Madras High Court
M/S.Sri Ranganathar & Co vs The State Of Tamil Nadu on 5 August, 2024
Author: Anita Sumanth
Bench: Anita Sumanth
2024:MHC:3611
W.P.Nos.35647 and 35369 of 2005
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 05.08.2024
CORAM
THE HONOURABLE DR. JUSTICE ANITA SUMANTH
and
THE HONOURABLE MR. JUSTICE G.ARUL MURUGAN
W.P.Nos.35647 and 35369 of 2005
& W.P.M.P.No.560 of 2007
M/s.Sri Ranganathar & Co.,
Now known as M/s.SRC Projects Private Limited,
No.4-B, Lakshmipuram,
Gandhi Road,
Salem – 636 007. ... Petitioner in both W.P.'s
Vs
1. The State of Tamil Nadu,
Represented by the
Secretary to Government,
Department of Commercial Taxes
and Religious Endowments,
Fort St.George,
Chennai 600 009.
2. The Commercial Tax Officer,
Salem Town North Circle,
Salem. ... Respondents in both W.P.'s
PRAYER in W.P.No.35647 of 2005: This Petition came to be numbered by
transfer of O.P.No.334 of 2003 from the file of the Tamil Nadu Taxation
Special Tribunal, Chennai under Section 7 of Act 42/92 of TNGST Act, 1959
after abolition of the Tribunal in 2004 praying this Court to declare
Explanation (v) to Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax
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W.P.Nos.35647 and 35369 of 2005
Act, 1970, inserted by Tamil Nadu Additional Sales Tax (Amendment) Act,
2002 (Act No.23/2002) as ultra vires Articles 14, 245, 246, 265, 269 and 286,
Entry 92-A of List-I to the Seventh Schedule, Entry 54 of List-II to the
Seventh Schedule to the Constitution of India, 1950 and hence ab initio void.
PRAYER in W.P.No.35369 of 2005: This Petition came to be numbered by
transfer of O.P.No.333 of 2003 from the file of the Tamil Nadu Taxation
Special Tribunal, Chennai under Section 7 of Act 42/92 of TNGST Act, 1959
after abolition of the Tribunal in 2004 praying this Court to call for the
records of the Second respondent herein in his Notice in Ref.No.2660224/01-
02 C.D2.P.27 dated 27/12/2001 and the consequential notice in
Ref.No.2660224/01-02 dated 31/01/2003, quash the same.
In both W.P.'s
For Petitioner : Mr.V.Sundareswaran
For Respondents : Mr.V.Prashanth Kiran
Government Advocate
COMMON ORDER
(Order of the Court was made by Dr.ANITA SUMANTH,J.) Heard Mr.V.Sundareswaran, learned counsel for the petitioner and Mr.V.Prashanth Kiran, learned Government Advocate for the respondents.
2. These matters were filed before the Tamil Nadu Taxation Special Tribunal, Chennai (in short 'Tribunal') by way of Original Petitions and stand transferred to this Court, re-numbered as Writ Petitions on the abolition of the Tribunal in 2004.
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3. In W.P.No.35647 of 2005, the prayer is for a Declaration to the effect that Explanation (v) to Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970, inserted by Tamil Nadu Additional Sales Tax (Amendment) Act, 2002 (in short 'Act') is ultra vires the Constitution and is hence ab initio void.
4. W.P.No.35639 of 2005 challenges notice dated 31.01.2003 proposing to levy Additional Sales Tax at the rate of 1.5% on the taxable turnover along with penalty under Section 24(3) of the Act. The petitioner has been granted 15 days from date of receipt of notice to file objections to the proposal. The proposal is premised on the amendment, which is challenged in W.P.No.35647 of 2005.
5. The prayer for Declaration would have to be allowed in favour of the petitioner in light of the decision of this Court in State of Tamil Nadu and another V. Taher Ali Industries and Projects (P) Ltd. (2016 SCC Online Madras 9288) .
