2019 (11) TMI 1720 - HC - VAT and Sales Tax

Court quashes penalties for VAT Act violations, emphasizing need for tax demand.

The court quashed penalty orders under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 for assessment periods 2008-09 to 2013-14. The ... Levy of penalty in terms of Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 - wrongful availment of ITC - stock transfers - errors apparent on the face of record - HELD THAT:- In the present case the tax due has been quantified as 'nil' in all the impugned orders (see the tabulation at paragraph 9). This is an admitted position. We are not concerned with the demand of purchase tax raised, for the reason that the reference to 'tax due' in Section 27(4) relates specifically to amount computed under Section 27(2) of Act and not under Section 12, relating to purchase tax. Thus, in a case such as the present, where there is no tax computed, the machinery for computation of penalty, being a percentage of the tax due, fails. The revenue is unable to produce any other order of assessment passed subsequent to order of this Court dated 01.02.2016 raising a demand of tax on reversal of ITC. The scheme of assessment & levy of penalty in terms of Section 27(2) read with Section 27(4), supports the position that the quantification of tax should result in an actual 'due' from the assessee in order to render the provision for levy of penalty workable. The issue arising for determination as to the leviability of penalty per se, is a legal issue and hence the petitioner need not be relegated to statutory appellate remedy - petition allowed. Issues:Challenging penalty orders under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 for assessment periods 2008-09 to 2013-14.Analysis:1. The petitioner, a dealer in jewellery and gift articles, faced inspection leading to discrepancies in Input Tax Credit (ITC) claims. Writ petitions challenged assessment orders, resulting in directions to file objections and revised orders. Subsequent rectification petitions and notices led to further legal proceedings.2. The petitioner alleged errors in assessment orders for not considering available ITC, filing a petition under Section 84 of the Act. The court directed consideration of rectification petitions, leading to the imposition of penalties under Section 27(4) for wrongful ITC availment.3. The respondent acknowledged errors warranting revision under Section 84, considering representations and instructions from higher officials. The petitioner provided detailed records related to ITC reversal during personal hearings, leading to the impugned penalty order dated 29.12.2016.4. The penalty levied under Section 27(4) is contingent on the tax due as per Section 27(2), which necessitates a demand from the assessee. In this case, the tax due was quantified as 'nil' in all orders, rendering the penalty computation invalid due to lack of a tax demand post-court order.5. Detailed tabulations from the impugned orders highlighted the absence of tax due, crucial for penalty calculation under Section 27(4). The legal position mandates an actual tax 'due' from the assessee for penalty imposition, which was lacking in the present case, rendering the penalty unsustainable.6. The revenue's argument of an alternate statutory appeal remedy was dismissed, emphasizing the legal issue of penalty leviability. Consequently, the court quashed the impugned orders, allowing the writ petitions and closing connected miscellaneous petitions without costs.