Madras High Court
Bhima Jewellery vs The Commercial Tax Officer on 22 July, 2019
Author: Anita Sumanth
Bench: Anita Sumanth
W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 22.07.2019
CORAM
THE HONOURABLE DR.JUSTICE ANITA SUMANTH
W.P(MD)Nos.9853, 8061 to 8067 of 2010
and 13683 to 13687 of 2015
and M.P(MD)Nos.1 to 1 of 2010 & 1 to 1 of 2015
W.P(MD)No.9853 of 2010:
Bhima Jewellery,
(Rep. by its Partner Deepa Kapoor),
37/5 Avvai Shanmugam Road,
Meenakshipuram,
Nagercoil – 629 001. ... Petitioner
Vs.
The Commercial Tax Officer,
Nageroil (Town),
Nagercoil. ... Respondent
Prayer: Writ Petition filed under Article 226 of the Constitution of India praying
for the issuance of a writ of Certiorarified Mandamus, to call for the records on
the file of the respondent herein in TIN.No.33436101640/2007-08, dated
14.06.2010 and quash the same, while directing the respondent to redo the
assessment after considering the replies filed by the petitioner on 01.02.2010,
15.03.2010 and 07.06.2010.
For Petitioner : Mr.N.Prasad
(W.P(MD)Nos.9853, 8061, 8062,
8063, 8064, 8065, 8066 &
8067 of 2010)
For Petitioner : Mr.AN.Ramanathan
(W.P(MD)Nos.13683, 13684,
13685, 13686 & 13687 of 2015)
For Respondent : Mrs.J.Padmavathy Devi,
Special Government Pleader.
http://www.judis.nic.in
1/12
W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015
COMMON ORDER
In this batch of writ petitions, the petitioners are dealers under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (in short 'Act') in jewellery. Since identical issues are involved in all the writ petitions, they are disposed by way of this common order.
2. The issues that arise in the writ petitions are as follows:
(i) Demand under Section 12 of the Act (in both batches of writ petitions)
(ii) Reversal of Input Tax Credit relying on the provisions of Section 19(2) and Section 19(4) of the Act (in W.P.9853 of 2010 and batch)
(iii) Penalty for the aforesaid additions/enhancements to turnover based on Section 27(3)(a) of the Act (in both batches of writ petitions)
3. Heard the detailed submissions of Mr.Prasad and Mr.AN.Ramanathan, learned counsels appearing for the petitioners and Mrs.J.Padmavathy Devi, learned Special Government Pleader appearing for the Commercial Taxes Department in all writ petitions.
4. The petitioners are manufacturers and traders in gold and silver jewellery. In the course of their business, the petitioners purchase worn-out jewelry from unregistered dealers as well as gold bullion from registered dealers both within the state, utilizing the same in the manufacture of new jewellery. The provisions of Section 12 of the Act provide for the levy of tax on purchases from registered dealers or any person in circumstances where no tax is payable by the registered dealers and where the goods purchased are used in the manufacture of other goods for sale. Credit is available on the tax paid on such purchasers.
5. According to the petitioners they are entitled to the credit of tax paid http://www.judis.nic.in 2/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 on the purchase of the gold converted into jewellery and sold, the turnover from which has suffered output tax. Thus, in computing output tax liability per month, the petitioner had set-off such credit arriving at the net figure of tax liability, that has been duly discharged. The respondent was however of the view that the methodology adopted was incorrect and that the petitioner ought to have remitted the tax liability in full, separately seeking credit of tax paid under Section 12(2) of the Act.