6. The impugned notice refers to a decision of the Division Bench of this Court in the case of South India Corporation Limited V. Commercial Tax Officer (124 STC 654). This decision has been discussed in the case of Taher Ali (supra) as well where, applying the ratio of the judgement of the Supreme Court in S.Sundaram V. V.R.Pattabhiraman (AIR 1985 SC 582), the https://www.mhc.tn.gov.in/judis Page No.3/6 W.P.Nos.35647 and 35369 of 2005 Bench concludes as follows:
13. In the case on hand, in the form of Explanation, in order to get over the effect of the judgment in South India Corporation Ltd. v. Commercial Tax Officer, Coimbatore and others reported in 124 STC 654, the scope of Charging Sections has been expanded. The learned Single Judge has considered the scope of Charging Sections, viz., amended Section 2(1)(aa) of the Act, and by placing reliance on the judgment of the Honourable Supreme Court in S.Sundaram v. V.R.Pattabhiraman reported in AIR 1985 SC 582 and also the opinion of the learned Authors, has held that it is contrary to the provisions of the Act.
14. It is a settled position of law that the Explanation normally should be read so as to harmonise with and clear up any ambiguity in the main section and it should not be so construed as to widen the ambit of the section and also to clarify the doubtful point in law and to serve as a proviso to main section.
15. In S.Sundaram v. V.R.Pattabhiraman reported in AIR 1985 SC 582, the following objects of an Explanation to a statutory provision have been culled out and it is relevant to extract the same as under:
"(a) to explain the meaning and intendment of the Act itself;
(b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve;
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful; (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same."
16. Section 7-C of the TNGST Act, is extracted hereunder:
"7-C. Payment of tax at compounded rates by works contractor.-
(1) Notwithstanding anything contained in Section 3-B, every https://www.mhc.tn.gov.in/judis Page No.4/6 W.P.Nos.35647 and 35369 of 2005 dealer referred to in item (vi) of clause (g) of Section 2, may, at his option, instead of paying tax in accordance with Section 3-B, pay, either on the total value of each works contract or on the total value of all works contracts, executed by him in a year, tax calculated at the following rate, namely:-
(i) Civil works contract. : Two per cent of the total contract value of the civil works executed;"
17. The dealer need to pay tax based on his taxable turnover determined after allowing various deductions admissible under law and without amending the said provision, merely the Explanation V is added to get over the effect of the judgment in South India Corporation Ltd. v. Commercial Tax Officer, Coimbatore and others reported in 124 STC 654.
18. In the light of the judgment of the Honourable Supreme Court in S.Sundaram v. V.R.Pattabhiraman reported in AIR 1985 SC 582, this Court is of the considered view that the impugned Explanation sought to widen the scope of taxable turnover as defined under Section 2(p) of the TNGST Act and the learned Judge in the impugned order has taken into consideration the well settled position of law and held that the impugned Explanation is contrary to the provisions of the Act and allowed the writ petition.
19. In paragraph 19 of the judgment in South India Corporation Ltd. v. Commercial Tax Officer, Coimbatore and others reported in 124 STC 654. the Division Bench of this Court also held that the claim for additional sales tax by treating the contract value as the taxable turnover is not permissible under the provisions of either the TNGST Act or the Additional Sales Tax Act. The said judgment has also reached finality as no further challenge has been made and therefore, on that ground also, the impugned Explanation is to be declared as ultra vires and it was rightly declared so in the impugned order passed in the writ petition.
20. This Court upon scrutiny and consideration of the relevant materials and in the light of the above judgment is the considered opinion that there is no error apparent or infirmity in the reasons assigned in the impugned order in allowing the writ petition and finds no merit in the writ appeal.
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AND G.ARUL MURUGAN,J.
7. Declaration sought for in W.P.No.35647 of 2005 is granted and as a consequence, impugned notice dated 31.01.2003 is quashed. Both Writ Petitions are allowed. No costs. Connected Miscellaneous Petition is closed.
(A.S.M.,J) (G.A.M.,J) 05.08.2024 Index:Yes/No Speaking order Neutral Citation: Yes sl To
1. The Secretary to Government, The State of Tamil Nadu, Department of Commercial Taxes and Religious Endowments, Fort St.George, Chennai 600 009.
2. The Commercial Tax Officer, Salem Town North Circle, Salem.
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