Madras High Court
M/S.Suseela Machinery ... vs The Commercial Tax Officer on 25 November, 2021
W.A. No.2844 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 25.11.2021
CORAM
THE HONOURABLE MR.JUSTICE R.MAHADEVAN
and
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
W.A. No.2844 of 2021
and
C.M.P. No.18925 of 2021
M/s.Suseela Machinery Electricals ... Appellant
Vs.
The Commercial Tax Officer,
Cuddalore Town Assessment Circle,
Cuddalore. ... Respondent
PRAYER: Writ Appeal filed under clause 15 of the Letters Patent, praying to
set aside the order of this court dated 11.08.2021 in W.P.No.18110 of 2016.
For Appellant : M/s.Adithya Reddy
For Respondent : Mr.Prashanth Kiran
Government Advocate (Taxes)
JUDGMENT
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W.A. No.2844 of 2021
(Judgment of the court was delivered by Mohammed Shaffiq, J.)
The short question that arises for consideration in this writ appeal is as
to whether the denial of the benefit of Composition Scheme under Section
3(4) of the Tamil Nadu Value Added Tax Act, 2006 (hereinafter referred to
as "TNVAT Act, 2006") on the premise that the appellant, after having
opted for the Composition Scheme, had collected taxes by mistake in respect
of thirteen (13) invoices out of more than five-thousand (5,000) invoices
raised during the year 2011-12, but the same had been refunded to the
customers on issuance of notice, is sustainable.
2. Briefly stated facts are as follows:-
The appellant is a dealer in electrical items and purchased the same
from local registered dealers and an assessee on the files of the respondent
herein. While so, they had opted to pay tax under the Composition Scheme in
terms of Section 3(4) of TN VAT Act, 2006 by filing Form-K returns and had
complied with all the conditions set out therein. On verification of records, it
was found that the appellant had collected taxes in respect of thirteen (13)
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W.A. No.2844 of 2021
invoices and thereby violating the provisions of section 3(4) and therefore,
they are not eligible to pay tax at the rate of 0.5% and are liable to pay tax at
the higher rate of 14.5% for the entire sales turnover for the year 2011-12.
Accordingly, the respondent issued a show cause notice dated 27.07.2015,
calling upon the appellant to submit its objections. The appellant soon after
realising the mistake, had refunded the tax amount collected from the
customers by issuing cheques to them and filed its objection explaining that
the collection of taxes in respect of 13 invoices out of 5000 invoices, was
made inadvertently and also enclosed the proof for refund/returning the tax
amount to the respective customers. Without considering the reply so filed by
the appellant, the respondent passed the assessment order dated 30.03.2016
determining tax under section 3(2), instead of under section 3(4) of the
TNVAT Act, 2006. Challenging the said order, the appellant preferred
WP.No.18110 of 2016, which by order dated 11.08.2021, was disposed of
by the learned Judge, by relegating the appellant to approach the appellate
authority, within a period of four weeks and by directing the appellate
authority to dispose of the said appeal, after providing opportunity to them.
Feeling aggrieved, the appellant / assessee is before this court with this writ
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W.A. No.2844 of 2021
appeal.
3.Heard both sides and perused the materials placed before this court.
4.At the outset, it would be appropriate to refer to the provisions of
Section 3(4) of the TNVAT, 2006, as per which, the appellant filed its return
and pay tax, which reads as under:-
"Section 3(4)(a) Notwithstanding anything
contained in sub-section (2), but subject to the provisions
of subsection (1), every dealer, who effects second and
subsequent sales of goods purchased [from the
registered dealers] within the State, whose total turnover
relating to taxable goods, for a year, is less than rupees
fifty lakhs, may, at his option, instead of paying tax under
sub-section (2), pay a tax, for each year, on his turnover
relating to taxable goods at such rate not exceeding one
percent, as may be notified by the Government. Such
option shall be exercised by the dealer , - (i)Who
commences business, within thirty days from the date of
commencement of the business; (ii)Whose turnover is
below rupees fifty lakhs during the previous year, on or
before 30th day of April of the year for which he exercises
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W.A. No.2844 of 2021
such options; (iii)For the year 2008-09, within thirty
days from the date of commencement of the Tamil Nadu
Value Added Tax (Second Amendment) Ordinance, 2008:
Provided that such dealer shall not collect any
amount by way of tax or purporting to be by way of tax;
Provided further that such dealer shall not be
entitled to input tax credit on the goods purchased by
him;
Provided also that the dealer who purchased
goods from such dealer shall not be entitled to input tax
credit on the goods purchased by him.
