2014 (5) TMI 336 - HC - VAT and Sales Tax

Court affirms Tribunal's jurisdiction on lease receipts, pre-1986 agreements. Remands for detailed examination.

M/s. Sundaram Finance Limited Versus The State of Tamil Nadu rep. By the Joint Commissioner (CT)

M/s. Sundaram Finance Limited Versus The State of Tamil Nadu rep. By the Joint Commissioner (CT) - TMI Issues Involved:1. Jurisdiction of the Sales Tax Appellate Tribunal.2. Taxability of lease receipts for agreements entered prior to 01.04.1986.3. Taxability of import-lease and inter-State lease transactions.4. Levy of penalty.Issue-wise Detailed Analysis:1. Jurisdiction of the Sales Tax Appellate Tribunal:The assessee contended that the Sales Tax Appellate Tribunal exceeded its jurisdiction by interfering with the remand order of the First Appellate Authority concerning import-lease and inter-State lease transactions. The Tribunal's jurisdiction was questioned based on the third proviso to Section 36(1) of the Tamil Nadu General Sales Tax Act. The Court found that the State had raised disputes regarding lease receipts on imported and inter-State goods, lease receipts on agreements entered prior to 01.04.1986, and the deletion of surcharge and penalty. Therefore, the Tribunal did not exceed its jurisdiction, and this contention was rejected.2. Taxability of Lease Receipts for Agreements Entered Prior to 01.04.1986:The assessee argued that lease receipts from agreements entered before 01.04.1986 should not be taxed due to the absence of a charging provision before this date. The Court examined the nature of the transactions and the implications of the 46th Amendment to the Constitution, which allowed states to levy tax on the transfer of the right to use goods. The Court concluded that the liability to pay tax under Section 3A of the Tamil Nadu General Sales Tax Act arises irrespective of the date of the agreement. The Court upheld the order of the Appellate Assistant Commissioner, setting aside the Tribunal's decision and remanding the matter to the Assessing Officer for further examination of the transactions.3. Taxability of Import-Lease and Inter-State Lease Transactions:The Court examined the nature of the transactions between the assessee, foreign suppliers, and lessees. It was noted that goods were imported specifically for particular customers, and the names of the lessees appeared in all import documents. The Court emphasized the need to examine the documents to determine whether the transactions were exempt from sales tax. The Court referenced the Supreme Court's decision in 20th Century Finance Corporation Ltd vs. State of Maharashtra, which held that the taxable event is the transfer of the right to use goods, not the delivery of goods. The Court remanded the matter to the Assessing Officer to consider the documents and determine the tax liability based on the principles laid down by the Supreme Court.4. Levy of Penalty:The Court noted that the penalty levied by the Assessing Officer was set aside by the First Appellate Authority and remanded for fresh consideration. Given the remand of the assessment to the Assessing Officer for further examination, the question of penalty did not arise at this stage. The Court concluded that the Tax Case (Revisions) should be disposed of on these terms, restoring the assessments to the Assessing Officer for reconsideration.Conclusion:The Court remanded the matter to the Assessing Officer for a thorough examination of the transactions, considering the principles laid down by the Supreme Court in 20th Century Finance Corporation Ltd vs. State of Maharashtra. The Assessing Officer was directed to consider the documents and determine the tax liability, including the applicability of Section 3A of the Tamil Nadu General Sales Tax Act and the implications of the 46th Amendment to the Constitution. The question of penalty was deferred until the reassessment was completed. The Tax Case (Revisions) were disposed of accordingly, with no costs imposed.