2019 (1) TMI 491 - HC - VAT and Sales Tax

Correct categorization key in tax assessment decision. Appellate Authority directives must be followed for judicial discipline.

The court held that the assessment should have been conducted under Section 3-D(2) of the TNGST Act, emphasizing correct categorization. The 50:50 best ... Assessment u/s 3-D(2) of the TNGST Act - whether the demand for the relevant assessment year should be assessed under Section 3-D(2) of the TNGST Act? - Held that:- Section 3-D deals with Payment of tax by hotels, restaurants and sweet stalls. It is not disputed by the Revenue that the assessee was assessed under Section 3-D(2) for the assessment years 1996-97, 1997-98, 1998-99, 1999-00, 2000-01, 2001-02, 2002-03, 2004-05, 2005-06, 2006- 07 and only for the subject assessment year, the assessee was not assessed under the said section - The Revenue did not file any appeal against the said order. Therefore, judicial discipline demands that the Assessing Officer should implicitly obey the order passed by the Appellate Authority or the Tribunal. But unfortunately, the Commercial Tax Officer, Egmore - I Assessment Circle, failed to follow the same and passed an order rejecting the appellant's case by order dated 06.11.2007. The Hon'ble Supreme Court in the case of Union of India v. Kamlakshi Finance Corporation Limited [1991 (9) TMI 72 - SUPREME COURT OF INDIA] has held that the subordinate authorities are bound by the directions issued by the Appellate Authorities, if such hierarchy is not followed, then it will result in judicial anarchy. Therefore, the Assessing Officer is bound to follow the direction issued by the Appellate Authority in its order dated 19.01.2007 in A.P.No.50 of 2006, especially when the Revenue has not filed any appeal against the said order. Tax Case Revision is allowed. Issues:1. Interpretation of Section 3-D of the TNGST Act for the assessment year 2003-04.2. Validity of the 50:50 best judgment assessment.3. Compliance with the directions of the Appellate Authority by the Assessing Officer.Analysis:1. The primary issue in this case revolves around the application of Section 3-D of the TNGST Act for the assessment year 2003-04. The Tribunal's decision to override the mandatory provisions of Section 3-D(1) was challenged by the assessee, questioning the differentiation made between hoteliers/restaurants and small eating houses. The court emphasized that the assessment should have been conducted under Section 3-D(2) of the Act, as consistently done in previous years, highlighting the importance of correct categorization under the law.2. Another significant aspect of the judgment concerns the validity of the 50:50 best judgment assessment made by the Officer, overriding the direction of the First Appellate Authority. The court noted that the Appellate Deputy Commissioner had previously allowed the assessee's appeal, directing the Assessing Officer to assess the disputed turnover under Section 3-D(2) of the TNGST Act. The failure of the Tribunal to consider this final order and the subsequent appeal by the State led to the restoration of the original direction in favor of the assessee.3. The final issue addressed in the judgment pertains to the compliance of the Assessing Officer with the directions issued by the Appellate Authorities. The court cited judicial discipline and the principle of hierarchy in upholding the binding nature of such directions. Referring to a Supreme Court ruling, the judgment emphasized that failure to adhere to appellate directives would result in judicial anarchy. Consequently, the Tribunal's decision was set aside, and the original order directing assessment under Section 3-D(2) was reinstated, highlighting the importance of following legal procedures and respecting higher authority decisions in tax matters.