2017 (12) TMI 886 - HC - VAT and Sales Tax

Rate of tax - sale of construction machinery, treating them as capital goods - inter-state sale - vires of Section 2 (11) of the TNVAT Act, 2006 - principles of Natural Justice - Held that - the first respondent was bound to consider the objections filed by the petitioner, and pass a speaking order. It would be incorrect on that part of the first respondent to state that, merely because, vires of Section 2 (11) has been upheld, the petitioner will not heard on merits and are required to remit the differential rate of tax. If this is the interpretation given by the first respondent, it would run contrary to the decision of the Division Bench, dated 05.04.2016, wherein, liberty was granted to file objections to revision notices. This liberty is not an empty formality. Therefore, the Assessing Officer, the first respondent is bound to consider the objections. In the instant cases, the petitioner specifically sought for an opportunity of personal hearing, which has not been afforded - The Division Bench, in several decisions has observed that, in the absence of specific prohibition under the statute, for affording an opportunity of personal hearing, the Assessing Officer could afford such personal hearing, as it would help the Assessing Officer to complete the assessment in a proper manner. The impugned orders have been passed in violation of the principles of natural justice - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Applicability of Section 8(2) of the Central Sales Tax Act, 1956.
3. Classification of goods as capital goods under Section 2(11) of the Tamil Nadu Value Added Tax Act, 2006.
4. Validity of the orders passed by the Assessing Officer demanding differential tax.
5. Role and authority of the Authority for Clarification and Advance Ruling.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner argued that the impugned orders were passed without assigning reasons and without granting an opportunity for a personal hearing, violating the principles of natural justice. The court noted that the petitioner specifically sought a personal hearing, which was not afforded. The court emphasized that personal hearings help in completing assessments properly and found that the impugned orders were indeed passed in violation of natural justice principles.

2. Applicability of Section 8(2) of the Central Sales Tax Act, 1956:
The petitioner contended that they were making CST payments at 4% on batching plants sold in interstate trade without 'C' Form under Section 8(2) of the CST Act, based on the classification of goods as capital goods attracting a 4% tax rate. The court was required to consider whether the expression 'shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State' in Section 8(2) was correctly interpreted by the Assessing Officer. The petitioner relied on the Gujarat High Court's decision in State of Gujarat Vs. Reliance Industries Ltd., which emphasized understanding the applicable rate as if similar goods were sold within the State of the selling dealer.

3. Classification of Goods as Capital Goods under Section 2(11) of the Tamil Nadu Value Added Tax Act, 2006:
The petitioner challenged the classification of concrete mixing (batching) plants as non-capital goods, which would attract a higher tax rate of 12.5%. The Division Bench had upheld the constitutional validity of Section 2(11) of the TNVAT Act, which defines capital goods. The court noted that the Assessing Officer should consider the objections filed by the petitioner regarding this classification and pass a speaking order.

4. Validity of the Orders Passed by the Assessing Officer Demanding Differential Tax:
The impugned notices demanded a differential tax at 8.5%, after crediting the 4% tax already paid. The court found that the Assessing Officer failed to consider the petitioner's objections and wrongly interpreted the Division Bench's decision as a blanket approval to demand the differential tax. The court directed the Assessing Officer to reconsider the objections and pass a speaking order, ensuring that the petitioner's contentions are addressed.

5. Role and Authority of the Authority for Clarification and Advance Ruling:
The court noted that the Division Bench had observed that any ruling or clarification issued by the Authority for Clarification and Advance Ruling cannot go contrary to statutory provisions. The petitioner sought to rely on a clarification dated 22.07.2014, which was not challenged in the earlier writ petitions. The court held that granting the petitioner leave to file review petitions before the Authority would amount to granting relief that was not secured in the earlier writ petitions.

Conclusion:
The court allowed the writ petitions, set aside the impugned orders, and directed the Assessing Officer to consider the objections filed by the petitioner, afford a personal hearing, and pass a speaking order on merits. The court emphasized that the Assessing Officer should address any new factual issues raised by the petitioner and could reject contentions already considered by the Division Bench. No costs were awarded, and connected writ miscellaneous petitions were closed.