Madras High Court
Victory Chemicals (P) Ltd vs The Commercial Tax Officer on 23 November, 2021
WP. No. 18818 of 2008
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 23.11.2021
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
W.P. No. 18818 of 2008
and
M.P.No.1 of 2008
Victory Chemicals (P) Ltd
Represented by its Director
C. Subhasingh
No.A/14-C, SIPCOT Industrial
Complex, Cuddalore – 607 005 .. Petitioner
Versus
1. The Commercial Tax Officer
Cuddalore Taluk
2. The Appellate Assistant
Commissioner (CT)
FAC, Cuddalore
3. Tamil Nadu Sales Tax Appellate Tribunal
(Additional Bench)
City Civil Court Building
High Court Complex
Chennai – 600 104
4. State of Tamil Nadu
Represented by the Deputy
Commissioner (CT)
Vellore Division .. Respondents
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WP. No. 18818 of 2008
Writ Petition filed under Article 226 of the Constitution of India praying
for issuance of a Writ of Certiorari, calling for the records on the file of the
third respondent herein in STA No. 1674/00 dated 27.06.2008 and quash the
same.
For Petitioner : Mr. N. Inbarajan
For Respondents : Mr. Prashanth Kiran
Government Advocate (Taxes)
ORDER
(Order of the court was made by R.Mahadevan, J.)
Calling in question the order dated 27.06.2008 passed by the third
respondent / Tamil Nadu Sales Tax Appellate Tribunal (for brevity, the
Tribunal), the petitioner has preferred this writ petition to quash the same.
2. The petitioner/assessee is a dealer in chemicals. Originally, the
Assessing Officer assessed the taxable turnover under the Tamil Nadu General
Sales Tax Act, 1959 at Rs. 2,32,08,144/- for the assessment year 1996-97,
besides levying additional sales tax at 1.5% for the taxable turnover upto
31.07.1996. However, by a revision of assessment dated 14.12.1998 under
Section 16 of the TNGST Act, the first respondent revised the additional sales
tax at 2% as against 1.5% on the turnover of Rs.72,43,397/- which is the
taxable turnover upto 31.07.1996, besides levying penalty of Rs.51,217/- under
Section 12 (3) (b) of the Act. According to the petitioner, the first respondent
proceeded such assessment on the basis that a turnover of Rs.72,43,397/-
ought to have been assessed to tax at the rate of 2% instead of 1.5% inasmuch
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WP. No. 18818 of 2008
as the taxable turnover for the whole year of 1996-1997 exceeded Rs.1 crore
and therefore, as per Section 2(1)(a)(ii) of the Additional Sales Tax Act, 1970,
the tax payable by the petitioner shall be increased at the rate of 2% of the
taxable turnover. The petitioner raised objections by stating that by Act 31 of
1996, Section 2 (1) (a) was substituted and if the taxable turnover for a year
exceeds Rs.100 crores only there shall be a levy of additional sales tax under
the Tamil Nadu Additional Sales Tax Act, 1970 with effect from 01.08.1996
and therefore, for the purpose of levy of additional sales tax, the taxable
turnover for the period from 01.04.1996 to 31.07.1996 has to be assessed as
prescribed prior to amendment of Act 31 of 1996 and for the period from
01.08.1996 to 31.03.1997, the rate shall be revised as per the amendment by
Act 31 of 1996.
3. Notwithstanding such objections, the first respondent has taken
the entire taxable turnover of the whole year for the purpose of determining the
rate of tax and the slab as prescribed in Section 2 (1) (a) of the Act and revised
the rate of tax from 1.5% to 2%. Aggrieved by the same, the petitioner
preferred an appeal before the second respondent, who concluded that for the
purpose of liability under the Tamil Nadu Additional Sales Tax Act, 1970, the
taxable turnover upto 31.07.1996 alone could be taken into consideration and
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WP. No. 18818 of 2008
accordingly, modified the order passed by the first respondent, holding that
there shall be no levy of additional sales tax under the Additional Sales Tax
Act, 1970 inasmuch as the taxable turnover is less than Rs.100 crores, besides
setting aside the order of penalty imposed by the first respondent.
