2018 (4) TMI 1298 - HC - VAT and Sales Tax

Revision of assessment - penalty for the wrong availment of ITC - Section 12(3)(b) of the TNGST Act - Held that - In Appollo Saline Pharmaceuticals (P) Ltd., Vs. Commercial Tax Officer (FAC) and Others, 2001 (10) TMI 1100 - MADRAS HIGH COURT held that The legislative intention therefore, except during the period December 3, 1979 to May 27, 1993 and on and after April 1, 1996 must be taken to be to, permit the levy of penalty only in case where the assessment is a best judgment assessment made on an estimate and not by relying solely on the accounts furnished by the assessee in the prescribed return. On and after April 1, 1996 an explanation has been added below Section 12 (3) which requires the turnover relating to the tax assessed on the basis of the accounts of the assessee, to be disregarded, while determining the turnover on which the penalty is to be levied under Section 12 (3). Penalty set aside - Tax Case Revision Petition is dismissed.

Summary

Issues:
1. Reversal of input tax credit (ITC) on purchases for office use.
2. Declaration of taxable goods as exempt purchases.
3. Failure to reverse ITC on sales to SEZ units.
4. Levying penalty for wrong availment of ITC.
5. Appellate authority's deletion of penalty.
6. Department's disagreement leading to cross appeals.
7. Tribunal's decision upholding deletion of penalty.
8. Challenge by the State through Tax Case Revision.

Reversal of Input Tax Credit (ITC) on Purchases for Office Use:
The case involved Tvl.Rathna Fan House (P) Ltd. wrongly claiming ITC on the purchase of UPS for office computers and van for office use during the year 2007-2008. The audit revealed these discrepancies, leading to the re-opening of the assessment and the subsequent reversal of the wrong ITC availment.

Declaration of Taxable Goods as Exempt Purchases:
The audit also found that the dealers declared purchases of taxable goods as exempt purchases, indicating a misrepresentation of transactions. This discrepancy contributed to the reassessment and the imposition of penalties under the TNVAT Act, 2006.

Failure to Reverse ITC on Sales to SEZ Units:
Another issue highlighted was the failure of the dealers to reverse ITC on sales of fans to SEZ units, despite not complying with the necessary provisions as per Section 19(2) of the TNVAT Act, 2006. This non-compliance led to the imposition of penalties during the revised assessment.

Levying Penalty for Wrong Availment of ITC:
Penalties were levied for the wrong availment of ITC, as per Section 27(4) of the TNVAT Act, 2006. The penalties were based on the amount of ITC wrongly availed, with specific penalties outlined for different assessment years.

Appellate Authority's Deletion of Penalty:
The Appellate Deputy Commissioner (CT)-III, while disposing of the appeals, remanded the assessment portion to the Assessing Officer and deleted the penalties levied under Section 27(4) of the TNVAT Act, 2006. This decision was based on the lack of independent evaluation and appraisal before imposing penalties.

Department's Disagreement Leading to Cross Appeals:
Disagreement arose between the department and the Appellate Deputy Commissioner (CT)-III, leading to cross appeals being filed before the Tamil Nadu Sales Tax Appellate Tribunal. The department contested the deletion of penalties and sought a different outcome.

Tribunal's Decision Upholding Deletion of Penalty:
The Tamil Nadu Sales Tax Appellate Tribunal dismissed the appeals and upheld the deletion of penalties by the Appellate Deputy Commissioner (CT)-III. The Tribunal emphasized the need for a thorough evaluation before imposing penalties and cited legal precedents to support their decision.

Challenge by the State Through Tax Case Revision:
The State, being aggrieved by the Tribunal's decision, preferred a Tax Case Revision challenging the deletion of penalties. The State argued that penalties were justified based on the wrong availment of ITC, as outlined in the TNVAT Act, 2006. However, the decision was upheld based on legal interpretations and precedents emphasizing the necessity of specific concealment for penalty imposition.