Madras High Court
Tvl Tcs Textiles Private Limited vs The Prinicipal Secretary And ... on 6 January, 2020
Author: C.Saravanan
Bench: C.Saravanan
W.P.No.31767 of 2014
IN HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 17.12.2019
Pronounced On 06.01.2020
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.No.31767 of 2014
and
M.P.No.1 of 2014
Tvl TCS Textiles Private Limited,
Represented by its Authorised Signatry,
Thiru R.Mahesh,
No.68, College Road,
Tirupur. ... Petitioner
vs
1.The Prinicipal Secretary and Commissioner
of Commercial Taxes,
Ezhilagam, Chepauk,
Chennai - 600 005.
2.The Assistant Commissioner (CT),
North Circle, Tirpur. ... Respondents
Prayer: Writ Petition filed under Article 226 of Constitution of India, to issue a
Writ of Certiorari calling for the records in respect of the Letter
No.Q3/5138/2012 dated 27.11.2014 of the First Respondent, quash the same
and to grant any other relief.
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http://www.judis.nic.in
Page No 1 of 10
W.P.No.31767 of 2014
For Petitioner : Mr.S.P.Asokan
For Respondents : Mr.V.Haribabu
Additional Government Pleader (T)
ORDER
Heard the learned counsel for the petitioner and the learned Additional Government Pleader (Tax) for the respondents. In this case, the petitioner has challenged the impugned order passed by the 1st respondent Principal Secretary/Commissioner of Commercial Taxes.
2.Operative portion of the impugned order reads as under:-
" 1.With reference to references above, it is informed that as per section 12 (1) of TNVAT Act the purchase tax is to be paid by a registered dealer of any taxable goods from unregistered dealer / sources or from registered dealers who are exempted either generally or conditionally from payment of tax on sale of such goods, if such goods are purchased. Such purchase tax liability is only based on the conditions specified under clauses
(a) (b) (c) and (d) of Section 12 (1) of TNVAT Act. On being covered under any one of such clauses of Section 12 (1), the dealer effecting purchase of goods from aforesaid sources shall pay purchase tax at the specific rates. The dealer who pay tax under subsection (1) of section 12 shall be entitled to input tax credit (read section 12 (2)) and adjust the same towards output tax liability. Hence, it is clear that payment of purchase tax must precede claim of input tax credit.
2.In the case of petitioner – dealer, the purchases of worn out jewellery from their customers and use of the same for making of new jewellery attracts the liability to purchase tax under _____________ http://www.judis.nic.in Page No 2 of 10 W.P.No.31767 of 2014 section 12 (1) 9a) of Act. Hence, the revision of assessment made for the purchase of worn out jewellery as liable to tax under section 12 (1) of the Act, is found to be correct.
3.Therefore, the dealers are directed to pay the purchase tax as demanded by the assessing authority for the year 2007-2008 to 2009-2010 and avail input tax credit.
4.The letter in the reference 4th cited hereby stands withdrawn."
3.The petitioner had originally suffered an assessment order dated 06.06.2011 for the assessment year 2008-09. The petitioner had challenged the assessment said order dated 06.06.2011, before this Court in W.P.No.17416 of 2011. However, the said writ petition was withdrawn with liberty to approach the 1st respondent for getting appropriate clarification / direction.
4. Meanwhile, during the pendency of the above petition, recovery proceedings and distraint notices were issued. Therefore, WP.Nos.31089 and 31090 of 2014 were filed by the petitioner along with another dealer to quash the respective orders. These writ petitions were allowed. Thereafter, the impugned order came to be passed by the 1st respondent.
5.Though the impugned order talks about the jewellry and not textile products manufactured and sold by the petitioner, it is evident that the impugned order has answered the principal issue. It has held that the _____________ http://www.judis.nic.in Page No 3 of 10 W.P.No.31767 of 2014 petitioner a dealer registered under the TNVAT Act, 2006 who purchased inputs/goods from unregistered dealers was liable to discharge purchase tax liability under Section 12 (1) of the TNVAT Act, 2006 in cash. By the impugned order, the 1st respondent has directed the petitioner to pay the taxes for the relevant assessment years in question in terms of the assessment orders.
