2010 (1) TMI 1142 - HC - VAT and Sales Tax

Court rules petitioner liable for 10% tax on adjusted amount, exempts 1st Rs. 10 lakhs.

The court partially allowed the writ petition, ruling that the petitioner was liable to pay tax at a 10% rate on the adjusted taxable amount of Rs. ... Taxability under sales tax act - Held that:- Even assuming that the provisions of section 2(1)(a)(i) of the Tamil Nadu Additional Sales Tax Act is made applicable to the case of the assessee, it is an admitted fact that the total taxable turnover is ₹ 10,58,688 only and that the total turnover does not exceed ₹ 1 crore. In that event, in the wake of the proviso to clause (i) of that provision, the first ₹ 10 lakhs is to be exempted and is not liable to be taxed. If that 10 lakhs rupees is exempted, the balance amount in the taxable turnover is ₹ 58,688 only, which is not in dispute, for which the assessee is liable to pay tax at the rate of 10 per cent in terms of section 8(2)(b) of the Central Sales Tax Act. However, Mr. S. Ramanathan has submitted that the balance taxable turnover includes the amount of ₹ 6,600 towards iron scrap and that amount also should be deducted, leaving the balance of ₹ 52,088 only to be taxed at 10 per cent. We find force in the said submission. Accordingly, we hold that the assessee is liable to pay tax at the rate of 10 per cent under the Central Sales Tax Act for the amount of ₹ 52,088. Writ petition is partly allowed. Issues:Assessment of tax under Central Sales Tax Act for various items, applicability of section 8(2)(b) of the Central Sales Tax Act, interpretation of section 8(2A) of the Central Sales Tax Act, exemption under section 2(1)(a)(i) of the Tamil Nadu Additional Sales Tax Act.Analysis:The judgment revolves around the assessment of tax under the Central Sales Tax Act for different items by the Commercial Tax Officer. The petitioner, engaged in poultry and rabbit farming, faced tax assessments on items like empty gunny bags, iron scrap, and rabbit wool. The tax was initially levied at different rates but was revised to a uniform 10% rate under section 8(2)(b) due to the non-filing of C forms and the taxable turnover exceeding Rs. 10 lakhs. The Appellate Tribunal upheld this decision, leading to the filing of a writ petition challenging the proceedings.The petitioner's counsel argued that as per section 8(2A) of the Central Sales Tax Act, a lower tax rate applies if the taxable turnover is below Rs. 10 lakhs, regardless of C form submission. Additionally, the counsel contended that the provisions of the Tamil Nadu Additional Sales Tax Act were not applicable due to the specific provisions of the Central Sales Tax Act. The counsel further highlighted the exemption clause under the Additional Sales Tax Act for the first Rs. 10 lakhs of turnover, which, in this case, should result in a 10% tax liability only on the remaining amount after deducting exempted portions.On the other hand, the Special Government Pleader argued that section 8(2)(b) allowed for a higher tax rate of 10% when the rate within the state was lower. The Pleader contended that the provisions of section 8(2A) did not apply due to the Explanation provided, which limited its scope to specific circumstances not present in this case. However, acknowledging the exemption under the Additional Sales Tax Act for turnovers below Rs. 1 crore, the Pleader agreed that the petitioner should only be taxed on the amount exceeding the exempted Rs. 10 lakhs.The court, while acknowledging the arguments on both sides regarding the application of section 8(2A) of the Central Sales Tax Act, decided to base its judgment on the second ground. It noted that the petitioner's taxable turnover was Rs. 10,58,688, and as it did not exceed Rs. 1 crore, the exemption for the first Rs. 10 lakhs applied. After deducting the exempted amount, the court agreed with the petitioner's counsel that only the remaining balance, excluding the amount for iron scrap, should be taxed at 10%. Consequently, the court partly allowed the writ petition, ruling that the petitioner was liable to pay tax at a 10% rate on the adjusted taxable amount of Rs. 52,088.