Madras High Court
Tvl.Jai Renga Mills Ltd vs State Of Tamil Nadu on 22 January, 2021
W.P.No.32570 of 2002
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 22.01.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Ms.Justice R.N.MANJULA
W.P.No.32570 of 2002
Tvl.Jai Renga Mills Ltd.,
Rep. by its Managing Director,
Mr.K.J.Ravichandra Raja,
Rajapalayam. ...Petitioner
Vs
1. State of Tamil Nadu,
Rep. by its Secretary to Government,
Department of Commercial Taxes,
Fort St. George, Chennai - 9.
2. The Commercial Tax Officer-I,
Rajapalayam,
3. The Registrar,
Tamil Nadu Taxation Special Tribunal,
Chennai. ...Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India
praying to issue a Writ of Certiorarified Mandamus to call for the records
relating to the order in O.P.No.559 of 2002 dt. 12.06.2002 passed by the 3 rd
respondent herein to quash the same and to direct the 2nd respondent to pass
orders on the application submitted by the petitioner under Section 55 of the
1/20
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W.P.No.32570 of 2002
TNGST Act dt. 12.03.2002 and to make the refund of the additional sales
tax collected from the petitioner for the period from 01.04.1996 to
31.07.1996.
For Petitioner: Mr.A.S.Mujibur Rahman
For Respondents: Mr.Md.Shaffiq
Special Government Pleader
for R1 & R2
Mr.N.Inbarajan, Amicus Curiae
R3 - Tribunal
ORDER
(Made by T.S.Sivagnanam,J)
This writ petition has been filed challenging the order passed by
the Tamil Nadu Taxation Special Tribunal, Chennai ('the Tribunal' for
brevity) in O.P.No.559 of 2002 dated 12.06.2002 and to consequently direct
the second respondent herein to pass orders on the application given by the
petitioner dated 12.03.2002 to refund the additional sales tax collected.
2. The petitioner is a registered dealer on the file of the second
respondent under the provisions of the Tamil Nadu General Sales Tax Act,
1959 (hereinafter referred to as 'TNGST Act') for the assessment year 1996-
97. The second respondent-Assessing Officer, vide order dated 10.04.1998
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had levied and collected additional sales tax from the petitioner. The
petitioner had approached the Tribunal in O.P.No.559 of 2002, by filing an
application under Section 55 of the Act to direct the Assessing Officer to
revise the assessment and refund the amount collected as additional sales
tax for the assessment year 1996-97. The Tribunal rejected the application
by placing reliance on the decision in the case of Siemens Ltd. vs State of
Tamil Nadu [110 STC 313]. Challenging the same, the present writ petition
has been filed.
3. Mr.A.S.Mujibur Rahman, learned counsel for the petitioner
contended that the Assessing Officer ought to have revised the assessment
by passing orders under Section 55 of the Act, in the light of the decision in
Siemens Ltd., which was accepted by the Government in G.O.302,
Commercial Taxes Department, dated 03.11.1998. It is further submitted
that against the decision in Siemens Ltd., the Government has not preferred
any appeal in the Hon'ble Supreme Court and the decision having become
final, the assessment should have been revised. It is further submitted that
the turnover for the assessment year 1996-97 should be taken from
01.04.1996 to 31.03.1997 and splitting up the assessment year into two
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W.P.No.32570 of 2002
parts, namely 01.04.1996 to 31.07.1996 and 01.08.1996 to 31.03.1997, for
the purpose of levying additional sales tax is not permissible under law.
4. The learned counsel further submitted that the Tribunal ought to
have considered various decisions of the Hon'ble Supreme Court, wherein it
has been held that the additional sales tax collected for the period from
01.04.1996 to 31.07.1996 as per Act 23 of 1993, wherein the taxable limit
was Rs.10 lakhs and above. Further, it is reiterated that the taxable turnover
should not be split for a financial year while calculating and the year has to
be taken as whole. The learned counsel for the petitioner would state that
the taxable turnover of the petitioner for the entire year 1996-97 falls below
Rs.100 crores and therefore, the additional sales tax collected for the period
from 01.04.1996 to 31.07.1996 could not be recovered on the ground that
the taxable turnover was below Rs.100 crores and therefore, the additional
sales tax was leviable. Therefore, it is contended that the collection of the
additional sales tax to the tune of Rs.10,32,171/- for the period from
01.04.1996 to 31.07.1996 is without authority of law under Article 365 of
the Constitution of India.
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W.P.No.32570 of 2002
5. The learned Special Government Pleader appearing for the
respondents submitted that the law on the point was settled in Siemens Ltd.,
which decision has become final and subsequently, the Hon'ble Division
Bench in the case of Philips India Limited vs The Assistant Commissioner
(CT), Fast Tract Assessment Circle II and others [2004 137 STC 134
(Mad)] has considered the legal position and held that the amendment of the
Act in the course of the year prescribing different qualifying minimum
taxable turnover for registered dealers and others was held to be
discriminatory and was read down and the qualifying taxable turnover was
to be computed of whole year and not from the date of amendment. Further,
it is submitted that the decision in Siemens Ltd., was noted by the Hon'ble
Division Bench in the case of State of Tamil Nadu vs National Time Co.
