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TMI Blog2015 (6) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... irm processes/manufactures rubber thread out of raw rubber. A large amount of this rubber thread is being sold outside the State either by transfer of stock on "F" form or by means of inter-State sale on "C" form. Value added tax @ 12.5% per annum was leviable on the sale of rubber thread sold in Tripura upto 03-05- 2011 and thereafter @ 13.5% per annum w.e.f. 04-05-2011. 3. Notice was issued to the petitioner under section 31(1) of the TVAT Act, 2004 to produce the books of account and other relevant documents. The Assessing Officer found that a very small proportion of the produce was being sold in Tripura and a major portion of the manufactured product was sold outside the State of Tripura. The case of the revenue is that the petitioner purchased raw rubber from the dealers and paid tax on the purchase of raw rubber. Thereafter, the rubber was processed and rubber thread was manufactured and this rubber thread was sold outside the State by charging CST which was collected from the consignees outside the State. According to the revenue, the assessee collected huge amount as CST on the sales made but it did not pay the amount but adjusted the amount towards the amount of VAT paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,91,534.46 NIL Total tax payable 1,58,91,534.46 Less: Tax paid Nil Balance 1,58,91,534.46 Add: Interest for 34 months at 18% PA 81,04,682.57 Add: Penalty at 150% as discussed 2,38,37,701.69 Net due. 4,78,33;918.72 Rounded off 4,78,33,919.00 2011-12 Particulars Inter-State sales C form produced Inter-State sales C form not produced TOR 76,33,40,915.19 25,55,685.81 TOD 76,33,40,915.19 25,55,685.81 Tax collected 1,53,62,257.55 51,113.71 Tax payable 1,53,62,257.55 3,45,017.58 Total Tax payable 1,57,07,275.13 Less: Tax paid Nil Balance 1,57,07,275.13 Add: Interest for 22 months at 18% PA 51,83,400.79 Add: Penalty at 150% as discussed 2,35,60,912.69 Net due 4,44,51,588.61 Rounded off 4,44,51,589.00 2012-13 Particulars Inter-State sales "C" form produced Inter-State sales "C" form not produced TOR 65,17,92,268.12 4,09,72,469.70 TOD 65,17,92,268.12 4,09,72,469.70 Tax collected 1,30,46,733.03 8,19,449.39 Tax payable 1,30,46,733.03 55,31,283.40 Total Tax payable 1,85,78,016.43 Less :Tax paid Nil Balance 1,85,78,016. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on inter-State sales. He, however, submits that what is sought to be recovered is Central Sales Tax as would be clear from the assessment orders. It is submitted by Dr. Saraf that though the assessing authority would have been better advised to also mention section 9(2) of the CST Act while issuing the notices, the mere non-mention of such provision would not be sufficient to hold that the State is not recovering Central Sales Tax but is recovering value added tax. On merits, Dr. Saraf has urged that in view of various provisions of the TVAT Act, especially section 10 and sub-sections (3) and (7) thereof, no input tax credit can be availed of in respect of inter-State sales. He submits that the provisions of the TVAT Act do not in any manner provide that input tax credit is available in respect of inter-State sales. Dr. Saraf contends that a taxing statute has to be interpreted in the context of the language of the Act and if the Act does not permit grant of benefit of input tax credit on inter-State sales, then merely because of the concept of VAT the same cannot be granted. The legal provisions: 9. To appreciate the various arguments raised by the petitioner, it would be pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) shall be claimed or be allowed to a registered dealer - xxx xxx xxx (ix) in respect of goods used for transfer of stock other than by way of sale outside the State of Tripura; (x) in respect of sales exempt from tax as specified in Schedule III. (xi) in respect of raw materials used in manufacture or processing of goods where the finished products are despatched other than by way of sales: Provided that in respect of transactions falling under item (ix), input tax credit may be allowed on the tax paid in excess of 4% on the raw materials used directly in the manufacture of the finished products. (7) The Commissioner may, after giving sufficient reasons in writing, reject the method adopted by the registered dealer in a year to determine the extent to which goods are used, consumed or supplied or intended to be used, consumed or supplied, in the course of making taxable sales and calculate the amount of input tax credit after giving the registered dealer concerned an opportunity of being heard." 12. Sections 18(1), 31(5) and 85 read as follows:- "18(1). The State Government may, for carrying out the purposes of this Act, appoint a Commissioner of Taxes, and such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section." 