9911796707
TMI Blog2024 (1) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... levant period, petitioner was engaged in the manufacture and sales of home appliances including washing machines. The manufacturing unit was situated in Goa. The goods so manufactured were transferred to other States including Tamil Nadu for sale of such home appliances. The petitioner's branch at Tamil Nadu received the goods so stock transferred and effected sale of such goods. A portion of such sales was made to "Canteen Stores Department" (hereinafter referred to as "CSD") during the relevant period viz., 2003-04 to 2006-07. Sale of goods by any dealer in the State of Tamil Nadu to CSD was exempted vide G.O.P.No.3125 dated 30.12.1964. 2.2. The Entry Tax Act came into force on 01.12.2001 vide notification No.II(2)CT/892(a-2)/2001 dated 30.11.2001. Washing machine was one of the item which was liable to Entry Tax Act, pursuant to its insertion as Item No.25 of the Schedule to the Entry Tax Act. The above Entry/Item was added with effect from 21.03.2003 vide Section 2 of Amendment Act No.22 of 2003. The rate of Entry Tax on washing machines was fixed at 12.5%, while the rate of tax on the sale of such washing machines was fixed at 12% under the TNGST Act. In respect of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awing the earlier Circular dated 03.10.2007 wherein the assessing officer's were instructed not to enforce collection of pending demands relating to Entry Tax until the Apex Court decides the issue of validity of Entry Tax Act. It was stated that the petitioner's plea of the proceeding being barred by limitation overlooks the fact that the levy of Entry Tax was challenged in writ petition in W.P.No.12553 of 2002 and this Court had held the same to be invalid vide its judgment dated 22.03.2007. The above order of this Court was challenged before the Hon'ble Supreme Court wherein the validity of levy of Entry Tax was upheld vide order dated 23.08.2017. In view thereof, the period during which the proceeding relating to the validity of Tamil Nadu Entry Tax Act was pending before the High Court and the Hon'ble Supreme Court must be excluded while reckoning limitation for revision of assessment. 2.5. A common reply was filed by the petitioner vide letter dated 25.10.2020 inter alia highlighting the following: a. The tax paid under the Tamil Nadu Entry Tax Act by a dealer on Scheduled goods results in reducing its liability on the sale of Schedule goods under the TNGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he importer submits a return without receipt from the Government Treasury or crossed demand draft for the tax paid the assessing authority shall issue a notice in Form II directing the importer to pay a sum within the time specified. In the case on hand there is no assessment under Sub-rule (4) and (5) to Rule 3 for the Assessment Years 2004-2005 to 2006-2007 and thus the returns must be deemed to be accepted provisionally. b. With the introduction of Section 12C of TNGST Act, which stands incorporated by virtue of Section 10 of Entry Tax Act, assessments must be deemed to have been made on the basis of the return. The assessment under Section 12C of the TNGST Act is to be treated as having concluded on 20.12.2006. Thus, any assessment / reassessment under Entry Tax Act in terms of Section 16 of TNGST Act, which by virtue of Section 10 of Entry Tax Act stands incorporated in the Entry Tax Act, ought to be initiated within 6 years from the date of the assessment / deemed assessment i.e., 20.12.2006 for the assessment years 2003-04 to 2006-07. In other words, any notice for the assessment years 2003-04 to 2006-07 ought to have been issued on or before 20.12.2012. The notice under E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. 6. On considering the arguments advanced by both sides it appears that the impugned order of assessment insofar as it proceeds on the premise that the exemption on the sales to CSD under the TNGST Act must be confined to that particular enactment is unexceptionable. However, it fails to see that Entry Tax paid on goods is available as set-off even in respect of goods exempt under General Sales Act as held by the Hon'ble Supreme Court in Associated Cement Companies reported in 137 STC 389. Before proceeding to examine the above judgment it may be relevant to refer to Section 4 of Tamil Nadu Entry Tax Act which reads as under: "4. Reduction in tax liability - (1) Where an importer of any scheduled goods liable to pay tax under this Act, being a dealer in scheduled goods becomes liable to pay tax under the General Sales Tax Act and additional sales tax under the Tamil Nadu Additional Sales Tax Act, 1970 (Tamil Nadu Act 14 of 1970), by virtue of the sale of such scheduled goods, then his liability under those Acts shall be reduced to the extent of tax paid under this Act. " 6.1. A reading of sub-Section (1) to Section 4 of the Entry Tax Act would show that an importer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be prescribed: Provided different rates for different scheduled goods and different local areas may be specified by the State Government. (2) The tax leviable under this Act shall be paid by every dealer liable to pay tax under the Bihar Finance Act, 1981 or any other person who brings or causes to be brought into the local areas such scheduled goods whether on his own account or on account of his principal or takes delivery or is entitled to take delivery of such goods on such entry: Provided no tax shall be leviable in respect of entry of such scheduled goods effected by a person other than the dealer if, the value of such goods does not exceed 25 thousand in a year: Provided further that where an importer of scheduled goods liable to pay tax under the Act, becomes liable to pay tax under the Bihar Finance Act, 1981 (Bihar Act 5 of 1981) by virtue of sale of such scheduled goods, his liability to pay tax under the Bihar Finance Act, 1981 shall stand reduced to the extent of tax paid under the Act. (3) The liability to pay tax on scheduled goods shall only be at the point of first entry into a local area and any subsequent entry or entries into any other local ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability, question of exemption does not arise. Liability