[2011 39 VST 247 (Mad)].
6. We have elaborately heard the learned counsel for the parties
and carefully perused the materials placed on record.
7. The law on the subject has been settled by the decision in
Siemens Ltd.,which was taken note of by the Hon'ble Division Bench of
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this Court in Philips India Limited, wherein it was held as follows:
"7. It is true that in the decision in question,
namely Siemens Limited v. State of Tamil Nadu
[1998] 110 STC 313, the Tribunal had observed:
"To give effect to the said intention we proceed to
hold that clause (a) of sub-section (1) of section 2
of the principal Act, namely, Act 14 of 1970 is
ultra vires and should stand deleted. We make it
clear that we are striking down only clause (a) of
section 2(1).
The aforesaid observation of the Tribunal
considered in isolation, supports the contention of
the petitioner to the effect that there was no
provision attracting liability to pay additional
sales tax before August 1, 1996. However, as
rightly observed by the Special Tribunal under the
impugned order, the said observation made in
[1998] 110 STC 313 has to be understood in the
context in which such observation has been made.
It is quite well settled that the effect of a judgment
has to be examined in its totality and in the context
in which it was made and not by referring to a
stray sentence here or there, torn totally out of the
context in which such observation has been made.
It has to be remembered that before the Act was
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amended by Act 31 of 1996, the liability to pay
additional sales tax in a graded scale had been
clearly laid down under Section 2(1)(a) of the
Tamil Nadu Additional Sales Tax Act, 1970. Only
after tinkering had been made by the Legislature
by amending section 2(1)(a), making it applicable
to the dealers other than the dealers registered in
Tamil Nadu and by introducing a new provision in
the shape of Section 2(1)(aa), raising exemption
limit regarding the liability to pay additional sales
tax so far as the registered dealers in Tamil Nadu
are concerned to more than Rs.100 crores, the
provision was found offensive. In other
words,Section 2(1), as it originally stood, was not
found offensive, but Section 2(1)(a) as amended by
the Act 31 of 1996 was struck down and the new
provision as contained in Section 2(1)(aa) with
required modifications was held to be applicable
to all concerned. Even though the learned counsel
appearing for the petitioner is correct in his
submission to the effect that striking down of
Section 2(1) (a) did not have the effect of reviving
Section 2(1)(a) as it originally stood, the fact
remains that so long as that provision, namely
Section 2(1)(a) of the unamended Act, was in
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statute book, the liability to pay tax as per such
provision was already incurred. In other words,
the liability as envisaged under Section 2(1)(a) as
per the original Act was in existence for the period
from April 1, 1996 till July 31, 1996. At that stage
the liability was incurred as soon as the turnover
exceeded Rs.10 lakhs and as per the original
provision, the extent of such liability varied upon
the taxable turnover as per the original provision.
With effect from August 1, 1996, the exemption
limit was raised to Rs.100 crores and by virtue of
the decision of the Tribunal, such exemption was
equally applicable to all concerned. In view of the
above, the contention of the learned counsel for
the petitioner that there was no liability during the
period April 1, 1996 to July 31, 1996 is not
acceptable.
8. Even assuming that there was no liability to pay
and there was no provision regarding payment of
additional sales tax between April 1, 1996 and
July 31, 1996, the annual turnover of the
petitioner for the assessment year 1996-97 was
admittedly more than Rs.100 crores. It is
immaterial that the taxable turnover for the period
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W.P.No.32570 of 2002
from August 1, 1996 to March 31, 1997 did not
exceed Rs.100 crores. Even assuming that the
liability to pay additional sales tax arose only with
effect from August 1, 1996, the contention that the
taxable turnover after the said date alone could be
considered is also not tenable. The Assessing
Officer was justified in coming to a conclusion
that the taxable turnover for the period between
April 1, 1996 and March 31, 1997 being more
than Rs.100 crores, the petitioner was liable to
pay additional sales tax even as per the amended
provision as contained in Section 2(1)(aa).
9......
10. Learned senior counsel has contended that
under the impugned proceedings reference has
been made to Section 55 of the TNGST Act for the
purpose of effecting rectification, but jurisdiction
under section 55 is not available to be exercised
as the matter relates to Tamil Nadu Additional
Sales Tax Act, 1970. This submission overlooks the
basic concept that the levy of additional sales tax
under section 2(1)(aa) of the Tamil Nadu
Additional Sales Tax Act, 1970 is actually
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W.P.No.32570 of 2002
collection of sales tax at a higher rate from the
dealers having turnover over a particular limit.