6. Learned counsel for the petitioner relies on a decision of this court rendered in Bhima Jewellery vs. The Commercial Tax Officer in W.P.Nos.9853, 8061 to 8067 of 2010 and W.P.Nos.13683 to 13687 of 2015 on 22.07.2019. There, the learned Single Judge has referred to an approval given by the Commissioner of Commercial Taxes, Chennai in a proceedings dated 29.11.2007 which has been extracted in paragraph 13 of the order which reads as under:-
13. I am of the considered view that the assessing authority has not appreciated the methodology followed in the proper perspective. What the petitioner has done is, as apparent from the tabulation and reply extracted above, to remit the purchase tax by taking credit in respect thereof against the credit available in the immediately preceding month. Thus, at the end of the period in question, the liability to purchase tax is taken to be remitted in full by set-off of such liability against credit admittedly available in the monthly returns. This methodology has found acceptance and approval bymthe Commissioner of Commercial Taxes, Chennai, in proceedings datedm29.11.2007.
At paragraphs No.3 and 4, the Commissioner states thus:
"3/ nfs;tp -- vf;!!; fphpol; ,Uf;Fk;nghJ Section-12 y; thp brYj;jp cs;spl;L thp tut[ vLj;Jf;bfhs;syhkh my;yJ thp brYj;jhkny fHpj;Jf; bfhs;syhkh> _____________ http://www.judis.nic.in Page No 4 of 10 W.P.No.31767 of 2014 bjspt[iu -- kpFjp cs;spl;L thp tut[ ,Uf;Fk;nghJ thp brYj;jhkny fHpj;Jf; bfhs;syhk;.
4/ nfs;tp -- Section-12- d;go xt;bthU khjj;jpw;Fk; jdpahf thpfl;l ntz;Lkh my;yJ Kjy; khjj;jpy; cs;s vf;!!; bjhifapy; fHpj;Jf;bfhs;syhkh> bjspt[iu: -- xt;bthU khjKk; jdpahf thpfl;l ntz;Lk; kpFjp bjhif ,Ug;gpd; fHpj;Jf;bfhs;syhk;"
7.It is the contention of the learned counsel for the petitioner that the issue is now squarely covered by the above decision of the learned Single Judge and therefore the impugned clarification was liable to be quashed with consequential directions to the assessing officers.
8.The learned counsel for the petitioner further submitted that the issue was revenue neutral as tax payable under Section 12(1) of TNVAT Act was available as input tax credit under Section 12(2) of Act and therefore the petitioner cannot be asked to pay tax in cash under Section 12(1) of the TNVAT Act, 2006. The learned counsel for the petitioner also relies on the decision of this Court rendered in Commissioner of Central Excise Vs. Kohinoor Printers Private Limited, 2015 (321) ELT 448 which in turn placed reliance on the decision of the Honourable Supreme Court in Eicher Motors Ltd Vs. Union of India, 1999 (81) ECR 7 (SC). He also relies on the decision of this Court in Commissioner of Central Excise Vs. SPIC Ltd, 2014 (305) ELT 484. _____________ http://www.judis.nic.in Page No 5 of 10 W.P.No.31767 of 2014
9.Learned Additional Government Pleader (Tax) submits that the impugned clarification is well reasoned and requires no interference. He submits that purchase tax has to be discharged in cash and only thereafter it is available by way of input tax credit under Section 12(2) of the T.N. VAT Act, 2006.
10.I have considered the arguments of the learned counsel for the petitioner and the learned Additional Government Pleader (Tax) for the respondents. Value Added Tax (tax) is payable on the sale of goods under Section 3 of the Act. Section 12(1) of the Act is an exception. As per Section 12(1) of the Act purchase tax is payable by a recipient-dealer who in the course of his business, purchases any goods (the sale or purchase of which is liable to purchase tax under the Act) under the circumstances prescribed therein. This provision is subject to the charging provisions of section 3(1) of the Act.
