9911796707
TMI Blog2010 (2) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... is to quash the consequent reassessment order dated April 6, 2009 under section 39(1) of the Act, annexure J. The petitioner, a dealer in cement manufactured in the States of Karnataka, Andhra Pradesh and Tamil Nadu, in the course of business, offers discount to its dealers in three forms, namely, price difference, cash discount and percentage discount. As regards price difference, it is stated that, during the first week of every subsequent month, a price is proposed and forwarded to the corporate office by the branch office for approval and the difference between the billed price and proposed price is offered as a price difference in credit notes to dealers, which is automatically generated by a system maintained by the petitioner, however, in the subsequent month immediately on the receipt of the approval from the corporate office. In respect of cash discount, it is stated that any dealer paying the invoice amount within seven days from the date of invoice, is eligible for two per cent cash discount on invoice price during the period April and May 2006, and if the payment is made within 8 to 15 days, the dealer is offered a one per cent cash discount on the invoice price and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent to the completion of the sale transaction. This was followed by a show-cause notice dated January 22, 2009, annexure G, under section 39(1) of the Act proposing to reassess the petitioner's assessments for the months of April and May 2006. In response to the notice, the petitioner filed its reply dated February 7, 2009, annexure H, pointing out to the fact that the amendment brought about retrospectively is unworkable, impractical, arbitrary and not possible of being implemented. Despite the reply, the second respondent confirmed the proposal to disallow the discount for the months of April and May 2006, by reassessment order dated April 6, 2009 levying VAT at the rate of 12.5 per cent on the said amount and demand notice dated April 6, 2009, collectively marked as annexure J. This consequently led to coercive action by way of a recovery notice dated April 22, 2009, annexure K, for recovery of Rs. 20,92,887, including interest of Rs. 5,90,087. The premise on which the petitioner has called in question the vires of the provisions of the Act as unconstitutional are thus: (i) Section 29 of the Act contemplates issue of tax invoices and bills of sale by a registered dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of transaction previously taken place not subject to any liability. By the amendment, it is contended that the petitioner will be burdened with 12.5 per cent tax on the discounted amount for the months of April and May 2006 and hence, unconstitutional. The petitioner having had the benefit of extending discount on the sale transactions by raising credit notes after the completion of the transaction and issue of invoices under the unamended rule 3(2)(c), the subsequent amendment has the effect to increasing the tax burden, for no valid or justifiable reason thus exposing the petitioner to additional tax, penalty and interest which cannot but be termed as oppressive, irrational, impracticable and unworkable, and calling upon the petitioner to do an act contrary to the law in order to avoid the penal consequences, hence violative of articles 14 and 19(1)(g) of the Constitution of India. (v) The notification impugned amending the proviso to the rule from an anterior date, serves no purpose and works unreasonably by placing an additional burden upon the petitioner who had by the time the notification was put into force, had issued invoices in compliance with the law as it stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State submits that the reason for the amendment being made retroactive from April 1, 2006 was that all business transactions would fall within the financial year commencing from April 1, 2006, as empowered by sub-clause (4) of section 88 of the Act. Having heard the learned counsel for the parties, perused the pleadings, there can be no more dispute that the object of bringing into force the amendment to the proviso to rule 3(2)(c) of the Rules was only to ensure that it would apply to all transactions for the financial year commencing from April 1, 2006 onwards. It is no doubt true that sub-section (4) of section 88 of the Act empowers the State to frame rules so as to bring them into force with retrospective effect. But that does not mean that the State could do so without noticing the repercussions and the adverse impact it would have on the concluded business transactions of dealers as also in the matter of accounting and securing the deduction on discount for purpose of tax, in accordance with the procedure prescribed by the unamended rule, for the months of April and May 2006. The procedure followed by the petitioner in maintaining its books of account by not showing in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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