arises in terms of Section 3 and tax becomes payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessional rate. 20. Therefore, it cannot be said that as tax was not paid on portion of the turnover of the scheduled goods i.e. cement, the appellant assessee had no liability under the Act. It was definitely liable to pay tax under the Act, but for the exemption. There is no dispute that the appellant assessee was liable to pay tax under sub-section (3) of Section 3 of the Entry Tax Act. Therefore, it was entitled to reduction to the extent of tax paid under the Entry Tax Act while working out tax payable by it under the Act." 6.3. Viewed from the above perspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs 6,10,580. It is stated by the learned counsel appearing on behalf of the assessee that the excise duty paid and MODVAT credit availed of were identical. Therefore the consequences of payment of excise duty after availing of MODVAT credit was revenue neutral. The appeals are accordingly dismissed. If upon verification, the submission of the respondent is found to be incorrect, liberty is granted to the appellant to mention these matters before this Court." 6.5. The impugned orders of assessment having not considered the petitioner's entitlement to set off / reduction to the extent of tax paid under the Entry Tax Act while working out the tax payable by it under the General Sales Tax Act and the relevance / applicability of the principle of Revenue Neutrality stands vitiated for failing to take into account relevant aspect/factors thereby warranting reconsideration of the issue. 7. Now coming to the issue of limitation, both the Petitioner and the Respondents have placed reliance on Section 10 of the Entry Tax Act, though they take positions which are diameterically opposite viz., that the order is barred by limitation by the Petitioner and that it is not so by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above provisions would show that the provisions of the TNGST Act relating to assessment, reassessment, inspection, search, seizure, payment of taxes etc., is incorporated by reference to the Entry Tax Act. The above position is not disputed rather conceded to by both sides. Importantly, Section 10 of the Entry Tax Act opens with the following set of expressions viz., "subject to the other provisions of this Act and the rules made thereunder". The above set of expressions would mean that in the event of any irreconcilable conflict between the provisions or rules under the Entry Tax Act/Rules occupying a particular field and the TNGST Act / Rules, the former i.e., Entry Tax Act/ Rules would prevail. That being the case one may have to enquire as to whether there are any provisions governing assessment/ assessment of escaped turnover / reassessment under the Entry Tax Act. On gleaning through the provisions/ Rules of the Entry Tax Rules, I find that Rule 4 of the Entry Tax Rules provides for assessment of Tax on the basis of the return if on enquiry it is found to be correct and complete, it also provides that if the return appears to be incorrect or incomplete, an assessment includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India, reported in (1976) 2 SCC 181: "15....It may well be that for an exercise of the suo moto power of revision also, the revisional authority has to initiate the proceeding within a reasonable time. Any unreasonable delay in exercise may affect its validity. What is a reasonable time, however, will depend upon the facts of each case." 9.1. That leads one to the question as to what would constitute reasonable period for the purpose of making assessment under Rule 4 of Entry Tax Rules. While on the issue of whether the impugned orders were made within a reasonable period, it may be necessary to note that the vires of the Entry Tax Act, was challenged before this Court and vide judgment dated 22.03.2007 it was held to be ultra vires. The State carried the matter in appeal to the Supreme Court. The SLP came up for hearing on 05.09.2007 as would be evident from the Circular dated 03.10.2007 and the validity was upheld vide order dated 23.08.2017. 9.2. Against this background the question is whether the above period spent before the Supreme Court in deciding the vires of Entry Tax Act, ought to be excluded while determining what would constitute reasonable period for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable period in terms of Rule 4 of the Entry Tax Rules. Two questions would follow viz., whether Section 16 (5) of the TNGST Act, would have relevance in determining what would constitute reasonable period for the purposes of making an assessment under Rule 4 of Entry Tax Rules. Secondly, whether time spent in challenging validity of a levy would be excluded under Section 16 (5) of the TNGST Act. It may be relevant to extract Section 16(5) of the TNGST Act which reads as under: "Section 16(5): In computing the period of limitation for assessment or reassessment under this section, the time during which any appeal or other proceeding in respect of any other assessment or reassessment is pending before the (Special Tribunal) or the Supreme Court involving a question of law having a direc bearing on the assessment or reassessment in question, shall be excluded." 9.6. I shall proceed to deal with the second question first viz., whether time spent in challenging validity of a levy would be excluded under Section 16 (5) of the TNGST Act. A reading of the above provision would show that in computing the limitation for the purpose of assessment / reassessment under Section 16 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon taxpayers guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made." b) Union of India v. Vijay Chand Jain, AIR 1977 SC 1302: "3.....The words "in respect of" admit of a wide connotation; In the context of Section 23 (1-B), the expression means "being connected with". Therefore, the currency in respect of which there has been a contravention covers the sales proceeds of the foreign currency. The intention of the legislature is clear from the explanation to sub-section (1-B) of Section 23." 