2021 (2) TMI 761 - HC - VAT and Sales Tax

Compounding of Offence - detention of goods - allegation is that invoice raised by the supplier declared the name of the consignee, which was an unregistered place of business of the petitioner and therefore the documents were construed as invalid - HELD THAT - An Adjudication Notice dated 20.07.2015 was issued to the petitioner. It stated that that the petitioner had not declared No. 48, Bye pass Road, Kalavasal, Madurai as additional place of its business and therefore, there was a violation of Rule 5(5)(c) of the Tamil Nadu Value Added Tax Rules, 2007 and therefore, the petitioner had wilfully evaded payment of tax under Section 71(1)(b) of the Tamil Nadu Value Added Tax Act, 2006 - The petitioner replied to the said Adjudication Notice dated 20.07.2015 vide its reply/objection dated 19.08.2015. In the said reply/objection, the petitioner questioned the jurisdiction of the respondent and stated that only jurisdictional Assessing Authority was empowered under the Act to adjudicate tax liability and hence requested for dropping of the proceeding. The impugned order dated 20.01.2016 was passed by the respondent. In the impugned order, the respondent has merely stated that the reply of the petitioner was an afterthought and as such deserves no consideration. In the impugned order, it has also been observed that the explanation of the petitioner cannot be accepted as there was an offence committed by the petitioner under Sections 71(3)(a) and 71(7) of the TNGST Act, 2006 and therefore, an opportunity was given to the petitioner to compound the offence under Section 72(1)(a) of the TNVAT Act, 2006. In the case of Vestas Wind Technology Vs. The Commercial Tax Officer, Enforcement and Ors. 2020 (5) TMI 500 - MADRAS HIGH COURT , the Court dealt with identical situation and observed that Failure to obtain separate registration for the site office attracts penal provision Section 71(1)(b). Thus, this Writ Petition is allowed by restricting the compounding fee to be paid by the petitioner for a sum of ₹ 2,000/- under Section 72(1)(b) of the Tamil Nadu Value Added Tax Act, 2006 - respondent shall adjust the amount paid by the petitioner and refund the balance amount to the petitioner or in the alternative, permit the petitioner to adjust such amount for discharging its tax liability under the current tax regime - petition allowed.

Summary

Issues:
Challenge to impugned tax order - Validity of documents - Jurisdiction of assessing authority - Alleged tax evasion - Compounding of offense.

Analysis:
The petitioner contested an order seeking to impose a tax, challenging the validity of documents related to the procurement of battery cells from a supplier in Andhra Pradesh. The respondent alleged a violation of tax laws and detained the goods at a check post. The petitioner was directed to pay a proportionate tax earlier. Subsequently, an adjudication notice was issued, accusing the petitioner of tax evasion.

The petitioner raised objections regarding the jurisdiction of the respondent in adjudicating the tax liability. However, the impugned order passed by the respondent upheld the offense committed by the petitioner under specific sections of the tax act and provided an opportunity to compound the offense.

In the judgment, the court referred to previous cases to differentiate the circumstances. Notably, a case involving the detention of goods due to failure to claim them by the importer was distinguished from the current case. Another case highlighted errors in jurisdiction assumption by the tax officer in demanding tax and imposing compounding fees. The court upheld the invocation of specific tax provisions but restricted the compounding fee to a lower amount.

Based on the precedents and the specific circumstances of the case, the court allowed the writ petition, limiting the compounding fee to ?2,000 under the relevant tax act. The respondent was directed to refund any excess amount paid by the petitioner and adjust the remaining amount towards the tax liability. The court granted consequential relief to the petitioner without imposing any costs.

In conclusion, the court found in favor of the petitioner, restricting the compounding fee and providing relief in the form of refunds and adjustments for tax liabilities. The judgment emphasized adherence to tax laws while ensuring fair treatment and appropriate application of penalties.