Bifurcation of sales tax year allowed; pre-amendment and amended regimes had to be applied separately.

Additional sales tax liability for assessment year 1996-97 under the Tamil Nadu Additional Sales Tax Act, 1970 could be computed by bifurcating the financial year, because the unamended section 2(1)(a) applied up to 31 July 1996 and the amended sections 2(1)(a) and 2(1)(aa) applied thereafter. For the first period, the taxable turnover had to be assessed under the pre-amendment slab structure after deducting the first ten lakhs. For the later period, the amended regime applied, but liability under that regime arose only if the full-year taxable turnover crossed one hundred crores. A uniform two per cent levy on the entire annual turnover was unsustainable.

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Issues: Whether, for assessment year 1996-97, the additional sales tax liability under the Tamil Nadu Additional Sales Tax Act, 1970 had to be computed by applying the unamended section 2(1)(a) up to 31 July 1996 and the amended sections 2(1)(a) and 2(1)(aa) thereafter, with the taxable turnover for the first period being subjected to the pre-amendment rates after deducting the first ten lakhs.

Analysis: The financial year could be bifurcated for the purpose of applying the different statutory regimes that operated during that year. The definition of "year" in the Tamil Nadu General Sales Tax Act, 1959 did not prevent the assessing authority from computing liability separately for the period ending 31 July 1996 and the period thereafter. Up to 31 July 1996, the unamended section 2(1)(a) governed the levy, including the deduction of the first ten lakhs and the slab-wise rates. For the period from 1 August 1996 onwards, the amended provisions applied, but liability under the amended regime arose only if the taxable turnover for the full year crossed one hundred crores.

Conclusion: The assessment made by applying a uniform rate of two per cent on the entire annual turnover was unsustainable. The liability had to be recomputed by applying the unamended provision to the turnover up to 31 July 1996 after deducting the first ten lakhs, and the assessee succeeded on this issue.

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