Madras High Court
The State Of Tamil Nadu vs Tvl. Chennai Sakthi Steel Products (P) ... on 2 March, 2018
Author: S.Manikumar
Bench: S.Manikumar, V.Bhavani Subbaroyan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.03.2018 CORAM: THE HONOURABLE MR.JUSTICE S.MANIKUMAR and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.(R).Nos.32 and 33 of 2018 The State of Tamil Nadu, Rep. by the Joint Commissioner (CT), Chennai (Central) Division, Chennai - 600 006. .. Petitioner in Both Cases Vs. Tvl. Chennai Sakthi Steel Products (P) Ltd., No.4, South Road, West CIT Nagar, Chennai- 600 035. .. Respondent in Both Cases COMMON PRAYER: Tax Case Revision Petitions are filed under Section 60 of Tamil Nadu Value Added Tax Act, 2006, to revise the order dated 18.09.2014, passed in S.T.A.Nos.207 and 208 of 2013, on the file of the Tamilnadu Sales Tax Appellate Tribunal (Additional Bench) Chennai. For Petitioner : Mr.V.Hari Babu Additional Govt. Pleader (Taxes) COMMON ORDER
(Common Order of this Court was made by S.MANIKUMAR, J.) Tax Case Revision Petitions are filed to revise the order, dated 18.09.2014, passed in S.T.A.Nos.207 and 208 of 2013 respectively, on the file of the Tamilnadu Sales Tax Appellate Tribunal (Additional Bench) Chennai.
2. Short facts leading to the Tax Case Revisions are that the respondent/Tvl. Chennai Sakthi Steel Products (P) Ltd., dealers in manufacturing of SS Utensils, were assessed on a total and taxable turnover of Rs.1,14,66,984/- and Rs.7,37,967/-, for the years 2007-2008 and Rs.23,67,420/- for the year 2008-2009 respectively, under the VAT Act, by the Commercial Tax Officer, T.Nagar (South) Assessment Circle, vide proceedings, dated 29.01.2010, under Section 22(2) of the Tamil Nadu Value Added Tax Act, 2006. Subsequently, VAT Audit was conducted by the Enforcement Wing Officers, during the period from 08.12.2009 to 14.12.2009, at the place of business and they noticed difference in the value of purchase and sale of scrap. Based on the above, the Assessing Officer has revised the assessment, reversing the ITC of Rs.21,179/- and Rs.44,984/-, vide orders, dated 30.09.2010 respectively.
3. Aggrieved by the said orders, the dealer has filed appeals in A.P.Nos.VAT/29 & 30/10, before the Appellate Assistant Commissioner (CT)-III, Chennai and after hearing both sides, vide order, dated 02.07.2012, the appellate authority allowed the appeals, as follows:
"(b) The appellants are manufacturers of SS Utensils and at any given moment of time in their manufacturing activity, there should be stock of raw material, semi finished goods and finished goods.
(c) The appellants have purchased raw material both from other state, without ITC and local state with ITC and it cannot be imagined that all the raw materials have been converted into finished products before the day of inspection.
(d) Both the utensils and the ss scrap are taxable in the hands of the appellants being the first seller. As seen from the inspection statement, neither any purchase suppression nor any sales suppression was found out and recorded.
(e) What has been not recorded in the inspection statement cannot be a base for revision of assessment.
(f) Moreover the report received from the Enforcement Wing lacks any logic in mooting out a turnover and reversal of ITC. The learned Assessing Officer, no other go has implemented such report in his order which cannot stand the test of an appeal."
4. Against which, the State has preferred appeals in S.T.A.Nos.207 and 208 of 2013, before the Sales Tax Appellate Tribunal (Additional Bench), Chennai. Vide order, dated 18.09.2014, made in S.T.A.Nos.207 and 208 of 2013, the Tribunal held as follows:-
"Admittedly the respondent is manufacturer of S.S.Utensils. The respondent purchased the raw materials from other states and within the state for manufacture. While in the manufacturing process scrap will arise during the course of manufacturing activities. Admittedly the respondent sold the utensils and Scraps as first seller and collected tax. Further the respondent remitted tax to the department adjusting the ITC. The respondent had not sold the scrap at zero value.
Therefore on sale of such scrap the respondent is entitled to claim ITC. Further the Audit officials had not found any purchase suppression or sales suppression. They found negligible stock discrepancy of Rs.2,357/- only. In these circumstances it is not correct to reverse the ITC on the sale of scrap.
Further on perusal of sworn statement of Thiru.T.E.Nandakumar, it is seen that he requested to drop the reversal proposal as said by officials. But the VAT Audit officials have not passed any other or finding in the Audit Report. They said in the Part-X summary column as "As per statement recorded". Further in the inspection statement, neither any purchase suppression nor any sales suppression was found out and recorded. Further there is no admission by the dealer in the sworn statement. So, without analyzing the records the Assessing Officer passed revised order.
Admittedly the respondents purchased raw materials and manufactured the S.S.Utensils. The respondents sold the finished goods as well as scrap and collected tax and paid to Government with monthly returns. Further there is no stock discrepancy. Hence this Tribunal feels that the method adopted by the Assessing Officer is not acceptable.