6. The details of liability under section 9(1) and 12(1), eligible credit under section 19(1) and 12(2), balance carried forward after set-off and remitted to the Department are set out by the petitioner in affidavit to W.P.(MD) No.9853 of 2010 as follows:
Sl. Month Liability Eligible Liability Eligible Balance Excess Total Total tax Amount Cheque No under credit under credit due carried eligible liability for which No. and . Section under Section under forward ITC cheque date 9(1) Section 12(1) Section given 19(1) 12(2) including tax under Section 12(1) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 1 April, 2754725 2065923 34772 34772 688802 - 2100675 2754725 688802 324560 2007 16.5.07 2 May, 4260259 3021400 37806 37806 1238859 - 3059206 4298065 1238859 324634 2007 19.6.07 3 June, 5543657 4917137 23993 23993 626520 - 4941130 5567650 626520 324676 2007 18.7.07 4 July, 2723517 2220473 29560 29560 503044 - 2250033 2753077 503044 068820 2007 17.8.07 5 Augus 2376914 2724666 46559 46559 - 347752 2771225 2423472 - -2007
6 Sept, 852536 844106 53123 53123 - 339322 1244981 905659 - -2007
7 Oct, 640877 622849 104080 104080 - 321294 1066251 744957 - -2007
8 Nov, 537993 461832 141609 141609 - 245133 924735 679602 - -2007
http://www.judis.nic.in 3/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 Sl. Month Liability Eligible Liability Eligible Balance Excess Total Total tax Amount Cheque No under credit under credit due carried eligible liability for which No. and . Section under Section under forward ITC cheque date 9(1) Section 12(1) Section given 19(1) 12(2) including tax under Section 12(1) 9 Dec, 1086425 985963 198338 198338 - 144671 1429434 1284763 - -
2007 10 Jan, 1602019 1176984 171012 171012 280364 - 1492667 1773031 125921 179159 2008 20.2.08 154444 68889 26.9.07 11 Feb, 1394200 1120608 143065 143065 273592 - 1263673 1537265 273592 179195 2008 18.3.08 12 Mar, 4363149 5203423 183877 183877 - 840274 5387300 4547026 - - 2008
7. I do not propose to extract factual details in respect of each writ petition for the sake of brevity and also for the reason that though the specific numerical details would vary, the issue they pertain to remain one and the same and the conclusion that I reach in this writ petition would apply on all fours in respect of all the writ petitions without exception. WP(MD)Nos.8062 to 8064 of 2010 and 9853, 8065 to 8067 of 2010 (in re.Bhima Jewellers) challenge various proceedings of the respondent including assessments. The summary of the writ petitions in the case of Bhima Jewellers have been circulated by way of a chart and I extract the chart below for the sake of convenience.
Sl. W.P.No. Issue involved Prayer
1 8061 of 2010 Reversal of input credit relying Writ of Declaration to declare the
on the provisions of Section provisions of Section 19(2)(ii) and 19(2)(ii) and Section 19(4) Section 19(4) as unconstitutional. 2 8062 of 2010 Reversal of input credit relying Writ of Certiorari to quash on the provisions of Section assessment order dated 13.05.10 for 19(2)(ii) and Section 19(4) assessment year 2006-07. http://www.judis.nic.in 4/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 Sl. W.P.No. Issue involved Prayer 3 8063 of 2010 (a) Reversal of input credit by Writ of Certiorari to quash the relying on provisions of Section assessment dated 13.05.2010 for 19(2)(ii) and (b) Demand under assessment year 2008-09. Section 12 of TNVAT Act, 2006.
(purchase tax).
4 8064 of 2010 Proposal to reverse input tax by Writ of Mandamus to forebear the
relying on the provisions of Respondent from proceeding
Section 19(2)(ii) and Section pursuant to notice dated 22.12.2009
19(4). for the assessment year 2009-10
(Up to October 2009).
5 9853 of 2010 (a) Reversal of input tax credit by Writ of Certiorarified Mandamus to
relying on the provisions of quash the assessment order dated
Section 19(ii) and 14.06.2010 for the assessment year
(b) demand of purchase tax under 2007-08 and direct the Respondent
Section 12 of TNVAT Act, 2006 to redo the assessment.
and
(c) Penalties relying on Section
27(3)(a) of TNVAT Act, 2006.
6 8056, 8066 Proposals to reverse input credit Writ of Mandamus to forebear the
and 8067 of by relying on the provisions of Respondents from proceeding to
2010 Section 19(2)(ii) and Section reverse input tax credit pursuant to
19(4). separate notices dated 02.12.2009
for the assessment years 2007-08,
2008-09 and 2009-10 by relying on
the provisions of Section 19(2)(ii)
and Section 19(4) of TNVAT Act,
2006.
In the case of Arasu Jewels, five writ petitions have been filed challenging five (5) assessments for the periods 2006-07 to 2010-11.