9.7. If we apply the above construction placed on the expressions "assessments" and "in respect of", while interpreting section 16 (5) of the TNGST Act, it is clear that any proceeding connected with the assessment would be covered by Section 16(5) of the TNGST Act. To my mind, there is no doubt in the light of the above discussion that the validity of the levy is certainly connected with the assessment and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above judgment of the Hon'ble Supreme Court to the provisions of the Entry Tax Act, it appears to me that the limitation provided under Section 16 of the Act is indicative of what would constitute reasonable period for the purpose of assessment under Rule 4 of the Entry Tax Rules. If the impugned orders of assessments are treated as original assessment under Rule 4 of Entry Tax Rules, which does not prescribe any limitation and thus ought to be made within a reasonable period. If one bears in mind the scheme of the Act and the judgments referred to supra and the facts of the case there is no doubt in my mind that the impugned orders of assessment are made within a reasonable period. 9.10. B. Impugned assessments - Reassessment / Assessments of escaped turnover: I shall now proceed to deal with the contentions advanced by the learned counsel for the Petitioner/assessee that the provisions of Section 12C of the TNGST Act, would apply to Entry Tax. It was submitted that the assessments under Entry Tax Act, must be deemed to have been completed on 20.12.2006. In view thereof, any assessment of escaped value of Scheduled Goods or reassessment, must be made within the limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of a dealer has escaped assessment to tax, the assessing authority may, subject to the provisions of sub-section (2), at any time within a period of five years from the date of order of the final assessment by the assessing authority, determine to the best of its judgement the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary and after giving the dealer a reasonable opportunity to show cause against such assessment. (b) Where, for any reason, the whole or any part of the turnover of business of a dealer has been assessed at a rate lower than the rate at which it is assessable, the assessing authority may, at any time within a period of five years from the date of order of the final assessment by the assessing authority, reassess the tax due after making such enquiry as it may consider necessary and after giving the dealer a reasonable opportunity to show cause against such re-assessment. " 9.13. The crucial expression is "escaped assessment", which had come up for consideration on numerous occassions and it was held that it would include cases where no asessment has been made within the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, Bombay v. Narsee Nagsee & Co. MANU/SC/0093/1960: [1960]401TR307(SC), construing the provisions of section 14 of the Business Profits Tax Act, 1947, reviewed the law on the subject and came to the following conclusion: "All these cases show that the words "escaping assessment" apply equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee, and, therefore, there was no assessment of his income." 11. It is true that the said decisions were given with reference to either s. 34(1) of the Income-tax Act or s. 14 of the Business Profits Tax Act, but so far as the present enquiry is concerned the said sections are pari materia with section 11-A of the Act. In construing the meaning of the expression "escaped assessment" in s. 11-A of the Act there is no reason why the said expression should bear a more limited meaning than what it bears under the said two Acts. All the three Acts are taxing statutes and the three relevant sections therein are intended to gather the revenue which has improperly escaped. A division Bench of the Madras High Court in The State of Madras v. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.1965 subject to the condition that the assessment proceedings in respect of respondents would continue but no recovery would be made, and the respondents could initiate assessment proceedings in respect of those assessees. Notices were issued by the State after the interim order was made absolute on 29.01.1965. But by then notices were barred by limitation. Question arose as to whether in view of the interim order, the period during such interim order must be excluded in reckoning limitation, the above contention was rejected holding as follows: "17. The first contention on behalf of the State that it became impossible for the State to issue notice under Section 7(2) of the new Act within two years of the expiry of the period of return is unsound on principle and facts. The maxim lex non cogit ad impossibilia means that the law does not compel a man to do that which he cannot possibly perform. In the present appeals, the applications were moved in the High Court for stay of proceedings. The respondents challenged the validity of the Act, and, therefore, asked for an injunction restraining the State from taking proceedings under the Act. At no stage, did the State ask for vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order is made, the authorities empowered to issue such notice cannot refrain from issuing the required notice within the period of limitation nor can they plead the existence of such interim order as a defence against the plea of limitation". d) Commissioner of Central Excise, Calcutta Vs. Hindustan National Glass & Indus Limited reported in 2005 (182) E.L.T. 12(S.C.): Interim orders issued by High Court related to realization and not levy. While holding that the issuance of levy and collection are two distinct and separate concepts. It was found that when High Court stayed only recovery/collection, it was open to issue show cause notice and thus it was not open to the revenue to claim exclusion of the period of above interim order in reckoning limitation. 9.16. The above judgments may not have any relevance to the present facts inasmuch as this Court had declared the levy to be ultra vires and thus unless it was set-aside/ overturned in appeal the question of issuing notice initiating assessments may not arise. In any event when there is express provision under Section 16 (5) of the TNGST Act providing for exclusion of time during which any appeal or proceedings in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