This position is now clear in view of the Supreme
Court decision reported in 34 STC 73 (S. KODAR
v. STATE OF TAMIL NADU). Moreover, Section
2(1)(b) specifically lays down that the provisions
of the TNGST Act shall apply in relation to the
additional tax payable under Section 2(1)(aa) as
they apply in relation to the tax payable under the
TNGST Act. Apart from the above, Section 4 of the
Additional Sales Tax Act contains the rule making
power by the Government to carry out the
purposes of the Act. Even though certain rules
have been framed relating to some aspects of the
assessment to be made and no specific rule is
available for the purpose of effecting rectification,
Rule 9 of the Tamil Nadu Additional Sales Tax
Rules, 1970 provides that the provisions of the
Tamil Nadu General Sales Tax Rules, 1959 shall
apply mutatis mutandis to the additional tax
leviable under section 2 of the Act.
11. A combined reading of these provisions make it
amply clear that the provision under Section 55 of
the TNGST Act and the relevant rules would be
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W.P.No.32570 of 2002
applicable for the purpose of effecting
rectification. The Tamil Nadu Additional Sales Tax
Act, 1970 is not a self contained code. It merely
supplements Tamil Nadu General Sales Tax Act. It
is necessary to read and construe the Tamil Nadu
General Sales Tax Act and the Tamil Nadu
Additional Sales Tax Act together. The observation
made by the Supreme Court in [1983] 53 STC 1
(Ashok Service Centre v. State of Orissa) in the
context of Orissa Sales Tax Act and Orissa
Additional Sales Tax Act is equally applicable in
the present context. It has been held in [1999] 113
STC 496 (Mad.) (Kirloskar Brothers Ltd. v. State
of Tamil Nadu that the provisions under Section 55
of the TNGST Act can also be availed for the
purpose of rectification of assessment under the
Central Sales Tax Act and the ratio of the said
decision would equally apply to the assessment of
additional sales tax."
8. In National Time Co., the Division Bench took note of the
decision in Siemens Ltd. and set aside the order passed by the Tribunal and
remanded the matter back to the Assessing Officer to pass fresh orders
keeping the taxable turnover of the respondent-assessee therein upto
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W.P.No.32570 of 2002
31.07.1996. The operative portion of the Judgment reads as follows:
"12. In the above stated background, when we
consider the respective submissions of the learned
counsel for the petitioner as well as the
respondent, we find that the definition of the
expression "year" under section 2(1)(t) of the
Tamil Nadu General Sales Tax Act will have no
implication, while applying the un-amended
Section 2(1)(a) up to July 31, 1996 and the
amended Section 2(1)(a) and 2(1)(aa) after
August, 1 1996.
13. The definition of the expression "year" which
means the financial year, is only for the limited
purpose of ascertaining what is the financial year
with reference to which the tax liability under the
main Act as well as the Additional Sales Tax under
the Tamil Nadu Sales Tax Act is to be worked out.
The mere fact that underSection 2(1)(a), a
reference is made to a "year", the same will not in
any way create any different impact, while
applying the liability or the rate of tax to be
worked out during the financial year. In other
words, if in the very same financial year, different
rates are to be worked out by virtue of prescription
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W.P.No.32570 of 2002
of such different rates, due to statutory
amendments, the only exercise to be carried out
would be to ascertain the period for which the
different rates of tax are to be worked out. In our
considered view, such prescription of different
rates in that financial year will not in any way
affect the very basis of the liability created. Once
we steer clear of the said position, we do not find
hurdle at all in bifurcating the financial year in the
case of any assessee, while applying the un-
amended Section 2(1)(a) upto July 31, 1996 and
the liability after its amendment on and after
August 1, 1996, for the purpose of calculating the
additional sales tax liability.
14. In the case on hand, having regard to the
decision of the Special Tribunal in Siemens' case
[1998] 110 STC 313, the Additional Sales Tax
liability upto July 31, 1996 is to be worked out
based on the un-amended Section 2(1)(a), which
was prevailing upto that date. As per the provision
as it stood as on July 31, 1996, in the case of a
dealer whose taxable turn over in that financial
year upto July 31, 1996 exceeded ten lakhs of
rupees, upto one crore of rupees, his tax liability
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W.P.No.32570 of 2002
has to be increased by an additional sales tax at
the rate of 1.5%; where the taxable turnover
exceeded one crore of rupees upto five crores of
rupees, it is 2%; where it exceeded five crores of
rupees up to ten crores of rupees, at the rate of
2.25%; where it exceeded ten crores upto 300
crores of rupees at the rate of 2.5% and where it
exceeded 300 crores of rupees at the rate of 3%.
However, no additional tax could be levied for the
first ten lakhs of rupees.
