2023 (6) TMI 780 - HC - VAT and Sales Tax

Forbearance from assessing or recovering any sums under Section 13 of the Tamil Nadu Value Added Tax, Act, 2006 from members - HELD THAT - The writ petition is maintainable. As pointed out, not just a common, but identical cause of action has been espoused by 1087 assesses. Though, it is added that their status i.e., whether they are proprietorship concerns, partnership firms or HUF constitutes a question of fact that this Court would not touch upon, their prayer in common is based upon a circular issued by R2 and hence nothing found untoward in they having filed a single writ petition. It is an admitted position that 1087 members who have filed this writ petition form a significant majority of all the association members and it is only 10, who would stand distanced from this cause of action. In the present case as well, the petitioner association is registered under the provisions of the Tamil Nadu Societies Registration Act, 1975. Though the association is not recognized as an assessee by the Commercial Taxes Department, this would not stand in the way of the maintainability of this writ petition itself since admittedly, the cause of action espoused by all the members before the Court is identical, and relates to clarification dated 04.11.2015. Maintainability is addressed towards the prayer itself, which is for a mandamus as against the respondents - HELD THAT - The respondents are agreed upon that the mandamus of the nature sought for is not liable to be granted. The petitioners pray for a direction that respondents must not assess or recover any sums under Section 13 of the Act. Section 13 deals with deduction of tax at source in works contract and fastens, on 'every person' responsible for paying any sum to any dealer for execution of works contract, the necessity to deduct an amount calculated at certain stipulated rates. The statutory position supports the position that the responsibility of tax deduction falls only upon certain specified persons and proprietorships, partnership firms and HUF stand excluded from this responsibility. - In the present case, the petitioner states that 1087 members whose cause it espouses are proprietary concerns, partnership firms or HUF. This is question of fact. That apart, individual assessee / members have received notices from the respondents and it is for them to respond to those notices clarifying and establishing their status, as to whether they are indeed proprietary concerns, partnership firms or HUF. Failure to do so will entail consequences that they must suffer. Likewise, adverse orders of assessment could also be challenged relying upon the relevant provisions of law. This writ petition is disposed permitting those assessees who are in receipt of notices to file replies before the authority establishing their status. If they do establish their status to be either proprietary concerns, partnership firms or HUF, then evidently they would be protected by virtue of the statutory exclusion in the explanation to Section 13(1) of 2006 Act.

Summary

Issues:
1. Maintainability of the writ petition filed by the Erode Cloth Merchants Association.
2. Granting of mandamus forbearing the State of Tamil Nadu from assessing or recovering sums under Section 13 of the Tamil Nadu Value Added Tax Act, 2006.

Issue 1: Maintainability of the writ petition
The Erode Cloth Merchants Association filed a writ petition on behalf of its members seeking a mandamus against the State of Tamil Nadu to prevent assessment or recovery of sums under the 2006 Act from their 1087 members who are proprietorship concerns, partnership firms, or Hindu Undivided Family (HUF). The respondents raised a preliminary objection to the maintainability of the petition, arguing that the association, as a registered society, lacks locus standi to file the petition on behalf of its members. However, the petitioner argued that since all members are engaged in identical businesses and the cause of action is common, it is more efficient to pursue the matter through a single writ petition.

Issue 1: Maintainability of the writ petition (contd.)
The Court found that the writ petition is maintainable as all 1087 assesses have a common cause of action, even though their individual status as proprietorship concerns, partnership firms, or HUF may vary. The Court noted that the cause of action relates to a circular issued by the Principal Secretary/Commissioner of Commercial Taxes, and therefore, a single writ petition by the association is appropriate.

Issue 2: Granting of mandamus
The petitioners sought a mandamus directing the respondents not to assess or recover any sums under Section 13 of the Act, which deals with tax deduction at source in works contracts. The respondents argued that the responsibility to deduct tax at source does not apply to proprietorships, partnership firms, or HUF, as per the statutory provisions. The Court agreed with the respondents that the mandamus sought should not be granted, as the responsibility for tax deduction does not fall on the members represented by the association.

Issue 2: Granting of mandamus (contd.)
The Court disposed of the petition by allowing the assessees who received notices to establish their status as proprietary concerns, partnership firms, or HUF before the authority. If they can prove their status, they will be protected by the statutory exclusion in Section 13(1) of the 2006 Act. The Court also allowed the petitioners to raise other objections to the notices if deemed necessary, including on the aspect of limitation. No costs were awarded, and the connected miscellaneous petition was closed.