In view of the above discussion we come to the conclusion that the order of Appellate Assistant Commissioner (CT) is correct and there is no reason to interfere in the order of Appellate Assistant Commissioner (CT).
In the result the STA 207/13 and 208/13 are dismissed."
5. Being aggrieved by the above order, State have filed the present Tax Case Revision Petitions, on the following substantial questions of law:-
1) Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that no provision has been prescribed under the Act for reversal of ITC on the sale of scrap which is sold to some consideration when the provision under Section 24(i) of the Act contemplate the re-assessment of turnover of dealer when the sale of goods sold at prices which are abnormally compared to the prevailing market rate of such goods?
2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not considering the fact that the claim of huge ITC accumulation by the respondent is for the reason of wantonly reporting the lesser sale value of the product in the name of scrap and therefore by virtue of Section 24(i) of the Act, the Assessing officer revised the assessment and reversed the claim of ITC on the reason of sale of scrap for lesser value, which presumed to be final products?
6. Supporting the above substantial questions of law, Mr.V.Hari Babu, learned Additional Government Pleader (Taxes), submitted that the Tribunal ought not to have dismissed the appeal, holding that no purchase or sales suppression was noticed by the Audit officials and when the dealer himself had admitted the above proposal, at the time of inspection.
7. Learned Additional Government Pleader (Taxes) further submitted that the Tribunal ought to have examined the proportion of finished goods and scrap, with reference to raw material purchased. He further submitted that during the above assessment years 2007-08 and 2008-09, out of the total purchase of 74968 kgs., and 141077 kgs., of raw materials, finished products generated only 49655 kgs., and 85716 kgs., respectively and the balance of 25313 kgs, being 34% of the total purchases and 56361 kgs., being 39% of the total purchases, relate to scrap, which according to him, are not possible, in this line of trade.
8. Learned Additional Government Pleader (Taxes) further submitted that the respondent-dealer enjoyed more ITC, by reporting lesser sale value in the name of scrap, which is evident from the inspection report and therefore, the Tribunal ought not to have held that no purchase or sales suppression was noticed by the audit officials, when reversal of ITC, is not with reference to purchase or sales suppression, but only with the accumulation of ITC, by wrongly reporting lesser sale value in the name of scrap.
9. Learned Additional Government Pleader (Taxes) submitted that the Tribunal erred in holding that no order has been passed by the audit officials, on the request made by the dealer, as order passed was available at page 123 of the assessment file. But the figures arrived at, were as per Section 19(9)(iii) of VAT Act and also with reference to the balance sheet. Therefore, he submitted that it cannot be said that the scrap sold by the dealer is not at zero value.
Heard the learned counsel appearing for the parties and perused the materials available on record.
10. Section 19(9) of the Tamil Nadu Value Added Tax Act, 2006, dealing with input tax credit, is extracted hereunder:
"19. Input tax credit:
(9) No input tax credit shall be availed to a registered dealer for tax paid or payable at the time of purchase of goods, if such -
(i)goods are not sold because of any theft, loss or destruction, for any reason, including natural calamity. If a dealer has already availed input tax credit against purchase of such goods, there shall be reversal of tax credit; or
(ii)inputs destroyed in fire accident or lost while in storage even before use in the manufacture of final products.
11. A reading of the Section 19(9)(i) of the TNVAT Act makes it evident that no input tax credit shall be availed by a registered dealer for purchase of goods, if such goods are not sold because of any theft, loss or destruction, for any reason, including natural calamity, and if the dealer has already availed input tax credit against purchase of such goods, there shall be reversal of tax credit. Reversal of input tax credit has been done by the Original Authority, based on the surprise inspection conducted by the Enforcement Wing officials, that there is difference in the value of purchase and sales of scrap.
12. Though the learned Additional Government Pleader (Taxes), submitted that by reporting lesser sale value in the name of scrap, the dealer enjoyed more ITC, the Tribunal, after going through the inspection statement and other material on record, held that neither any purchase suppression nor any sales suppression was found out and recorded.
13. Though the learned Additional Government Pleader (Taxes), submitted that the dealer himself has admitted the proposal, at the time of inspection, going through the statement, the Tribunal has categorically held that there is no admission by the dealer in the sworn statement. The stock discrepancy recorded by the Tribunal is Rs.2,357/-, and the Tribunal has observed as negligible stock.
14. Both the appellate authority and the Tribunal, upon considering the material available on record, have found that the dealer had sold utensils and scrap, as first sale and paid tax to the department, after adjusting input credit. Upon analysing the evidence, there is a concurrent finding of fact, in favour of the dealer, which does not warrant reversal on the grounds raised.
S.MANIKUMAR, J.
AND V.BHAVANI SUBBAROYAN, J.
skm
15. For the foregoing reasons, we do not find any question of law, much less substantial question of law, arising for consideration in these revisions and accordingly, they are dismissed. No costs.
(S.M.K., J.) (V.B.S., J.) 02.03.2018 skm/dm To The Tamilnadu Sales Tax Appellate Tribunal (Additional Bench) Chennai.
T.C.(R).Nos.32 and 33 of 2018