Turnover threshold under VAT law controls tax liability; levy and penalty fail when recorded turnover is below the limit.

Liability to pay tax under the Tamil Nadu Value Added Tax Act depends on the statutory turnover threshold under section 3. Where the impugned proceedings themselves recorded turnover below the prescribed limit, the levy of tax at 14.5% and the consequential penalty under section 27 could not be sustained. A further allegation that tax had been collected but not remitted did not support the demand, because that basis was not reflected in the impugned orders. The levy and penalty were therefore held unsustainable on the recorded facts, and relief was granted to the assessee.

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Issues: Whether the levy of tax at 14.5% and penalty under section 27 of the Tamil Nadu Value Added Tax Act, 2006 was sustainable when the turnover was below the statutory threshold under section 3 of the Act.

Analysis: Section 3 of the Tamil Nadu Value Added Tax Act, 2006 fixes the liability to pay tax with reference to the prescribed turnover threshold. The impugned proceedings themselves recorded that the turnover was below Rs. 10 lakhs. In that factual setting, the levy of tax at 14.5% and the consequential penalty could not be supported under section 3. The further contention that tax had been collected but not remitted was not reflected in the impugned orders and could not sustain the demand as framed.

Conclusion: The levy of tax and penalty was unsustainable and the writ petitions were allowed in favour of the assessee.

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