4. Challenging the order so passed by the second respondent, the
fourth respondent filed an appeal before the third respondent / Tribunal, which
allowed the appeal by order dated 27.06.2008 by observing that the taxable
turnover for the period from 01.04.1996 to 31.07.1996 was above Rs.10 lakhs
and the taxable turnover for the whole year exceeded Rs.1 crore and therefore,
the order of the first respondent levying the rate of tax at 2% under the
Additional Sales Tax Act, 1970 was restored and the order passed by the
second respondent was set aside. Hence, the petitioner / assessee is before this
court with this writ petition.
5. The issue involved in this writ petition is as to the applicability of
un-amended section 2 (1) (a) of the Tamil Nadu Additional Sales Tax Act,
1970, which existed prior to Act 31 of 1996, since by Act 31 of 1996, the
previous section 2(1)(a) came to be amended with effect from 01.08.1996 and
after the amendment, section 2(1)(a) and 2(1)(aa) came to be introduced.
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WP. No. 18818 of 2008
6. According to the learned counsel appearing for both sides, the
aforesaid issue is covered by the decision of a Division Bench of this Court in
the case of State of Tamil Nadu v. National Time Co. [(2011) 39 VST 247
(Mad)], wherein, it was held that “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 order passed by the
Division Bench can usefully be extracted hereunder:-
"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
Act under the Tamil Nadu Sales Tax Act is to be worked out.
The mere fact that under Section 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 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 under 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
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WP. No. 18818 of 2008
worked out based on the unamended section 2 (1) (a), which
was prevailing up to that date. As per the provision as it stood
as on July 31, 1996, in the case of a dealer whose taxable
turnover in that financial year upto July 31, 1996 exceeded ten
lakhs of rupees, up to one crore of rupees, his tax liability has to
be increased by an additional sales tax at the rate of 1.5 per
cent; where the taxable turnover exceeded one crore of rupees
up to five crores of rupees, it is two per cent; where it exceeded
five crores of rupees up to ten crores of rupees at the rate of
2.25 per cent; where it exceeded ten crores up to 300 crores of
rupees at the rate of three per cent. 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 up to that date, namely, the unamended section 2 (1)
(a) and that for the period subsequent to August 1, 1996 upto
March 31, 1997 for the taxable turnover generated on and after
August 1, 1996 alone, the applicable rate of tax will have to be
calculated.
16. To make the position more clear, for instance, in the
financial year 1.4.1996 to 31.3.1997, for the period upto
31.7.1996, 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 January 28, 1998, in the case on
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WP. No. 18818 of 2008
hand, we find that the taxable turnover of the respondent –
assessee was Rs.54,97,880 upto July 31, 1996. 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 two per cent on the taxable turnover 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 turnover
upto the end of the financial year exceeded one hundred crores
of rupees and not otherwise. Consequently, the rate of tax
applied, viz., two per cent was not in consonance with the
statutory provision as was prevailing as on July 31, 1996. since
the 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 of 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 per cent 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)."
7. Following the aforesaid order passed by the Division Bench of this
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WP. No. 18818 of 2008
Court, we set aside the orders of the Tribunal as well as the Assessing
Authority. Consequently, we direct the assessing authority/first respondent to
pass fresh orders in the light of the order of the Division Bench of this Court as
mentioned supra, within a period of four weeks from the date of receipt of a
copy of this order.
8. Accordingly, this writ petition stands disposed of. No costs.
Consequently, connected miscellaneous petition is closed.
(R.M.D., J.) (M.S.Q., J.)
23.11.2021
dhk/rsh
Internet : Yes / No
Index : Yes / No
To
1. The Commercial Tax Officer
Cuddalore Taluk
2. The Appellate Assistant Commissioner (CT) FAC, Cuddalore
3. Tamil Nadu Sales Tax Appellate Tribunal
(Additional Bench)
City Civil Court Building
High Court Complex, Chennai – 600 104
4. The Deputy Commissioner (CT)
State of Tamil Nadu, Vellore Division
R. MAHADEVAN, J.
https://www.mhc.tn.gov.in/judis and
WP. No. 18818 of 2008
MOHAMMED SHAFFIQ, J.
dhk/rsh
WP No. 18818 of 2008
23.11.2021
https://www.mhc.tn.gov.in/judis
