Madras High Court
Tvl.Sri Shanmuga Polymers (P) Ltd vs The Assistant Commissioner (Ct) on 21 February, 2018
Author: M.Sathyanarayanan
Bench: M.Sathyanarayanan, R.Hemalatha
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 21.02.2018 CORAM THE HONOURABLE MR.JUSTICE M.SATHYANARAYANAN and THE HONOURABLE MRS.JUSTICE R.HEMALATHA W.A(MD)No.496 of 2009 and M.P(MD)Nos.1 of 2009, 1 of 2010 and 1 of 2014 Tvl.Sri Shanmuga Polymers (P) Ltd., rep. by its Managing Director, A.A1/2, SIPCOT Complex, Trichy Road, Pudukottai. : Appellant Vs. The Assistant Commissioner (CT), The Commercial Tax Officer (FAC), Pudukottai 1, Assessment Circle, CT Buildings, Pudukottai. : Respondent PRAYER: Writ Appeal is filed under Clause 15 of the Letters Patent, praying to set aside the order dated 07.08.2009 passed in W.P(MD).No.9920 of 2008. !For Appellant : Mr.S.K.Soundara Rajan ^For Respondent : Mr.A.Muthukaruppan Additional Government Pleader :JUDGMENT
[Judgment of the Court was delivered by M.SATHYANARAYANAN, J.] The appellant is the writ petitioner. The writ petitioner made a challenge to the impugned order of the respondent dated 25.08.2008 and so far as determining taxable turnover liable to tax under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959 [in short, ?TNGST Act?] at the rate of 1 % of Rs.82,56,954/-. The said writ petition came to be dismissed on 07.08.2009 as not maintainable, on the ground that an effective alternate appellate remedy is available and challenging the legality of the said order, the present writ appeal is filed.
2.This Court vide order dated 09.10.2009, while admitting the writ appeal has observed that ?This Writ appeal is admitted only on the question of liability of turnover to an extent of Rs.82,56,954/- assessable under the provisions of Additional Sales Tax Act, barring that other issued do not fall for consideration before this Court? and also granted interim orders.
3.The facts briefly narrated leading to this writ appeal are as follows:
3.1.The petitioner Company is a Private Limited Company and it is a manufacturer of HDPE/PP Woven Bags for the past several years and also a registered dealer under the TNGST Act and the Central Sales Tax Act and also an assessee on the file of the respondent. The appellant /writ petitioner averred that they reported a total and taxable turnover of Rs.10,70,55,248/-
under the TNGST Act and the respondent at the time of finalisation of the assessment, based on the report of the Enforcement Wing Authorities, proposed to levy tax at the rate of 1%, being the difference of tax between the tax as per the schedule and concessional rate of tax at the rate of 3% for the reason that the petitioner had sold the polythene granules purchased by giving Form XVII, as per the second proviso to Section 3(3) of the TNGST Act.
3.2.It is also averred by the appellant / writ petitioner that the respondent has also proposed to impose a penalty under Section 23 of the TNGST Act, as the company has misused Form XVII for the reason that the purchased materials in the form of granules were sold as such without using the same in the manufacture of other goods and penalty under Section 12(3)(b) was also proposed.
3.3.Accordingly, the respondent has issued the revision notice under Section 16(1)(a) of the TNGST Act, wherein he has proposed to levy a penalty under Section 23 and also additional tax at the rate of 1% on the turnover of Rs.10,71,00,990/-, in which the purchase turnover of Rs.82,56,954/- was also taken into consideration for the purpose of arriving the taxable turnover under the provisions of Tamil Nadu Additional Sales Tax Act. According to the appellant / writ petitioner, the respondent has committed an error in taking into consideration the purchase turnover which was subjected to tax at the rate of 1%, for the reason that those goods were not used for the declared purpose and it is the taxable turnover only at the hands of the seller who sold the granules to them.
3.4.The appellant / writ petitioner had also filed their objections on 14.08.2008, taking a specific stand that the purchase turnover of Rs.82,56,954/- will not be liable for Additional Sales Tax, as it is not the taxable turnover in their hands, whereas, it is the taxable turnover at the hands of the seller, who has declared the monthly returns and also appropriate rates before their assessing officer. However, without taking note of the objection, the order was confirmed and penalty was also proposed for which also the petitioner has filed his response, which culminated in the impugned order dated 25.08.2008.
