2015 (2) TMI 1119 - HC - VAT and Sales Tax

Court upholds tax assessment on crusher machinery, not qualifying as capital goods under tax law

M/s. Salem Tollways Limited rep. by its Authorised Signatory Mr. R. Thiyagarajan Versus The Assistant Commissioner (CT) Chithode Assessment Circle, Erode, The Appellate Deputy Commissioner (CT) and The State of Tamil Nadu, Chennai

The court upheld the revision of assessment, taxing the sale of crusher machinery at 12.5% instead of 4%, as it did not qualify as capital goods due to ... Writ petition - Rate of VAT on sale of Machinery as capital goods - 4% or 12.5% - TNVAT - concessional rate of tax under Sec.2(11) as a manufacturer/processor of goods - Held that:- The issue raised by the petitioner is a question of fact. It has to be finally decided by the Tribunal and the statute provides for the same. Whatever point that has been addressed by the petitioner before the Original Authority and First Appellate Authority, has been considered by the Authority and a decision has been rendered on the merits of the case. It is therefore for the petitioner to pursue the next form by way of appeal as provided in the statute. We, therefore, find no reason to entertain this Writ Petition under Article 226 of the Constitution of India, more so, there is an effective and alternative remedy. - Petition dismissed as not maintainable - Decided against the assessee. Issues:1. Revision of assessment under Section 27(1) of the Tamil Nadu Value Added Tax Act, 2006.2. Appeal to the Appellate Deputy Commissioner (CT), Erode.3. Challenge to the order of the first Appellate Authority.4. Constitutional challenge to Section 58(1) of the Act.Issue 1: Revision of assessment under Section 27(1) of the Tamil Nadu Value Added Tax Act, 2006:The petitioner, a contractor, sold crusher machinery to a company and paid tax at 4% treating the machinery as capital goods. The Department issued a notice for revision of assessment, contending that the machinery did not fall under the definition of capital goods and should be taxed at 12.5%. The objections by the dealer were overruled, and the assessment was revised to tax the sale of machinery at 12.5%. The Appellate Authority upheld this decision, stating that the crushing activity did not amount to manufacturing under Section 2(27) of the Act, and hence, the machinery did not qualify as capital goods. The appeal to the Tamil Nadu Sales Tax Appellate Tribunal was indicated.Issue 2: Appeal to the Appellate Deputy Commissioner (CT), Erode:The petitioner pursued an appeal to the Appellate Deputy Commissioner (CT), Erode, challenging the order of the Assessing Officer. The grounds of appeal included contentions that the assessment was not tenable in law, there was no escapement of turnover or tax, and the goods were used as capital goods. However, the Appellate Authority, after considering the arguments and relevant legal provisions, upheld the levy of tax at 12.5% on the sales turnover, concluding that the crushing activity did not involve manufacturing as per statutory definitions.Issue 3: Challenge to the order of the first Appellate Authority:The petitioner filed a writ petition challenging the order of the first Appellate Authority. The petitioner argued that the machinery was used in the manufacturing process and should be taxed at 4%. However, the court noted that the objections raised were not detailed, lacked specific legal citations, and did not address the contrary view taken by the Appellate Authority. The court emphasized that the issue was a question of fact to be decided by the Tribunal, and the petitioner should pursue the appeal as provided by the statute. The writ petition was dismissed due to the availability of an alternative remedy through the appeal process.Issue 4: Constitutional challenge to Section 58(1) of the Act:A separate writ petition was filed challenging the constitutionality of Section 58(1) of the Act, alleging violation of constitutional provisions. However, the court dismissed this petition as it was filed as a consequence of the first petition and lacked an independent cause of action. The court emphasized that the challenge to the Act could be raised at the appropriate stage if necessary, but the current petition was not maintainable. Both writ petitions were dismissed, with costs not awarded.This detailed analysis of the judgment highlights the legal proceedings, arguments presented, and the court's reasoning in addressing each issue raised by the petitioner.