15. Having made reference to the various legal provisions, we now propose to deal with the contentions raised befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the court to plug it by a strained construction in reference to the supposed intention of the Legislature. The Legislature must then step in to resolve the ambiguity and so long as it does not do so, the tax-payer will get the benefit of that ambiguity. But, equally, courts ought not to be astute to hunt out ambiguities by an unnatural construction of a taxing section. Whether the statute, even a taxing statute, contains an ambiguity has to be determined by applying normal rules of construction for interpretation of statutes. As observed by Lord Cairns in Pryce v. Monmouthshire Canal and Railway Companies, cases which have decided that Taxing Acts are to be construed with strictness, and that no payment is to be exacted from the subject which is not clearly and unequivocally required by Act of Parliament to be made, probably meant little more than this, that, inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the taxpayer and the taxing authority, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Legislature must be gathered, for the legislature means no more and no less than what it says. It is not permissible to the Court to speculate as to what the Legislature must have intended and then to twist or bend the language of the statute to make it accord with the presumed intention of the legislature. xxx" 19. In Ajmera Housing Corporation and another vs. Commissioner of Income Tax, [(2010) 8 SCC 739], the Apex Court again held as follows:- "36. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. IRC:(1921) 1 KB 64 and Federation of A.P. Chambers of Commerce & Industry & Ors. v. State of A.P. & Ors.). In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: CST v. Modi Sugar Mills Ltd.: AIR 1961 SC 1047)." We now pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would mean that if the goods are sold outside the State of Tripura, the benefit of input tax credit would be available. We are unable to accept this submission. 23. A conjoint reading of the provisions of the Act clearly shows that input tax credit can be claimed only in respect of tax paid or payable under the Act. Section 10(3) makes it absolutely clear that input tax credit is permissible only in respect of sales or resales made within the State of Tripura. Section 10(6) is couched in negative language and is in the nature of an exception or a proviso to subsection 10(1). We have to read section 10(6) along with section 10(1) and when both of these parts of the section are read harmoniously, then even if a person is entitled to benefit of input tax credit under section 10(1) but is excluded under section 10(6), he would not be entitled to get the benefit of input tax credit. Clause (ix) of section 10(6) provides that input tax credit will not be available in respect of transfer of stock, other than by way of sale outside the State of Tripura. This by no stretch of imagination can be interpreted to mean that under Clause (ix) of sub-section (6), such benefit has been given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax, Bombay etc. vs. M/s. Podar Cement Pvt. Ltd. etc., [(1997) 5 SCC 482] and Commissioner of Income Tax, Karnataka, Bangalore vs. M/s. Shaan Finance (P) Ltd., Bangalore, [(1998) 3 SCC 605] is totally misplaced. Intention: 27. Sri Dubey urged that it was the intention of the assessee to sell the manufactured goods within the State of Tripura in terms of section 10(3) of the Act. He submits that it is the only intention of the manufacturer which has to be taken into consideration and if for certain reasons like non-availability of the market, the goods are sold outside the State of Tripura that cannot be read to mean that the intention of the dealer was not to sell goods within the State of Tripura. On the other hand, Dr. Saraf urges that intention has to be gathered from the final action and not by the mere ipse dixit of the assessee. 28. We are not at all impressed with the argument raised on behalf of the petitioner. No document like a project report has been placed on record to show that when the petitioner set up the plant, his intention was to sell the goods within the State of Tripura. Some material like a project report or a feasibility report should have been produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct CST: 31. It is next contended by Mr. Dubey that the Taxing authorities of the State of Tripura have no authority or jurisdiction to collect tax, interest or penalty under the Central Sales Tax Act and, therefore, the entire assessment is without jurisdiction. This argument has been made without considering the import of section 9 of the CST Act and especially, sub-section (2) of section 9 which we have quoted hereinabove. Section 9 clearly lays down that the tax payable by any dealer under the Central Sales Tax Act in the course of inter-State trade or commerce shall be levied by the Government of India but shall be collected by the Government of the State from which the movement of the goods commenced. It is not disputed that the movement of the rubber thread commenced from Tripura. Therefore, the authorities in the State of Tripura are entitled to collect the tax. Sub-section (2) makes it amply clear that the authorities empowered to assess, reassess, collect and enforce payment of any tax under the sales tax law of the appropriate State shall on behalf of the Government of India asses, reassess, collect and enforce payment of tax including interest and penalty payable by a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the intention of the taxing authorities of the State was to collect the CST which had not been deposited by the assessee by claiming input tax credit. We are in agreement with the law laid down by the Allahabad High Court and, therefore, we hold that merely because there was no reference to the provisions of the Central Sales Tax will not make the action illegal, if otherwise the authorities of the State had jurisdiction to take the said action. Power of Commissioner alone: 34. Mr. Dubey next contends that only the Commissioner can exercise powers under