Composition tax requires taxable turnover; demand and permit refusal failed where no tax liability arose.

Composition tax under the Tripura Value Added Tax Act, 2004 is available only to a registered dealer with taxable turnover and, under sub-section (2), only as a substitute for tax otherwise payable. Where no actual sale, purchase, supply or distribution of goods occurred, no legally ascertainable tax liability arose and the power to demand compounded tax did not exist. On the facts found, the dealer had not incurred taxable liability in relation to the goods concerned, and the demand was raised without assessment or statutory basis. The demand notice was therefore unlawful, and refusal to issue permits on that footing could not be sustained.

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Issues: Whether the demand for lump sum tax and the refusal to issue permits under the Tripura Value Added Tax Act, 2004 were sustainable when the dealer had not incurred a taxable liability or achieved a taxable turnover.

Analysis: Section 15 of the Tripura Value Added Tax Act, 2004 enables composition of tax only in relation to a registered dealer who has a taxable turnover and, in the case of sub-section (2), only as a substitute for tax otherwise payable under the Act. The expressions "turnover" and "taxable turnover" in the Act contemplate actual sale, purchase, supply or distribution of goods, and the power to compound or realise tax does not arise in the absence of a legally ascertainable tax liability. On the facts found, the petitioner had not made sales or otherwise incurred liability to tax in relation to the goods in question, and the demand had been raised without assessment and without statutory foundation.

Conclusion: The demand notice was unlawful and the refusal to issue permits on the basis of the purported agreement could not be sustained. The relief was granted in favour of the assessee.

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