8. Pre-assessment notices had been issued proposing revision of assessments, on the grounds that the tax in respect of the purchases had not been paid and that the Input Tax Credit (in short 'ITC') claimed on the gold sent outside the state of Tamil Nadu for the manufacture of jewellery and sold, thereafter admittedly within the state of Tamil Nadu, was not permissible in http://www.judis.nic.in 5/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 terms of Section 19(2)(ii) of the Act.
9. The petitioners stated that tax paid on purchases of old gold, referred to within the trade as 'beaten up gold', is liable to be claimed as ITC. Reliance was placed on a Clarification issued by the Special Commissioner in letter No. VAT cell/7067/2007/(VCC No.627) dated 31.05.2007 that, according to the petitioner, supported its stand. The reply of the petitioner (in W.P.No.9853 of 2010 and batch) dated 01.02.2010 is extracted below to illustrate the stand taken by the petitioners in assessment:
'With reference to your above referred notices the matter concerning the claim of purchase tax under Sec.12 has already been clarified as per letter No.VAT Cell 7067/2007/ (VCC No.627) dated 31.05.2007 clearly mentioning it that purchase tax paid on the purchase of beaten up gold when utilized for manufacture is eligible for input tax credit.
The Details are as below:
2007-2008
------------------------------------------------------------
Apr – 07 3477241 34772
May-07 3780627 37806
Jun-07 2399299 23993
Jul-07 2955984 29560
Aug-07 4655883 46559
Sep-07 5312260 53123
Oct-07 10407973 104080
Nov-07 14160883 141609
Dec-07 198338 198338
----------
699840
---------
For the period from April 2007 to August 2007, the purchase tax Rs.154444/- has been paid to you as per your instruction vide Chq.No.68869 dated 26.09.2007 and taken the claim in Nov.07 as per out letter dated 20.12.2007.
The amount of Rs.564346/- has been paid to you http://www.judis.nic.in 6/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 vide chq.No.179125 dated 28.01.2008 as per your notice.
By our letter dated 28.01.2008 we had requested you to give credit for the payment by us forward purchase tax, but so far you have not adviced us to adjust it in future payments.
2007-2008 ..........................................................................
Jan-08 17101216 171012
Feb-08 14306547 143065
Mar-08 18387738 183877
..........
497954
..........
The amount of Rs.183877/- for Mar.2008 has been paid as per your instruction vide chq.No.553417 dated 27.05.2009 and claimed the same on May 2008.'
10. The proposal was reiterated on 26.02.2010 and 13.05.2010 and the petitioners' reply was reiterated on 02.03.2010, 15.03.2010, 01.06.2010 and 07.06.2010. The consistent stand of the petitioners' is that the methodology adopted by it for reversal has found approval by the Special Commissioner in proceedings dated 29.11.2007. However, notwithstanding the replies filed and the specific reference to the Clarification issued, the impugned orders have been passed, confirming the proposals.
11. A detailed counter has been filed wherein the authority expresses the view that the methodology followed by the petitioner does not tantamount to remittance of the taxes as contemplated by statute. In regard to the second issue relating to the movement of the gold from Tamil Nadu to other States for manufacturing, the respondent alleges that the details of job work carried out at Kerala were not furnished in order to establish the activity of job work. The movement of beaten jewels to Kerala and back were not established and the petitioner, according to the respondent, has not maintained the various registers http://www.judis.nic.in 7/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 mandated as per Rule 6(3)(a) such as production-cum-stock register in Form-H, Form-JJ and others. The respondent argues that Section 2(27) which defines 'manufacture' to mean producing, making, extracting, altering, ornamenting, finishing, assembling or otherwise processing or treating goods so as to bring into existence a commercially distinct and different commodity would be attracted in this case and thus the activity engaged by the petitioner in Kerala would also amount to manufacture. Reliances is placed on a judgment of the Supreme Court in 107 STC 6 to the effect that job work constitutes manufacture. Thus according to the respondent, since the entire manufacture activity was done in Kerala, the ITC claim should be reversed. Finally, the respondent contends that the orders under challenge are appealable orders and since no fundamental right has been violated in the instance goods nor is there an allegation of violation of the principles of natural justice, the petitioner should be relegated to appellate remedy.