15. Having regard to the impact made in the
amended provision, as per the judgment of the
Special Tribunal in Siemens' case[1998] 110 STC
313 (TNTST) on and after August 1, 1996, the
payment of additional sales tax would arise only if
the taxable turnover for the whole of the financial
year exceeded one hundred crores of rupees and
even in such a situation, while for the period up to
July 31, 1996, the liability will have to be worked
out as per the provision which was prevailing upto
that date namely, the unamended Section 2(1)(a)
and that for the period subsequent to August 1,
1996 up to March 31, 1997 for the taxable
turnover generated on and after August 1, 1996
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W.P.No.32570 of 2002
alone, the applicable rate of tax will have to be
calculated.
16. To make the position more clear, for instance,
in the financial year April 1, 1996 to March 31,
1997, for the period upto July 31, 1996, if the
taxable turnover was Rs.50 lakhs, for the first ten
lakhs of rupees, there would be no additional tax
liability, for the rest forty lakhs of rupees, the
liability by way of additional tax should be
calculated at the rate of 1.5% and if for the whole
of the financial year, the taxable turn over
exceeded Rs.100 crores, for the remaining amount
of Rs.99.50 lakhs i.e, excluding Rs.50 lakhs, which
is relatable to the period only upto July 31, 1996,
the rate of tax as per the amended Section 2(1)(aa)
will have to be worked out.
17. Keeping the above statutory implication
relating to payment of additional sales tax as was
applicable upto July 31, 1996 and after August 1,
1996, when we examine the order of the Assessing
Authority dated 28.1.1998, in the case on hand, we
find that the taxable turnover of the respondent -
assessee was Rs.54,97,880/- up to July 31, 1996.
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W.P.No.32570 of 2002
The taxable turnover for the financial year is
stated to have exceeded rupees one crore. But for
the purpose of calculation of additional sales tax,
since for the whole of the financial year, the
taxable turnover did not exceed one hundred
crores, there would be no necessity to make any
further calculation for the period beyond July 31,
1996. The Assessing Authority calculated the
additional sales tax at the rate of 2% on the
taxable turn over for the whole of the year.
18. The learned Special Government Pleader
fairly pointed out that since the unamended
provision was very much in force upto July 31,
1996, the calculation of additional sales tax would
have to be made by the Assessing Authority for the
taxable turnover which was prevailing only upto
the period July 31, 1996 and for the period
subsequent to August 1, 1996, the liability would
have been assessed, if at all the taxable turn over
upto the end of the financial year exceeded one
hundred crores of rupees and not otherwise.
Consequently, the rate of tax applied viz., 2% was
not in consonance with the statutory provision as
was prevailing as on July 31, 1996. Since the
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taxable turnover did not cross Rs.100 crores
during the said financial year, in the case of the
respondent - assessee, the liability of additional
sales tax will have to be calculated only for the
period upto July 31, 1996 and not beyond and that
too, on the taxable turnover that was available
upto that date viz., July 31, 1996.
19. Having regard to the said position, the
impugned order of the Tribunal as well as that of
the Assessing Authority are liable to be set aside.
While setting aside the order the Assessing
Authority, we direct the Assessing Authority to
pass fresh orders by keeping the taxable turnover
of the respondent assessee upto July 31, 1996 in a
sum of Rs.54,97,880/- and calculate the tax at the
rate of 1.5% on the sum of Rs.44,97,880/- (i.e.),
after deducting the first ten lakhs as provided
under the proviso to sub-clause (i) of Section
2(1)(a)."
9. In the light of the law laid down in the aforesaid mentioned
decisions, it goes without saying that the assessment made on the petitioner
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W.P.No.32570 of 2002
by the second respondent requires to be revised by following the law, which
has been laid down in the aforesaid mentioned decisions. Therefore, we are
of the view that the Tribunal should have exercised its jurisdiction and
issued appropriate directions to the Assessing Officer instead of rejecting
the application filed by the petitioner under Section 55 of the Act.
10. In the result, the Writ Petition is allowed. The impugned order
is set aside and the matter is remanded back to the Assessing Officer to
apply the aforesaid mentioned decisions and pass fresh orders in accordance
with law, within a period of 8 weeks from the date of receipt of a copy of
this order, after affording an opportunity of personal hearing to the
petitioner. No costs.
(T.S.S.,J.) (R.N.M.,J.)
22.01.2021
Index: Yes/No
Internet: Yes/No
Speaking order/Non speaking order
hvk
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W.P.No.32570 of 2002
To
1. The Secretary to Government,
Department of Commercial Taxes,
Fort St. George, Chennai - 9.
2. The Commercial Tax Officer-I,
Rajapalayam,
3. The Registrar,
Tamil Nadu Taxation Special Tribunal,
Chennai.
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W.P.No.32570 of 2002
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
hvk
W.P.No.32570 of 2002
22.01.2021
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