2023 (1) TMI 1133 - HC - VAT and Sales Tax

Seeking waiver of tax on the steel purchased which according to the petitioner was not converted into grills - It is the case of the petitioner that there was no conversion of steel purchased, because, the steel was used as such and since the steel was purchased from a registered dealer within the State, it could not be subjected to tax once again - scope for interference / judicial review of an order of Tribunal - HELD THAT - The petitioner was engaged in civil contract work. Thus, the petitioner would have been liable to tax under Section 3-B of the Tamil Nadu General Sales Tax Act, 1959 as a works contractor. The facts on record indicate that the petitioner had declared the total of Rs.62,63,932/- and taxable turnover of Rs.35,00,132/- in his return. However, the taxable turnover was re-determined as Rs.39,93,764/- by the Assessing Officer. The Assessing Officer namely, the third respondent has treated the Steel purchased by the petitioner as sale of Steel Grills liable to tax under Section 3-B of the TNGST Act, 1959 - As per Section 3-B(2)(b) of the Tamil Nadu General Sales Tax Act, 1959, the taxable turnover of a dealer for the transfer of property involved in the execution of works contract shall be arrived after deducting the value of goods used in the execution of works contract which were purchased from a registered dealer and were liable to pay tax at the rate specified in the First Schedule or the Second Schedule of the Act. The Tribunal has not committed any error while reversing the decision of the second respondent Appellate Assistant Commissioner as the petitioner did not produce any documents to substantiate that the steel that was purchased from a registered dealer within the State of Tamil Nadu was not used in the execution of works contract. Further, the scope for interference / judicial review of an order of Tribunal is very limited. Unless the order suffers from violation of principle of natural justice or is found to be ex-facie perverse or arbitrary , the Writ Petition ought not to have been entertained. The impugned order passed by the Tribunal does not suffer from any infirmity and cannot be set aside. Petition dismissed.

Summary

Issues Involved:
1. Revision of taxable turnover.
2. Tax liability on steel conversion.
3. Validity of the Enforcement Wing's proposal.
4. Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959.
5. Scope of judicial review under Article 226 of the Constitution of India.

Issue-Wise Detailed Analysis:

1. Revision of Taxable Turnover:
The petitioner reported total and taxable turnovers of Rs.62,63,932/- and Rs.35,00,132/- respectively for the Assessment Year 1996-1997. A pre-assessment notice was issued on 06.02.1998 to revise the taxable turnover, which included items like sand, bricks, blue metal, timber converted, and steel converted. The petitioner contested the revision, particularly regarding the steel, arguing it was used as purchased and not converted into grills. The Assessing Officer re-determined the taxable turnover as Rs.39,93,764/- and assessed tax, surcharge, and penalty accordingly.

2. Tax Liability on Steel Conversion:
The main contention was whether the steel purchased was converted into grills, which would affect the tax rate. The petitioner claimed no conversion occurred, and the steel was used as purchased from registered dealers within the state, making it non-taxable again. The Appellate Commissioner initially sided with the petitioner, but the Tribunal reversed this decision, noting discrepancies in the petitioner's statements and confirming the tax liability at 8% for the steel conversion.

3. Validity of the Enforcement Wing's Proposal:
The Enforcement Wing's D-3 proposal, which suggested the steel was converted into grills, was a critical point of contention. The Appellate Commissioner criticized the Enforcement Wing for not verifying the original assessment and sending a best judgment proposal without proper application of mind. The Tribunal, however, upheld the Enforcement Wing's proposal, emphasizing the petitioner's failure to provide adequate documentation to prove the steel was used as purchased.

4. Penalty under Section 12(3)(b):
The Appellate Commissioner found the penalty levied under Section 12(3)(b) incorrect, arguing that the revised orders indicated an excess payment situation, thus setting aside the penalty. The Tribunal did not specifically address the penalty issue in its reversal but focused on the overall tax liability and the validity of the revised assessment.

5. Scope of Judicial Review under Article 226:
The court emphasized its limited scope for interference under Article 226, focusing on the decision-making process rather than the decision itself. Citing H.B. Gandhi, Excise and Taxation Officer - cum - Assessing Authority, Karnal and others Vs. M/s. Gopi Nath & Sons and others, the court noted that unless there was a violation of natural justice or the decision was perverse or arbitrary, judicial review was not warranted. The court found no such issues in the Tribunal's decision-making process and thus dismissed the writ petition.

Conclusion:
The High Court dismissed the writ petition, upholding the Tribunal's decision to reverse the Appellate Commissioner's order. The court found no errors or perversity in the Tribunal's decision-making process and emphasized the limited scope of judicial review under Article 226. The petitioner's failure to substantiate claims regarding the use of steel and the validity of the Enforcement Wing's proposal were key factors in the court's decision.