2017 (7) TMI 547 - HC - VAT and Sales Tax

High Court sets aside compounding fee & tax levy, upholds Assessing Officer's authority on tax liability for imported goods

The High Court ruled in favor of the petitioner, setting aside the compounding fee and one-time tax levy imposed by the Check Post Officer. The court ... Jurisdiction of state to levy tax - inter-state sale - Detention of goods - the only reason assigned by the respondent in the impugned order is that the importer is a registered dealer in the State of Uttar Pradesh and the imported goods were cleared from Chennai Port and moved to Tvl. NLC India Limited, Neyveli without any Sale Invoice and only with Form-K.K of the Clearing Agent to the Ultimate Buyer, Tvl. NLC India Limited, Neyveli being other than the original importer. Therefore it was held that the Tamil Nadu is the appropriate State to levy tax. Held that: - The petitioner's case itself is that the movement from Chennai Port to Neyveli itself is pursuant to the conditions and it is an instance of contract between the petitioner and the Government of India and therefore, the question of taxing the transaction as a local sale would not arise and all that the Check Post Officer can look into is whether the consignment after clearance by customs on import is accompanied by a copy of the Bill of Entry, declaration in electronic Form-KK generated by Clearing and Forwarding Agent and trip sheet or log book, as the case may be, as per stipulations in Rule 15(14)(c) of the TNVAT Act, 2006 - this Court has no hesitation to hold that the levy of the compounding fee and demanding one time tax by the Check Post Officer on a interpretation made by him is without jurisdiction - petition allowed - decided in favor of petitioner. Issues:Challenge to Compounding Notices for levying compounding fee and demanding one-time tax.Analysis:The petitioner challenged two orders passed by the respondent, which were Compounding Notices, levying compounding fee and demanding one-time tax. The petitioner was awarded a contract for a Solar Power Plant Project by the Government of India and imported goods from China for the project. The goods were detained at a check post in Tamil Nadu during transportation to Neyveli. The petitioner objected, stating compliance with TNVAT Act 2006, as the goods were imported for the project and not for sale within the state. The respondent's order relied on the importer being registered in Uttar Pradesh and the movement of goods to Neyveli without a sale invoice, concluding Tamil Nadu as the appropriate state for tax levy.The High Court noted that the petitioner was authorized to import goods for the project at concessional duty rates and had executed a bond for the same. The Form-KK mentioned the ultimate buyer as NLC India Limited, Neyveli, but the court emphasized that the Assessing Officer should determine if the transaction constituted a local sale. The court held that the Check Post Officer exceeded authority by deciding tax jurisdiction, which falls under the Assessing Officer's purview. The petitioner's status as a registered dealer in Tamil Nadu further supported this position. The court directed the Assistant Commercial Tax Officer to assess the transaction based on filed returns, setting aside the compounding fee and one-time tax levy. The one-time tax collected was to be remitted to the petitioner's Assessing Officer for further assessment, allowing the writ petitions.In conclusion, the High Court ruled that the Check Post Officer's interpretation leading to the compounding fee and one-time tax demand was without jurisdiction. The court emphasized the Assessing Officer's role in determining tax liability, especially in cases of imported goods for specific projects, and directed a proper assessment based on returns filed by the petitioner.