9911796707
TMI Blog2024 (1) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... he time spent challenging the validity of the levy ought to be excluded while reckoning the limitation, for assessment of escaped turnover or value of Schedule goods or reassessment ought to be excluded in terms of Section 10 of Entry Tax Act read with Section 16(5) of TNGST Act. 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? - HELD 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, there is no doubt that the impugned orders of assessment are made within a reasonable period - thus, Section 12C of the TNGST Act, may not have any relevance in determining whether the impugned orders of assessment are barred by limitation or otherwise. Legality of the impugned orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sales made to CSD, exemption was claimed by the petitioner under the TNGST Act. 2.3. The petitioner had filed Form I monthly returns for the relevant assessment years viz., 2003-04 to 2006-07 under the Entry Tax Act. The petitioner's place of business was inspected by the officials of the Enforcement Wing on 22.08.2006 and 23.08.2006. During the course of such inspection it was found that the petitioner had not reported the interstate transfer / entry of washing machines into Tamil Nadu meant for sales to CSD nor was Entry Tax paid on such goods. The above import of washing machines was proposed to be treated as wilful suppression under the Entry Tax Act vide notice dated 02.12.2016 and 23.11.2016 for the assessment years 2003-04 and 2004-05 and 2005-06 respectively. The petitioner responded to the above notice vide letter dated 21.02.2017 and 22.02.2017 respectively for the assessment years 2003-04, 2004-05 and 2005-06 inter-alia highlighting that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner 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 Act to the extent of the Entry Tax paid, in terms of Section 4 of the Tamil Nadu Entry Tax Act. b. That the entire exercise is in any view Revenue Neutral inasmuch as even if the Entry Tax were payable it is entitled to be set off against the liability under the TNGST Act. c. That the time spent before this Court and the Hon'ble Supreme Court in litigation with regard to the validity of Entry Tax cannot be excluded while reckoning limitation for making assessments under Entry Tax Act. d. That the exemption under the TNGST Act must be understood as also extended to Entry Tax Act even in the absence of express / specific exemption under the Entry Tax law. 2.6. On considering the above objections, the impugned order of assessment for the assessment years 2003-04 to 2006-07 came to be passed vide order dated 12.07.2021 rejecting the objections filed by the dealer stating that the Commissioner of Commercial Taxes had vide Circular dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Entry Tax Act having been issued only on 23.11.2016, 02.12.2016 and 12.10.2020 for the assessment years 2003-04, 2004-05 and 2005-06 and 2006-07 respectively, the same is barred by limitation. c. That once the Schedule goods are exempt when sold to CSD under TNGST Act, the levy of Entry Tax is impermissible inasmuch as the exemption under the TNGST Act must be understood to also cover/extend to Entry Tax Act. d. In any view, the 1st respondent ought to have seen that the entire exercise is Revenue Neutral inasmuch as any levy of Entry Tax is available as a set off against the liability under the TNGST Act. 4. To the contrary, learned counsel for the respondents submitted as under: a) The exemption under the TNGST Act in respect of sales to CSD cannot be extended under the Entry Tax Act in the absence of specific exemption under the latter Act. b) Reliance was placed on Section 10 of the Entry Tax Act to submit that it provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Scheduled goods liable to pay tax under the Entry Tax Act and being a dealer in Scheduled goods on becoming liable to pay tax by virtue of sale of such Schedule goods under the General Sales Tax Act, such liability under the General Sales Tax Act shall be reduced to the extent of the tax payed under the Entry Tax Act. The entitlement to set off the Entry Tax paid under the General Sales Tax Act is only dependent on liability under the TNGST Act and not on actual payment of tax under TNGST Act. The fact that exemption is granted to sale of Schedule goods under the TNGST Act does not take away/wipeout the liability under the General Sales Tax Act. This is in view of the settled principle that exemption pre-supposes liability. Liability to pay tax and actual payment are conceptually different. To repeat, the condition for availing the benefit of set-off under Section 4 of the Entry Tax Act is only liability to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 area or areas of the said scheduled goods shall not be subject to tax provided the subsequent importing dealer produces before the assessing officer the original copy of the cash memo, invoice, bill or challan issued to him by the dealer from whom he purchased or received the said scheduled goods, and files a true and complete declaration in the form and manner prescribed. 6.2. On considering the above provisions the Hon'ble Supreme Court held as under : 15. A bare reading of clause (2) of the notification makes the position clear that liability of importer of cement under the Act shall be reduced to the extent of tax paid under the Entry Tax Act where such importer becomes liable to pay tax under the Act by virtue of sale of the scheduled goods. 