12. Coming to the first issue in regard to purchase tax, the argument advanced by the respondent in the counter to WP(MD)No.9853 of 2010 at para-4 of the counter is extracted below:
'4.It is submitted that the Petitioner has mentioned the purchase tax under section 12(2) but in no where pointed out that the purchase tax has been paid in the month of purchase in the Form I submitted by the petitioner. For example for month of April 2007 the tax liability is Rs.1754725-00 under section 19(1). Eligible credit under section 19(1) is Rs.2065923-00. The balance amount of Rs.688802-00 was only paid through cheque on 16-5-2007. The liability of Rs.34,772-00 under section 12(2) was not paid in the return filed for the month of April 2007.'
13. I am of the considered view that the assessing authority has not appreciated the methodology followed in the proper perspective. What the http://www.judis.nic.in 8/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 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 by the Commissioner of Commercial Taxes, Chennai, in proceedings dated 29.11.2007. At paragraphs No.3 and 4, the Commissioner states thus:
*3/ nfs;tp ?? vf;!!; fphpol; ,Uf;Fk;nghJ Section-12y; thp brYj;jp cs;spl;L thp tut[ vLj;Jf;bfhs;syhkh my;yJ thp brYj;jhkny fHpj;Jf; bfhs;syhkh> 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;/*
14. In the light of the aforesaid, I find no infirmity with the methodology adopted by the petitioner. Clearly, the petitioner has remitted tax on purchases and this fact is not denied. What is disputed is only the methodology of set-off against the monthly returns which, when approved by the Commissioner in proceedings dated 29.11.2007 ought not to have been rejected by the assessing authority. This issue is held in favour of the petitioners.
15. The second issue, concerning the reversal of ITC on worn-out jewellery sent outside the state for manufacture and received back and sold within the State, has been held in favour of the assessee by a Division Bench of this Court in the case of Patina Gold Ornaments Pvt. Ltd., Vs. Assistant Commissioner (CT), Park Road Circle, Erode and another, (2018 50 GSTR 114 http://www.judis.nic.in 9/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 (Mad)) wherein the Division Bench, at Para 29.1., states as follows:
'29.1 A bare perusal of the aforesaid extract would show that ITC availed of need not be reversed merely because goods purchased are sent temporarily outside the State for the purposes of job-work.
Therefore, having regard to the foregoing discussion, we are of the view that section 19(2)(ii) of the 2006 Act is invalid to the extent that it denies availment of ITC in respect of those units which despatch tax suffered raw materials, i.e., bullion/worn-out jewellery for conversion into final product (i.e jewellery) outside the State which upon conversion are received back and sold within the State of Tamil Nadu. Thus, according to us, the mere fact that the manufacturing unit is located outside the State of Tamil Nadu cannot be the basis, for denial of ITC, under section 19(1) of the 2006 Act. Clause (ii) of sub-section (2) of section 19 of the 2006 Act is, thus, declared bad in law.'
16. In the light of the above, this issue is also held in favour of the assessee.
17. The petitioner, in W.P.(MD)No.8061 of 2010 seeks a writ of declaration, declaring the provisions of Section 19(2)(ii) and Section 19(4) as unconstitutional, normally a writ of declaration is heard and decided by the Division Bench. In this case, this very issue has been adjudicated upon by a Division Bench of this Court in the case of Patina Gold (supra) and hence rather than placing this matter before the Division Bench for orders, the petitioner would request that the decision of the Division Bench be followed in this case as well, the facts as well as position in law being identical. No objection has expressed by the revenue to this request and hence this writ petition is allowed following the decision of the Division Bench of this Court in the case of Patina Gold (supra).
18. In summary, all writ petitions are allowed in the light of the detailed http://www.judis.nic.in 10/12 W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 discussion above. No costs. Consequently, connected Miscellaneous Petitions are closed.
22.07.2019
Index : Yes
Internet : Yes
sm/ps/cm
To
The Commercial Tax Officer,
Nageroil (Town),
Nagercoil.
http://www.judis.nic.in
11/12
W.P(MD)Nos.9853, 8061 to 8067 of 2010 and 13683 to 13687 of 2015 DR.ANITA SUMANTH,J.
sm/ps/cm W.P(MD)Nos.9853, 8061, 8062, 8063, 8064, 8065, 8066 & 8067 of 2010 and 13683,13684, 13685, 13685 & 13687 of 2015 22.07.2019 http://www.judis.nic.in 12/12