Rate under Section 3(3) of Tamil Nadu General Sales Tax Act:
Regarding a consignment sale under section 3(3) of the Act, the petitioner initially availed of a concessional tax rate but later engaged in a sale covered by section 3(4). The Act mandated a two percent tax on goods dispatched outside the State after availing of concessional rates. As the petitioner's sale fell under section 3(4) criteria, the levy of two percent tax was deemed appropriate, and the challenge against it was rejected.

Levy of Penalty under Section 12(3)(b) of the Act:
The imposition of a penalty under section 12(3)(b) was contested, citing a precedent that limited penalty imposition between specific dates. Since the assessment in question fell outside this period, the penalty was deemed inapplicable. The petitioner's disclosure of sales turnover and claim for exemption under G. O. P. No. 2280 were not accepted, leading to the penalty imposition. However, the penalty levy was set aside, and the rest of the assessment order was confirmed by the Appellate Assistant Commissioner and the Tribunal.

In conclusion, the tax case revision was partially allowed, with the penalty imposition being set aside while the rest of the assessment order remained confirmed.

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