2020 (5) TMI 500 - HC - VAT and Sales Tax

Refund of compounding amount/fee paid for release of the goods detained - levy of compounding fee - contention of the respondent is that since the petitioner did not have registration for the site office, the transportation was improper and without payment of duty - HELD THAT - The goods in question were directly dispatched by the manufacturer to the Petitioner s site in Tirunelveli for being installed along with the other wind energy equipment at a later point time - The petitioner had not affected any sale of the goods when the goods was detained by the 1st respondent at the Paranoor Check Post near Chengalpet. It is at a later stage, a sale would have taken place by the petitioner to its customer. The detention of the goods on the assumption that the petitioner had already effected sale and that no tax was paid when the goods were in transit was is purely based on the assumption, presumption and conjecture. As and when the petitioner effects sale, the petitioner would be liable to pay tax. There was an error in assumption of jurisdiction by the 1st respondent Commercial Tax Officer namely the Check Post officer on the ground that the goods had not suffered tax as the manufacturer had indeed charged tax in the invoice raised on the petitioner. The 1st respondent not only erred in demanding tax at the Check Post from the petitioner after wrongly detaining the goods but also erred in asking the petitioner to opt for compounding of the alleged offence under section 72(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 by asking the petitioner to pay the aforesaid amount of ₹ 2,74,048/-. Indeed, no case was made for detaining the goods in transit on the assumption that no tax was paid - Though the petitioner appears to have obtained VAT registration for its head office, it had not obtained separate registration for the site office as an additional place of business under Rule 5 (1) (a) of the Tamil Nadu Value Added Rules, 2007 read with Section 38 of the Tamil Nadu Value Added Tax Act, 2006. While upholding the invocation of Section 72(1) of the Tamil Nadu Value Added Tax Act, 2006, the composition fee ought to have been restricted to an amount not exceeding ₹ 2000/-under Section 72(1)(b) of the aforesaid Act - Petition allowed in part.

Summary

Issues:
1. Quashing of Compounding Notice and refund of amount paid.
2. Detention of goods for improper transportation and lack of registration.
3. Authority to levy compounding fee under the Tamil Nadu Value Added Tax Act.
4. Justification of detaining goods and demanding tax.
5. Error in jurisdiction assumption by the Commercial Tax Officer.
6. Failure to obtain separate registration for the site office.
7. Penalty for failure to register under the Act.
8. Modification of the compounding fee and refund of excess amount.

Analysis:

1. The petitioner sought to quash the Compounding Notice and refund the amount paid for the release of detained goods. The goods were intercepted during transit for delivery to an unregistered place, leading to detention by the Commercial Tax Officer.

2. The detention was based on the lack of registration for the site office, which was considered improper transportation without payment of duty. The petitioner was engaged in wind energy park development and had procured the gearbox for installation purposes.

3. The petitioner argued that the authority to levy compounding fee at the Check Post was without legal basis. The petitioner cited relevant court decisions to support the claim for a refund of the compounding fee paid.

4. The main issue was whether the Commercial Tax Officer was justified in detaining the goods and demanding tax and compounding fee. The petitioner had not completed the sale when the goods were detained, and tax liability would arise only upon sale to the customer.

5. The court found errors in the assumption of jurisdiction by the Commercial Tax Officer. The officer wrongly demanded tax at the Check Post, even though the manufacturer had already charged tax on the invoice. The petitioner was asked to pay a compounding fee without proper justification.

6. Despite the errors by the Commercial Tax Officer, the petitioner was also at fault for not obtaining separate registration for the site office, as required by the law. Failure to register attracted penal provisions under the Act.

7. The court upheld the invocation of Section 72(1) of the Tamil Nadu Value Added Tax Act but determined that the compounding fee should have been limited to a specific amount under Section 72(1)(b) due to the petitioner's failure to register the site office.

8. Consequently, the court modified the compounding fee and directed the respondents to refund the excess amount paid by the petitioner. The amount collected towards tax was to be adjusted against the petitioner's tax liability. The writ petition was partly allowed, and no costs were imposed.

By addressing each issue comprehensively, the court provided a detailed analysis of the legal aspects involved in the case and delivered a judgment that balanced the errors of both parties while upholding the principles of tax law and registration requirements.