Madras High Court
M/S.Krishna Timber vs The Commercial Tax Officer on 24 February, 2021
W.P.(MD)No.570 of 2019
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 24.02.2021
CORAM:
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
W.P.(MD)No.570 of 2019
and
W.M.P.(MD)No.459 of 2019
M/s.Krishna Timber,
Represented by its Partner Dharmesh Kumar,
132, Palam Station Road,
Goripalayam, Madurai. ... Petitioner
-Vs-
The Commercial Tax Officer,
Chokkikulam Assessment Circle,
Madurai. ... Respondent
PRAYER: Petition filed under Article 226 of the Constitution of India to
issue a Writ of Certiorarified Mandamus, to call for the records in TIN
33455002328/2014-15, dated 19.04.2018 and quash the same as
arbitrary, illegal and against the Judgment of this court reported in the
case of Infiniti Wholesale Limited Vs.Assistant Commissioenr (CT),
Koyambedu Assessment Circle, Chennai reported in (2015) 82 VST 457
and direct the respondent to furnish the copies of the records as relied by
the respondent in his notice dated 28.02.2017 and pass assessment order
afresh in the light of the guidelines enunciated in the batch of writ
petitions in the case of M/s.JKM Solutions Private Limited reported in
1/7
https://www.mhc.tn.gov.in/judis/
W.P.(MD)No.570 of 2019
2017(99) VST 343 (Mad) including the opportunity of personal hearing
within such time as may be directed by this Court.
For Petitioner : Mr.N.Sudalai Muthu
For Respondent : Mrs.J.Padmavathi Devi
Special Government Pleader
ORDER
Heard the learned counsel on either side.
2.The petitioner is a dealer registered with the respondent. The
case on hand pertains to the assessment year 2014-15. After issuance of
pre-revision notice and after affording an opportunity of personal
hearing, the impugned order dated 19.04.2018 came to be passed
fastening tax liability and penalty on the petitioner herein. The same is
put to challenge in the writ petition.
3.The respondent has also filed a detailed counter affidavit. The
impugned order refers to three aspects:-
(a) ITC reversal for process loss
(b) Handling and Sawing charges
(c) Annual Cross Verification
https://www.mhc.tn.gov.in/judis/
W.P.(MD)No.570 of 2019
As regards ITC reversal for process loss, on the face of it, it appears that
the respondent has chosen to levy tax by computing process loss at 5%.
The relevant provision is Section 19(1) of TNVAT Act, 2006. It reads as
follows:-
“19. Input Tax Credit :- (1) There shall be input tax credit of
the amount of tax paid under this Act, by the registered dealer to the
seller on his purchases of taxable goods specified in the first
schedule:
Provided that the registered dealer who claims input tax
credit, shall establish that the tax due on purchase of goods has
actually been paid in the manner prescribed by the registered dealer
who sold such goods and that the goods have actually been
delivered”
4.The petitioner can be denied the input tax credit only if the case
on hand falls under any of the aforesaid three contingencies. The
petitioner is a dealer in timber. The petitioner would specifically claim
that the final product was not sold for a lesser price. There has been
value addition. If it is the case of the respondent that the product was
sold for a lesser price compared to the purchase value, then, the
petitioner can be denied the input tax credit. It is clearly not the case
here.
https://www.mhc.tn.gov.in/judis/
W.P.(MD)No.570 of 2019
5.The learned counsel for the petitioner draws my attention to the
order dated 28.02.2020 in W.P.Nos.22304 to 22309 of 2016 (M/s.GBR
Metals Pvt.Ltd., Vs. The Assistant Commissioner (CT)). In the said
decision in turn refers to an earlier decision namely M/s.Ran India Stell
(P) Ltd., Rep. by its Managing Direction Vs. The Principal Secretary /
Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai
and other, in W.P.No.3172 of 2014, dated 04.12.2019, where it was
observed as under:-
“5.In my view, the expression “input destroyed at some
intermediary stage of manufacture” in sub Clause (iii) of Section
19(9)(iii) of TNVAT Act, 2006, will not take within its fold those
inputs “consumed” in the manufacture of final product. Only when
inputs are “destroyed at some intermediary stage of
manufacture”,reversal of input tax credit is warranted. They would be
instance of inputs which are withdrawn at an intermediary stage of
manufacture and are incapable of being used further and are sold as
scrap/waste or physically destroyed by an assessee having no residual
value. Such inputs alone can be construed as “inputs destroyed at
some intermediary stage of manufacture”. There is no scope for
reversal of input tax credit on inputs which get consumed during the
course of manufacture as “invisible loss”. The authorities may
therefore keep these observations while passing orders in the show
cause notice which have been issued.”
https://www.mhc.tn.gov.in/judis/
W.P.(MD)No.570 of 2019
Thus on the face of it, the levy of tax on the petitioner by computing the
process loss at 5% appears to be incorrect.
6.The second ground namely handling and sawing charges also
appears to be contentious. According to the respondent, the amount
shown under the aforesaid head will have to be included in the sales
turnover. According to the respondent, the said amount represents the
petitioner's income as indicated in the profit and loss account. I must
make it clear that if according to the petitioner this amount would
represent his income, then, it should have been reflected in the
petitioner's income tax returns and it should have been assessed
accordingly. The petitioner has to necessarily make available IT returns
filed by him. If in the IT returns, the said amount has been shown and
has also been assessed, then, the levy of tax under the said head will have
to go.
7.As regards the Annual Cross Verification, based on the mismatch
report, it is well settled that the procedure laid down in J.K.M.Graphics
Solutions Private Limited case (2017) 99 VST 343 (Mad) ought to have
been followed. In the present case, the said procedure was not adopted.
https://www.mhc.tn.gov.in/judis/
W.P.(MD)No.570 of 2019
G.R.SWAMINATHAN, J.
rmi
8. Therefore, I have no hesitation to quash the order impugned in
the writ petition. The Writ Petition is allowed. The matter is remitted to
the file of the respondent. The respondent will issue a fresh hearing
notice to the petitioner herein and after hearing the petitioner, pass orders
afresh in accordance with law. No costs. Consequently, connected
miscellaneous petition is closed.
24.02.2021
Index : Yes/No
Internet : Yes/No
rmi
Note :In view of the present lock down owing to
COVID-19 pandemic, a web copy of the order may be
utilized for official purposes, but, ensuring that the
copy of the order that is presented is the correct copy,
shall be the responsibility of the advocate/litigant
concerned.
To
The Commercial Tax Officer,
Chokkikulam Assessment Circle,
Madurai.
W.P.(MD)No.570 of 2019
https://www.mhc.tn.gov.in/judis/
W.P.(MD)No.570 of 2019
https://www.mhc.tn.gov.in/judis/