16. Stand of the respondents appears to be that since there was no liability in respect of portion of sales because of notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 perspective it would be evident that the impugned orders of assessment has not dealt with the said aspect and thus stands vitiated for failing to examine/take into account the above factors which has a material being on the issue under consideration. The impugned orders of assessment insofar as it fails to examine the above aspect stands vitiated. 6.4. Yet another aspect which is relevant and requires consideration but not examined is the relevance/applicability of the principle of Revenue Neutrality to the facts of the case. The petitioner may not be entitled to exemption under the Entry Tax Act on the basis of G.O.P.No.3125 dated 03.12.1964. However, in the light of the judgment of the Hon'ble Supreme Court in the case of Associated Cement Companies , the petitioner may still be entitled to claim set off of the Entry Tax paid while working out the tax payable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 the Respondent. It may thus be necessary to take a closer look at Section 10 of the Entry Tax Act which reads as under: 10. Tax authorities, returns, assessments, payments and recovery.- (1) Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, inspect, search, seize, confiscate, collect and enforce payment of any tax under the General Sales Tax Act shall assess, reassess, inspect, search, seize, confiscate, collect and enforce payment of tax, including any interest or penalty, payable by a dealer, an importer under this Act as if the tax or interest or penalty by such importer under this Act is a tax or interest or penalty payable under the General Sales Tax Act, and for this purpose they may exercise all or any of the powers they hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 including best judgment shall be made after giving the importer an opportunity. Thus original assessment would be governed by Rule 4 of Entry Tax Rules. 7.2. Importantly, there is no provision enabling the assessment of escaped value of scheduled goods or reassessment under the Entry Tax Act. In the absence of any provision or rule under the Entry Tax Act/Rules to assess escaped value of scheduled goods, the same would be governed by the provisions of the TNGST Act which stands incorporated by reference to the Entry Tax Act by virtue of Section 10 of the Entry Tax Act. 8. That leads one to the question as to the nature of the impugned order. It is undisputed that there has been no assessment made under the Entry Tax Act, prior to the impugned order. There are possibily two views as to the nature of the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 purpose of assessment under Rule 4 of the Entry Tax Rules. If the above period is not excluded then the time taken for initation of impugned assessments would be as under: S.No. A.Y. Last date of Return Date of Notice Time between notice and Return 1. 2003-2004 01.04.2004 02.12.2016 12 Y 08 M 1 D 2. 2004 -2005 01.04.2005 23.11.2016 11 Y 7 M 22 D 3. 2005-2006 01.04.2006 23.11.2016 10 Y 7 M 22 D 4. 2006-2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent by placing reliance on Section 16(5) of the TNGST Act, the time spent before the Supreme Court ought to be excluded even while determining whether the assessments are made within a reasonable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the court cannot proceed to make good deficiencies if there be any : the court must interpret the statute as it stands and in case of doubt in a manner favourable to the taxpayer. But where as in the present 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... One view can be that it should be a period not exceeding five years as the legislature has fixed the limitation of five years for completing assessments in case of escaped turnover. (emphasis supplied) 9.9. Applying the 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 10 of the Entry Tax Act read with Section 16 of the TNGST Act. Section 16(1) of the TNGST Act reads as under : 16. Assessment of escaped turnover. (1) (a) Where, for any reason, the whole or any part of the turnover of business 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Maharajadhiraj Sir Kameshwar Singh v. State of Bihar MANU/SC/0103/1959: [1959]371TR388(SC) and extended to cover a case where the first assessment was made in the course but a part of the income escaped thereform. This Court, in Commissioner of Income-tax, 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 mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch stay continued till 01.08.1963 when the new Act was also held ultra vires. The matter was carried in appeal before the Hon'ble Supreme Court and an interim stay of operation of judgment of High Court dated 01.08.1963 was granted thereafter stay was made absolute on 29.01.1965 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 pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 2002 (146) E.L.T. 241(S.C.) wherein it was held as under: It is a settled position in law that unless and until there is a specific injunction/stay granted by a competent court which restrains an authority, from issuing the required notice, merely because some interim 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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