Section 3(4)(b) – if the turnover, relating to
taxable goods of a dealer paying tax under clause (a), in
a year, reaches rupees fifty lakhs at any time during that
year, he shall inform the assessing authority in writing
within seven days from the date on which such turnover
has so reached. [Such dealer may pay a tax for each
year on the turnover relating to taxable goods upto
rupees fifty lakhs at such rate not exceeding one per cent
as may be notified by the Government and is liable to
pay tax under sub section (2) on all his sales of taxable
goods above rupees fifty lakhs] and he is entitled to the
input tax credit on the purchases made from the date,
and on the stock available with him, the purchases of
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W.A. No.2844 of 2021
which has been made within ninety days before the date
on which such turnover has reached rupees fifty lakhs:
Provided that such dealer whose turnover has
reached rupees fifty lakhs during the previous year shall
not be entitled to exercise such option for subsequent
years. "
A reading of Section 3(4) as extracted above, would show that an option is
provided to the dealers with a turnover of less than Rs.50 lakhs for a year,
who may, instead of paying taxes under sub-section (2) to Section 3 of the
said Act, pay taxes at 0.5 percent i.e., the rate notified by the Government
under Section 3(4) of the Act inter alia subject to the following conditions:-
a. Dealer shall not collect any amount by way of tax or purporting to be
by way of tax.
b. Dealer shall not be entitled to Input Tax Credit on the goods
purchased by him.
c. Dealer who purchased goods from such dealer shall not be entitled
to Input Tax Credit on the goods purchased by him.
5.Admittedly, the turnover of the appellant is below Rs.50 lakhs for
the assessment year in question and there was no inter-state purchase
effected. However, the appellant had inadvertently collected taxes in respect
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W.A. No.2844 of 2021
of thirteen (13) invoices out of five-thousand (5,000) invoices raised during
that year, but refunded to its customers immediately, upon receipt of notice
from the respondent. According to the learned counsel for the appellant, the
refund of the amount of tax collected by the appellant ought to have been
considered as if they had not made the initial collection of sales tax and
therefore, they have not violated any of the conditions set out in section 3(4)
of the TNVAT Act. In support of the said contention, the learned counsel
placed reliance on the decisions of this court in Kathan Nadar Company v.
State of Madras, reported in (1963) 14 STC 694 and Indian Steel Rolling
Mills v. Commercial Tax Officer, reported in (1965) 16 STC 285.
6.Per contra, the learned Government Advocate (Taxes) appearing for
the respondent submitted that as per Section 3(4) of the TNVAT Act, the
appellant having opted to pay the taxes under the composition scheme is
prohibited from collecting any amount by way of taxes or purporting by way
of taxes, whereas they had collected taxes in respect of 13 invoices in
violation of the said provision, which deemed to have retracted the appellant
from the benefit of the composition scheme.
7. However, we find some bonafide in the submission so made by the
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W.A. No.2844 of 2021
learned counsel for the appellant. There cannot be any dispute that the
amount of tax collected inadvertently in respect of 13 invoices out of 5000
invoices raised during the year 2011-12, was refunded to the respective
customers on realisation of the mistake by the appellant. In such
circumstances, the benefit of the composition scheme, especially when the
appellant had complied with all other conditions, cannot be denied to them.
The said factum of refund of collected tax by the appellant, that too, before
completion of the assessment proceedings, was not taken into consideration
by the assessing officer as well as by the learned single judge of this court, in
a proper perspective. Therefore, we are inclined to set aside the orders passed
by the assessing officer and the learned single Judge of this court.
8.Accordingly, the order dated 11.08.2021 passed in WP.No.18110 of
2016 and the order of assessment passed by the respondent vide proceedings
No.TIN:33524380568/11-12 dated 30.03.2016 for the Assessment Year
2011-12 are set aside. The matter is remitted back to the respondent /
assessing officer to verify the documents produced by the appellant after
providing an opportunity of hearing and pass appropriate orders, on merits.
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W.A. No.2844 of 2021
Such an exercise shall be completed within a period of twelve (12) weeks
from the date of receipt of a copy of this judgment.
9.This writ appeal stands disposed of in the above terms. No costs.
Consequently, the connected Civil Miscellaneous Petition is closed.
[R.M.D., J.] [M.S.Q., J.]
25.11.2021
Speaking (or) Non Speaking Order
Index : Yes/ No
mka
To
The Commercial Tax Officer,
Cuddalore Town Assessment Circle,
Cuddalore.
R.MAHADEVAN, J.
and
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W.A. No.2844 of 2021
MOHAMMED SHAFFIQ, J.
mka
W.A. No.2844 of 2021
and
C.M.P. No.18925 of 2021
25.11.2021
https://www.mhc.tn.gov.in/judis