4.The writ petition was entertained and the respondents have filed their counter affidavit and took a stand that the petitioner company, a manufacturer of HDPE/PP bags had purchased polythene granules on issue of Form XVII and availed the concession rate of tax at 3% at the said purchase and that the said commodity without Form XVII is taxable at 4% and the petitioner out of the purchase has resold the polythene granules for a sum of Rs.82,56,954/- which is against the condition laid down under Section 3(3) of the TNGST Act.
5.The respondent further took a stand that a portion of the purchase have not been used for manufacturing purpose and they were resold and that the appellant / writ petitioner has contravened the provisions under Section 3(3) of the TNGST Act and therefore, the said turnover has been assessed to tax at the rate of 1% which is in accordance with the statute. Insofar as levy of penalty is concerned, the respondent took a stand that in terms of Section 12(3)(b), the penalty is attracted and insofar as levy of additional sales tax is concerned, the respondent took a stand that the taxable turnover had exceeded 10 crores and prayed for dismissal of the writ petition.
6.The learned Judge after taking note of the rival submissions and materials placed, found that the petitioner is having an effective alternate remedy and as such the writ petition under Article 226 of the Constitution of India is not maintainable and citing the said reason, dismissed the writ petition vide impugned order dated 07.08.2009 and challenging the legality of the same, the writ petitioner has filed this writ appeal.
7.As already pointed out, this Court has admitted the writ appeal only on the question of liability of turnover to an extent of Rs.82,56,954/- assessable under the provisions of Additional Sales Tax Act.
8.Mr.S.K.Soundara Rajan, learned counsel appearing for the appellant / writ petitioner has invited the attention of this Court to Section 3(3) and 3(4) of the TNGST act and would submit that even as per the stand of the respondent in paragraph No.7, the appellant / writ petitioner have not used a portion of the purchase for manufacturing purpose and resold the same and as such, it would attract only Section 3(4) of the Act and not section 3(3) of the TNGST Act. Insofar as the levy of 1% on the taxable turnover of Rs.82,56,954/- is concerned, it is the submission of the learned counsel appearing for the appellant / writ petitioner that though, the appellant / writ petitioner has purchased the granules under Form XVII and has resold a part of the granules, the seller had filed the necessary tax as well as the additional sales tax and as such it cannot be construed as taxable turnover at the hands of the writ petitioner and though, it was pointed out in his response to the revision notice, the respondent has failed to take into consideration of the same.
9.The learned counsel appearing for the appellant / writ petitioner has also invited the attention of this Court to Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1979 and would submit that ?where the taxable turnover exceeds ten crores of rupees but does not exceed twenty five crores of rupees, 1% of the taxable turnover is the rate of tax and also further invited the attention of this Court to Explanation IV which says that ?Taxable turnover for the purpose of this clause does not include the turnover of resale, taxable under Section 3-H of the said Act? and would further submit that they have also paid the additional sales tax at the rate of 1% of Rs.82,56,954/- and as such, the levy of 1% of Rs.82,56,954/- is wholly unsustainable and since it is against the express provisions of the statute, the appellant / writ petitioner need not avail alternate remedy and prays for interference.
10.The learned counsel appearing for the appellant / writ petitioner in support of his submission, has placed reliance upon the decision rendered in Vol. 105 STC 202 (Eagle Flask Industries Limited Vs. Commercial Tax Officer and another) and another judgment rendered by the Tamil Nadu Taxation Special Appellate Tribunal, which was upheld by the Division Bench of this Court in order dated 02.12.2010 in W.P.No.2765 of 2005 (M/s.Everest Buildings Products Limited Vs. The Tamil Nadu Sales Tax Appellate Tribunal, Coimbatore and others).
11.Per contra, Mr.A.Muthukaruppan, learned Additional Government Pleader appearing for the respondent / revenue would submit that since the appellant / writ petitioner had resold the polythene granules, in its entirety, Section 3(3) is attracted and pre-revision notice was issued and the explanation submitted by the appellant / writ petitioner has been taken into consideration and the impugned order came to be passed by the respondent and the learned Judge has rightly dismissed the writ petition on the ground of availability of effective alternate remedy and hence, prays for dismissal of this writ appeal.
12.This Court has considered the rival submissions and also perused the materials placed before it.
13.A perusal of the impugned order would disclose that the respondent took a stand that the polythene granules purchased by the appellant / writ petitioner from the dealer has been resold in its entirety and the said fact is seriously disputed by the appellant / writ petitioner. It is also pertinent to point out at this juncture that the respondent has filed his counter affidavit in the writ petition and in paragraph No.7 of page No.4, has averred ?But a portion of the purchases have not been used for manufacture purpose and they were resold. Thus, the petitioner has contravened the provisions under Section 3(3) of the Act. Hence, the said turnover has been assessed to tax at 1% which is in accordance with statute?