section 31(5) of the TVAT Act. According to him, in the present case the powers have been exercised by the Superintendent of Taxes and, therefore, also the order is without jurisdiction. On the other hand, Dr. Saraf has drawn our attention to the notification dated 01-04-2006, whereby, in exercise of the powers conferred under section 85 of the TVAT Act, the Commissioner of Taxes has delegated the powers of the Commissioner to the Superintendent of Taxes under various sections and one of such section is section 31 of the Act. The said notification reads as follows:- " No.F.1-1(2)-TAX/92/5125-186 GOVERNMENT OF TRIPURA OFFICE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of input tax credit. He submits that the method has not been rejected and, therefore, there is no power with the Commissioner to issue an order rejecting the claim of the petitioner for the benefit of input tax credit. This argument has been made only for the purpose of being rejected. There is no merit in the same. Sub-section (7) only deals with those situations where a dealer adopts a method to arrive at the value of the inputs or goods which are used or consumed for making the taxable goods. Under sub-section (7) the Commissioner has the power to determine whether the method is right or wrong. In the present case, the impugned order has not been passed under subsection (7) but has been passed in exercise of the powers vested in the Commissioner under section 9(2) of the Central Sales Tax Act. It would also be pertinent to mention that sub-section (7) would come into play only where the benefit of input tax credit is available. If no input tax credit is available under law, then the question of determining the correctness of the method does not arise. 37. It was next urged by Sri Dubey that under section 31 the audit assessment does not cover method and he submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State of Tripura. First the authorities sleep over the matters for 4 to 5 years. Then they awaken from their deep slumber and suddenly become very active and do not give a reasonable opportunity to the assessee to put forth his case. 40. In the present case, five notices should have been issued for the five assessment years giving at least 15 days time to the assessee to respond. The manner in which the notices have been issued is not proper. The first notice was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of returns for the period 2008-09 to 2013-14 (upto 31-12-2013) is necessary. What are the reasons have not been spelt out. The Superintendent wanted to reopen the entire proceedings from the year 2008 till 2014. This notice is dated 01-02-2014 and it requires the petitioner to appear before the Superintendent of Taxes on 13-02-2014. To say the least, the manner in which this notice has been issued is highly improper. No reasons have been spelt out as to why detailed scrutiny is required and nothing is stated in the notice with regard to the nature of the inquiry. 41. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the manner in which the notices have been issued are highly improper since for the assessment years 2008-09, 2009- 10 and 2010-11 there is no dispute between the parties with regard to the amount collected as CST and all the 'C' forms have been produced, no prejudice has been caused to the petitioner. Therefore, the basic assessments assessing the tax and interest payable for these three years are upheld. With regard to the years 2011-12 and 2012-13, since there is some dispute with regard to the 'C' forms and we are of the opinion that no proper opportunity was given to the petitioner, the assessment orders are set aside and the proceedings shall now commence from the stage of filing of reply by the petitioner. Penalty: 43. It is lastly contended by Mr. Dubey that the maximum penalty of 150% has been imposed without giving any reasons as to why penalty should be imposed. 44. We have perused the orders in question and find that no reason has been given by the assessing authority as to why maximum penalty of 150% should be imposed. 45. We are clearly of the view that as far as the present cases are concerned, though the petitioner may be wrong in claiming the benefit of input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clearly of the view that in such a situation it cannot be said that the dealer had claimed this input tax credit with a view to evade or avoid payment of tax. It is a plain and simple case of different interpretations of the provisions of law. The assessee interpreted section 10 in a particular manner and this interpretation was accepted by the revenue also. In such an eventuality, it would be highly unfair and unjust to impose the maximum penalty of 150%. This is a fit case where the minimum penalty of 10% alone should have been imposed. Directions: 48. In view of the above discussion, we dispose of the writ petitions by upholding the order of assessment of tax and interest for the assessment years 2008-09, 2009-10, and 2010-11. 49. As far as the assessment years 2011-12 and 2012-13 are concerned, according to the Superintendent of Taxes, certain 'C' forms were not produced. In view of the fact that the notices issued by the respondent to the petitioner did not give an adequate opportunity to the petitioner to produce all the documents, we set aside the assessment orders and remit the matters for the years 2011-12 and 2012-13 to the Assessing Officer who shall afford reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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