2023 (2) TMI 656 - HC - VAT and Sales Tax

Scope of assessment - Reassessment of entire turnover or fresh assessment of escaped turnover - power of review - Exemption from sales tax - export sales - purchase of raw skins for export - revised assessment under Section 16 of the TNGST Act 1959 for the turnover of the year 1988-1989 or not - HELD THAT - The Division Bench in Ekambareeswarar Coffee and Tea Works case 1991 (2) TMI 359 - MADRAS HIGH COURT has held that it would be a travesty of law to hold that the orders made under section 16(1)(a) of the Act had set aside the original orders of assessment which were not even under consideration referred to or included in the order under section 16(1)(a) of the Act. The order of refund of tax already paid on the basis of the original order of assessment is therefore erroneous and cannot be sustained. The said observation has been made after considering the tenor of the re-assessment order passed under Section 16 of the Act. In the said case the Division Bench has taken note of the language used in Section 16(1)(a) and 16(1)(b) as well as the various interpretations of the Courts making it clear that Section 16(1) (a) deals with assessment of escaped turnover whereas Section 16(1)(b) deals with re-assessment of the turnover not only escaped assessment but also improperly assessed. In case of assessment on escaped turnover in exercise of power under Section 16(1)(a) reflection of the original order of assessment is not required even if the authority chooses to pass a composite order by including the assessment year relating to escaped turnover. If the tax liability already determined in the original assessment proceedings it can be bodily lifted and added to the order under Section 16(1)(a) of the Act. Admittedly the right to challenge the disallowance of exemption has not been availed. When the appeal preferred and remedy exhausted against the original order it will be preposterous to confer the said right in the subsequent assessment on the escaped turnover alone only because the subsequent order passed under Section 16(1)(a) of the said Act has also incorporated the earlier assessment order merely for the sake of completeness. Unless the entire turnover is re-assessed in exercise of power under Section 16 (1) (b) of the said Act the subsequent Appellate Authority cannot substitute his view contrary to the assessment regarding the turnover which has reached finality. Such substitution will amount to review of the earlier order. The power which the assessing authority thus exercises under Section 16(1)(a) of the Act is neither the power of revision nor the power of review. From the assessment order dated 31.03.1995 it is found that it is not reassessment of entire turnover. It is assessment made in exercise of power under Section 16(1)(b) of the said Act but only a fresh assessment regarding the escaped turnover in exercise of power under Section 16(1)(a) of the TNGST Act 1959. Appeal dismissed.

Issues Involved:
1. Legality of the revised assessment order under Section 16 of the TNGST Act, 1959.
2. Exemption of turnover from tax under the TNGST Act, 1959.
3. Inclusion of premium received for transfer of REP licence as taxable turnover.
4. Jurisdiction of the Joint Commissioner to revise the order of the Appellate Authority.

Detailed Analysis:

1. Legality of the Revised Assessment Order under Section 16 of the TNGST Act, 1959:
The assessing authority initially fixed the turnover for the assessment year 1988-89 and assessed it to 2% tax. The assessee challenged the assessment order but did not dispute the tax on the purchase of raw skins for export. Later, the assessing officer passed a revised assessment order under Section 16 of the TNGST Act, 1959, including the premium received for the transfer of REP licence. This revised assessment was challenged by the assessee, but the appellate authority only partly allowed the appeal. The Joint Commissioner then suo motu revised the appellate order, setting aside the exemption granted. The court upheld the Joint Commissioner's order, stating that the revised assessment order was valid as it dealt with the escaped turnover, not the entire turnover.

2. Exemption of Turnover from Tax under the TNGST Act, 1959:
The assessee claimed exemption for the turnover related to the purchase of raw skins for export, which was partly allowed by the appellate authority. However, the Joint Commissioner set aside this exemption, arguing that it was not challenged in the original assessment order. The court agreed with the Joint Commissioner, emphasizing that the original assessment order reached finality and could not be reopened under the guise of challenging the escaped turnover.

3. Inclusion of Premium Received for Transfer of REP Licence as Taxable Turnover:
The revised assessment included Rs. 2,83,302/- received as a premium for the transfer of REP licence as taxable turnover. The court noted that judicial pronouncements had established that the sale of incorporeal assets like REP licences attracts tax. Therefore, the inclusion of this amount in the taxable turnover was justified.

4. Jurisdiction of the Joint Commissioner to Revise the Order of the Appellate Authority:
The Joint Commissioner exercised his power under Section 34 of the TNGST Act to revise the appellate authority's order. The court upheld this jurisdiction, stating that the Joint Commissioner acted within his powers to correct an incorrect exemption granted by the appellate authority. The court referenced the judgment in the case of State of Tamil Nadu vs. C.M. Tiles, which clarified that reassessment proceedings under Section 16 of the Act only pertain to the escaped turnover and not the entire turnover assessed in the original order.

Conclusion:
The court dismissed the Tax Case Appeal, affirming the Joint Commissioner's order and holding that the revised assessment was valid, the exemption granted was incorrect, and the inclusion of the premium received for the transfer of REP licence as taxable turnover was justified. The court emphasized that the original assessment, which was not challenged initially, could not be reopened in the revised assessment proceedings.

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