2018 (7) TMI 971 - HC - VAT and Sales Tax

Court dismisses writ appeals, directs pursuit of statutory remedies over writ jurisdiction.

M/s. Rajalakshmi Textile Processors Pvt Ltd., N. Duraisamy Versus The Commercial Tax Officer

The court dismissed the writ appeals, upholding the assessment orders and directing the appellant to pursue statutory appeals. The court emphasized the ... Validity of assessment order - levy of tax at 1% under Section 3H of TNGST Act - local purchase of dyes and chemicals were used in the process - whether the respondent in the assessment orders, for the years 2002-03 and 2005-06, has to specifically give the details, of the extent of dyes used in bleaching / works contract and consequently, the quantum of liability to pay tax, in the case of works contract? - availability of alternative remedy. Held that:- From the perusal of the judgment of State of Tamilnadu Vs. Vanavil Colours, [2017 (5) TMI 1548 - MADRAS HIGH COURT], it could be seen that levy of tax has been sustained, but, penalty alone has been cancelled. Statute provides for an appeal. On more than one occasion, the Hon'ble Supreme Court, as well as this court, held that, ordinarily, writ petitions should not be entertained, when statutes provide for an effective and alternative remedy - where hierarchy of appeals is provided by the statute, the party must exhaust the statutory remedies before resorting to writ jurisdiction. Though, the appellant/assessee has sought for reversal of the common order impugned, it not correct to interfere with the same. It is always open to the appellant, to prefer statutory appeals as directed by the writ Court. While sustaining the orders impugned, the assessee are permitted to prefer statutory appeals to the appellate authority, if so advised - appeal dismissed. Issues Involved:1. Taxability of dyes and chemicals used in dyeing works contracts.2. Applicability of the decision in State of Tamil Nadu Vs. SSM Processing Mills.3. Whether the assessment orders should specify the details of dyes used and the quantum of tax liability.4. The appropriateness of the writ petition in the presence of an alternative remedy.5. Levy of penalty on the petitioner.Issue-wise Detailed Analysis:1. Taxability of dyes and chemicals used in dyeing works contracts:The appellant, engaged in dyeing works contracts, claimed exemption on the value of dyes and chemicals used in the process. The Commercial Tax Officer assessed the turnover and levied tax at 1% under Section 3H of the Tamilnadu General Sales Tax Act, 1954. The appellant contested this, citing a decision in State of Tamil Nadu Vs. SSM Processing Mills, which held that chemicals used in dyeing cloth would not attract sales tax as they were washed away in the process. However, the respondent rejected this contention and passed the assessment orders.2. Applicability of the decision in State of Tamil Nadu Vs. SSM Processing Mills:The writ petitions were dismissed by the court, which followed the decision in State of Tamil Nadu Vs. SSM Processing Mills. The court noted that the Special Leave Petitions (SLPs) filed by the assessee in the SSM Processing Mills case were withdrawn with liberty to raise additional queries before the appropriate forum. The appellant argued that the pendency of additional grounds in related tax cases should impact their assessment. However, the court held that unless a decision on those additional grounds favored the dealer, the judgment in SSM Processing Mills remained final and applicable.3. Whether the assessment orders should specify the details of dyes used and the quantum of tax liability:The appellant contended that the assessment orders lacked details on the extent of dyes used and the quantum of tax liability. The court acknowledged that this issue should be decided by the appellate authority based on the available material, emphasizing that it is the turnover that is assessed.4. The appropriateness of the writ petition in the presence of an alternative remedy:The court reiterated the principle that writ petitions should not be entertained when an effective and alternative remedy is available. It cited several Supreme Court decisions affirming that parties must exhaust statutory remedies before resorting to writ jurisdiction. The court emphasized that an appeal mechanism existed and should be utilized by the appellant.5. Levy of penalty on the petitioner:The appellant argued that the penalty for failure to pay tax on the turnover involved in dyeing and bleaching was inappropriate, as there was no suppression of turnover and the issue was one of statutory interpretation. The court noted that in the Vanavil Colours case, while the tax liability was confirmed, the penalty was set aside, following the decision in Jansons Textiles Process. The court suggested that the appellate authority should consider this precedent when addressing the penalty issue.Conclusion:The court dismissed the writ appeals, sustaining the impugned orders and directing the appellant to pursue statutory appeals. The court granted liberty to the appellant to file appeals and directed the exclusion of the period from 18.09.2017 till the receipt of the order for computing limitation. The court emphasized the importance of exhausting alternative remedies and upheld the principle that writ jurisdiction should not be invoked when statutory remedies are available.