11.These two taxes are available as an input tax credit under Section 19 and Section 12(2) of the Act respectively. As per section 12(2) of the Act, such dealer is also entitled to input tax credit (ITC) on the tax paid on the goods specified in the 1st schedule. In other words, purchase tax payable under _____________ http://www.judis.nic.in Page No 6 of 10 W.P.No.31767 of 2014 section 12(1) of the Act is available as an input tax credit. This provision is also exception to Section 19 of the Act.
12.Input tax credit that is made available under Section 12(2) and under Section 19 of the Act can be adjusted under Section 3(3) of the said Act. As per Section 3(3) of the Act, tax payable under Section 3(2) by a registered dealer is to be reduced in the manner prescribed to the extent of tax paid on the purchase of goods specified in Part B or Part C of the 1st schedule, inside the State, to the registered dealer, who sold the goods to him.
13.Thus, there is no scope for ambiguity. Input tax credit can be adjusted only for payment of tax under Section 3(2) and not under Section 12(1) of the Act. Purchase tax payable under Section 12(1) of the Act has to be paid in cash. Such purchase tax can be adjusted on the output tax in terms of section 3(3) of the Act.
14. The purpose of allowing ITC is to reduce the cascading effect of the taxes borne on the inputs and to allow seamlessly ITC at each stage of sale and purchase.
_____________ http://www.judis.nic.in Page No 7 of 10 W.P.No.31767 of 2014
15. If the intention of the legislature was to allow utilization of Input Tax Credit for discharging the tax liability under Section 12(1) of the Tamil Nadu Value Added Tax, 2006, the legislature would have expressly provided for the same.
16. Section 12(2) of the Act is merely a trade facilitation to reduce the cascading effect of the tax. It does not contemplate discharge of purchase tax under Section 12(1) Tamil Nadu Value Added Tax Act, 2006 from and out of Input Tax Credit.
17. The decision of the Hon'ble Supreme Court rendered in the context of Eicher Motors Ltd cited by the learned counsel was rendered in a totally different context. There the issue was regarding the fate of accumulated modvat credit lying unutilised on the day when the final products became exempted. Sub-Rule 57 F (4A) of the Central Excise Rules, 1944 was introduced with effect from 16.3.1995 to lapse/abate accumulated credit lying unutilised in the account/register of a manufacturer as the final product was being exempted. In that context, the Honourable Supreme Court held that the right accrued to a manufacturer on the date when they paid tax on the raw material or the inputs and that right would continue until the facility available gets _____________ http://www.judis.nic.in Page No 8 of 10 W.P.No.31767 of 2014 worked out or until those goods existed.
18.The Court further observed that Aection 37 of the Central Excise Act which gives the power to the Central Government to make rules did not authorise the authorities to make Rules to lapse/abate the credits lying unutilised on the goods manufactured prior to 16.3.1995 on which they had paid duty for the purpose of manufacturing goods. Therefore, the decision of the Court rendered in Kohinoor Printers Private Limited refered to supra and in the case of Commissioner of Central Excise Vs. SPIC Ltd, 2014 (305) ELT 484 is of no relevance.
19. Since there is no scope for discharging purchase tax liability from and out of Input Tax Credit (ITC), I am unable to agree with the views expressed in Bhima Jewellery Vs The Commercial Tax Officer’s case referred to supra. The said decision is based on a concession given by an officer of the Commercial Tax Department. Such confessions are not binding on the Court. Even clarification of authorities are not binding on the Court as per the decision of the Hon'ble Supreme Court in CCE Vs. Ratan melting and Wire Industries, Calcutta, 2005 (3) SCC 57.
_____________ http://www.judis.nic.in Page No 9 of 10 W.P.No.31767 of 2014 C.SARAVANAN, J.
Jen/kkd
20.In the light of the above discussion, the impugned order passed by the 1st respondent is sustainable. Accordingly, the above writ petition is liable to be dismissed and it is hereby dismissed. No cost. Consequently, connected Miscellaneous Petition is closed.
06.01.2020 Index :Yes/No Internet :Yes/No jen/kkd To
1.The Prinicipal Secretary and Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai - 600 005.
2.The Assistant Commissioner (CT), North Circle, Tirpur.
Pre-Delivery Order in W.P.No.31767 of 2014 and M.P.No.1 of 2014 _____________ http://www.judis.nic.in Page No 10 of 10