14.Similar issue arose for consideration before the Tamil Nadu Taxation Special Appellate Tribunal reported in Vol. 105 STC 202 (cited supra), wherein an argument was put forth on behalf of the petitioner / assessee therein that the value of the raw materials purchased for manufacturing of end-product ie.,Rs.22,65,828/- is not a turnover of the petitioner who is the manufacturer but it is the turnover of the registered dealer from whom the manufacturer purchased the raw materials and component parts. It is relevant to extract paragraph No.10 of the said order:
?10.In the instant case when various registered dealers in the State of Tamil Nadu sold component parts/raw materials to the petitioner, it is their duty and responsibility to include such sale value in their taxable turnover. It is rightly contended that the said turnover was assessed at the concessional rate of 3 per cent on condition of satisfaction of sub-section (3) to section 3. When there is a violation, the balance of 2 per cent tax is payable and that is collected from the purchaser who violated the declaration. But for such a declaration, tax would have been collected from the registered dealer at the point of first sale by them to the petitioner.
Therefore, by no stretch of imagination the value of goods of Rs.22,65,828 which went into the manufacture of end-products but were stock transferred in violation of declaration can be included as the taxable turnover of the petitioner attracting the provisions of the Tamil Nadu Additional Sales Tax Act, 1970. Since the petition is filed at the time of show cause notice, the petitioners are granted time till 30th January, 1997 to file their objections in respect of other issues?.
15.A Division Bench of this Court in the order dated 02.12.2012 made in W.P.No.2765 of 2005 (cited supra), has considered the issue as to the payment of additional sales tax in respect of the tax levied under Section 3(4) of the Tamil Nadu Additional Sales Tax Act and taken into consideration the above cited decision rendered by the Tribunal and observed as follows in paragraph No.12:
?12.The said decision was said to have become final and conclusive. Inasmuch as there is no challenge to the order of the Special Tribunal, the reasoning of the Tribunal passed on different set of expressions used in the proviso to clause (b) of Section 3(3) and Subsection 4 to Section 3 was well justified. We also fully concur with the conclusion of the Special Tribunal on the interpretation of Sec (2) of the Tamil Nadu Additional Sales Tax Act vis-a-vis Section 3(4) of Tamil Nadu General Sales Tax Act as regards the payment of additional sales tax.?
16.Ultimately, the Division Bench had sustained the stand of the appellant therein and held that no additional sales tax was leviable under the provisions of the TNGST Act, in respect of the tax paid under Section 3(4) of the TNGST Act and to that extent, has set aside the order of the Tribunal and partly allowed the writ appeal.
17.In the considered opinion of this Court, the above cited decisions are fully applicable to the facts of this case for the reason that the respondent also sought to levy tax on the taxable turnover of the dealer to an extent of Rs.82,56,954/- for which the dealer has paid the required tax as well as the additional sales tax. Admittedly, the appellant / writ petitioner had diverted the part of the granules purchased for the manufacture of HDPE/PP bags and as such, the provisions of Section 3(4) of TNGST Act would stand attracted for which he has paid 1% tax and also paid additional sales tax at the rate of 1%. Insofar as levy of penalty is concerned, it is the stand of the appellant / writ petitioner that if the said amount is deleted, the taxable turnover would not exceed 10 crores and in that event they are not liable to pay the penalty.
18.Therefore, this Court is of the considered view that the purchase turnover of Rs.82.56,954/- cannot be included for the purpose of levying the tax at the rate of 1% p.a. and for the purpose of assessment under the provisions of the Tamil Nadu Additional Sales Tax Act. Therefore, the impugned order to that extent, warrants interference.
19.In the result, the writ appeal is partly allowed and the order dated 07.08.2009 made in W.P(MD).No.9920 of 2008, is set aside and the impugned order in so far as determining taxable turnover liable to tax under Section 3(5) of the TNGST Act at the rate of 1%, is also set aside and consequently, the levy of penalty under Section 12(3)(b) of the TNGST Act is also set aside. However, in the circumstances of the case, there shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.
To The Assistant Commissioner (CT), The Commercial Tax Officer (FAC), Pudukottai 1, Assessment Circle, CT Buildings, Pudukottai.
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